Kroger(US:KR)2020-06-18 21:51Financial Data and Key Metrics Changes - The company reported an adjusted EPS of $1.22 per diluted share for Q1 2020, with identical sales without fuel increasing by 19% [27] - Digital sales grew by 92%, contributing slightly over 3% to identical sales without fuel [29] - FIFO gross margin rate, excluding fuel, increased by 44 basis points due to sales leverage [29] Business Line Data and Key Metrics Changes - Fresh departments, including meat, seafood, and produce, generated strong identical sales during the quarter [13] - The company's brands grew by 21.1%, with plant-based foods growing over 32% [14] - The digital channel saw a significant increase in sales, with triple-digit growth in April and May [15] Market Data and Key Metrics Changes - The average retail price of fuel was $2.13 this quarter, down from $2.62 in the same quarter last year [31] - Fuel profitability was a major tailwind in Q1, but is expected to be a headwind for the remainder of 2020 [31] Company Strategy and Development Direction - The company is committed to its Restock Kroger initiative, which includes significant investments in technology and digital capabilities [12] - The partnership with Ocado is seen as essential for enhancing e-commerce capabilities and improving profitability [16] - The company is focused on maintaining a flexible distribution network to adapt to changing consumer demands [17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unprecedented challenges posed by the COVID-19 pandemic but expressed confidence in the company's ability to adapt and grow [25] - The company is not providing specific guidance for 2020 due to uncertainties related to COVID-19 and its impact on consumer behavior [37] - Management expects continued elevated sales levels in Q2, although tapering from Q1 trends [39] Other Important Information - The company invested over $830 million in Q1 to support associates and safeguard customers during the pandemic [26] - An additional $236 million was contributed to multi-employer pension plans to stabilize future associate benefits [20] - The company is committed to diversity, equity, and inclusion within its workforce [20] Q&A Session Summary Question: Can you elaborate on the headwinds affecting Q2 EPS growth? - Management indicated that fuel performance would be a significant factor, with expected headwinds of $50 million to $100 million due to lower year-over-year gallons [45] Question: How has the partnership with Ocado influenced e-commerce plans? - Management noted that the strategic decisions made in previous years have paid off, with digital delivery and pickup business growing significantly [47] Question: What are the expectations for identical sales in Q2? - Management expects a gradual return to lower food eating at home, with sales growth trending in the mid-teens [56]