Dive Brief:

• Kroger posted $34.3 billion in sales during its fourth quarter, down nearly 8% from the same period a year ago, the grocer reported Thursday. Identical sales growth excluding fuel came in at 2.4%.
• The grocer reported an operating profit of $912 million in Q4, down nearly 24% year over year.
• Kroger’s digital business has been growing at a double-digit clip and posted the best quarterly digital profit improvements it has ever seen, interim CFO Todd Foley said during an earnings call Thursday morning.

Dive Insight:

As Kroger looks ahead following the abrupt departure this week of former CEO Rodney McMullen, it posted mixed earnings results that point to the challenges its interim chief executive, Ronald Sargent, and his team face.

Foley said Kroger saw another “strong” quarter for its private brands, with sales outpacing name brands. During fiscal 2024, Kroger added more than 900 store brands, including 370 in fresh categories. Foley said Kroger will likely continue adding private label products at this pace.

Kroger expects inflation to range between 1.5% to 2.5% in 2025, not including the effects from tariffs, Foley said.

The company saw egg prices rise by about 70% during Q4 and has also seen notable inflation in categories including beef, he added.

Foley said Kroger does not believe it will face a substantial impact from the tariffs the Trump administration has imposed on imports from countries including China, Canada and Mexico. He noted, however, that the company’s merchandising and sourcing groups are trying to diversify its fresh supply chain because it imports a small percentage of the produce it sells from Canada and Mexico. On Thursday, the Trump Administration announced it would pause implementing new tariffs on Mexico until early April.

“The teams are being proactive, even though it’s not a huge impact overall in our business … [it’s] certainly relative to our peers,” Foley said.

Kroger’s comparable-store sales have steadied

Kroger saw digital sales rise 11% year over year in Q4, with its pickup and delivery operations both showing better profitability. The company has seen improvements in its online operations from automation, new technology, and stronger density and volume, Foley said, adding that the digital profit improvements it posted during the quarter were the best it has ever seen.

“Every single piece of the puzzle continues to incrementally improve,” Foley said.

Asked if Kroger is considering adding to the fleet of robotic e-commerce facilities it has built with Ocado, Foley indicated that the company intends to wait “until we get profitability to where we need it and where we expect it to be” before deciding how to proceed. 

“What comes along with that is making sure that when we open the next shed, we’re able to do it at a volume level that kind of enables us to hit the ground running,” he said.

The search committee formed by Kroger’s board has started the process to find the grocer’s next CEO and is working with a “nationally recognized” search firm, Sargent told investors during the call. Kroger announced Monday that McMullen, who had served as the grocer’s CEO for over a decade, resigned following an ethics investigation into his personal conduct. 

Kroger is looking at internal and external candidates to fill the CEO’s role, Sargent said.

“We're focused on identifying the right leader to drive Kroger’s growth and enhance shareholder value,” Sargent said. “I am proud to serve in this role for as long as needed, but I am absolutely confident that our board will select the right next CEO, whether from inside the company or outside.”

For fiscal 2024, Kroger reported a modest 1.5% increase in identical sales, $147 billion in sales, more than $13 billion in digital sales and an operating profit of $3.8 billion. 

For fiscal 2025, Kroger expects identical sales without fuel to grow between 2% and 3% and adjusted net earnings per diluted share to fall between $4.60 and $4.80. Foley said Kroger’s 2025 guidance does not assume any benefit from the grocer’s new agreement with Express Scripts.

The grocer expects to spend between $3.6 billion and $3.8 billion on capital expenditures in fiscal 2025. Kroger plans to finish 30 major store projects in 2025 — about the same number completed in 2024 — and expects new store openings to accelerate beyond 2025, Foley said. 

Sargent said during the call that the company is postponing its investor day event, which was originally scheduled for April, because of the CEO transition.