How Kroger Is Gearing Up to Fight Amazon

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Kroger Co. (NYSE: KR) shares saw a nice uptick early Wednesday after the grocer came out and said at its annual investor conference that it plans to redefine the food and grocery experience. Kroger is calling this new direction the Restock Kroger Plan. Not to mention, the company also reaffirmed its 2017 guidance.

The Restock Kroger Plan will be fueled by capital investments, cost savings and free cash flow. The plan has four main drivers.

First, the company is looking to redefine the food and grocery customer experience by accelerating its digital and e-commerce efforts, applying its customer data and personalization expertise.

Kroger also will expand partnerships to create customer value by using more of its capital to fund technology and infrastructure upgrades, and to create alternative revenue streams. In part, the firm intends to redesign the front-end to maximize stores for self-checkout. At the same time, Kroger might explore the sale of some of its businesses.

Kroger plans to further develop talent by investing an incremental $500 million in human capital over the next three years. This will be in addition to the company’s continued efforts to rebalance pay and benefits while also focusing on certifications and performance incentives, career opportunities and training.

Finally, management said that the company plans to live Kroger’s purpose. Part of this includes community outreach and environmental plans.

In terms of the guidance, Kroger is calling for identical supermarket sales growth of 0.5% to 1.0%, excluding fuel, for the remainder of 2017. Earnings for the year are expected to fall in the range of $2.00 to $2.05. Consensus estimates are $1.97 in EPS and $121.75 billion in revenue.

Rodney McMullen, Kroger’s board chair and chief executive, commented:

We know that when we serve America through food inspiration and uplift, we create value for our shareholders, customers and associates. We understand that today’s marketplace is shifting rapidly. Kroger’s success has always depended on our ability to proactively address changes by focusing relentlessly on our customers. We have the scale, the data, physical assets and human connection to win. Combining our food expertise and data analytics uniquely positions Kroger to create new and highly-relevant customer experiences, delivered both digitally and in stores. Restock Kroger builds on our strengths and strategically repositions Kroger to accelerate our customer-centered efforts in order to create shareholder value.

Shares of Kroger were last seen up about 5% at $21.57, with a consensus analyst price target of $22.91 and a 52-week range of $19.69 to $36.44.