Rodney McMullen
Rodney McMullen
Kroger Co. is not taking its success for granted, Rodney McMullen, chairman and CEO, told shareholders in a letter the company shared with the media.
Touting the company’s strong financial results in 2015, McMullen said, “[That] performance wasn’t a rarity. Kroger is a compelling investment because of our ability to deliver remarkably consistent results.
“That consistency can make it easy for our results to be taken for granted. But I can assure you, we don’t take Kroger’s success for granted — not for a second.”
Despite achieving its 12th consecutive year of positive identical sales growth, its 11th consecutive year of market-share growth and other metrics that exceeded its long-term guidance, “our team is never satisfied with yesterday’s results,” McMullen wrote. “We are constantly challenging ourselves to do better.”
He said the Cincinnati-headquartered company is looking for improvements in three areas: core operations, initiatives beyond the core and innovation. “Too many companies over-focus on innovation in the hopes of discovering the next ‘big thing,’" McMullen said. “[But] balance is how we’ll continue to win with customers and create sustainable long-term value for shareholders.”
Friendlier service and fresher perishables are high on Kroger's priority list.
Friendlier service and fresher perishables are high on Kroger's priority list.
In its core supermarket business, Kroger will continue to remove costs “in places where customers don’t notice so we can reinvest the savings in ways that matter most to them,” McMullen said, including lower pricing, friendlier service, fresher perishables and corporate expansion.
“Important to our success with mergers is that we don’t need them to meet out long-term earnings-per-diluted-share growth target of 8% to 11%,” he pointed out, “[which] frees us up to only pursue deals that are the right fit for our company and will help create long-term value for shareholders.”
Looking at initiatives beyond the core supermarkets, McMullen said the strategic question for Kroger is “how do we leverage an asset like convenience.”

The company offers ClickList and, at Harris Teeter, ExpressLane service — online ordering with store pickup — at 221 stores, he pointed out, “[and] we will continue expanding [the program] to more stores and more markets."
Simple Truth and Simple Truth Organic, two of the chain’s corporate brands, achieved annual sales last year of $1.5 billion, while natural and organic sales totaled more than $12 billion, McMullen pointed out. The company also expanded its exclusive offerings with HemisFares — products imported directly from various regions of the world.
In terms of innovation, McMullen said Kroger is using data to offer more personalized offers. “Data helps you to be honest with yourself, especially when it runs counter to our assumptions,” he explained.
The company is also testing Digital Shelf Edge, a proprietary technology that displays high-resolution shelf tags with rich content at the point of purchase, “and while we still have a lot of work to do to prove it is scalable, we are excited about the possibilities of connecting with mobile devices and offering tailored content,” he said.