Kroger said yesterday that its Q3 total sales were $34.2 billion, up from $31.9 billion for the same period a year ago, though earnings dropped to $398 million from $483 million a year ago as inflation had an impact on costs and expenses.
Same store sales, excluding fuel, were up 6.9 percent for the period.
CNBC reports that CEO Rodney McMullen "said customers are eager to save: they’re downloading digital coupons, choosing items on promotion and buying private-label products more than before, he said.
"Sales growth for private-label brands, which tend to be cheaper than national name brands, outpaced the company’s overall sales growth in the quarter, McMullen said.
"One of those brands is Smart Way, Kroger’s least expensive private-label brand, which sells canned food, bread and other staples. The company launched the product line last quarter as customers faced inflation-related sticker shock. McMullen said Kroger plans to add more products to that line in the coming months."
Meanwhile, the Wall Street Journal writes that "while Kroger is doing well, it isn’t exactly trouncing the competition … its digital-sales growth of 10% last quarter lags behind Walmart’s 16% growth over the comparable period.
"For the full year, Kroger’s share of U.S. grocery e-commerce sales is expected to fall compared with a year earlier and stay stagnant in the following two years, according to estimates by Insider Intelligence."
- KC's View:
I suppose that everything Kroger reports these days has to be seen through the prism of its proposed acquisition of Albertsons.
Higher sales testify to Kroger's existing market power, and challenged profits would suggest that greater buying power would give it the ability to drive down prices.
Though opponents of the deal will suggest that greater power will mean that Kroger can be less responsive to competitive challenges, I'm not sure this is true. Or entirely fair. Kroger would be foolish - and it would be out of character - to simply raise prices because it can. (This would mean ignoring the lessons of Jurassic Park: Just because you can do something doesn't mean you should do something.) Plus, it would concede a large share of stomach to competitors who emphasize low price, and I don't think Kroger is likely to do that.
But, it could. Which means the Federal Trade Commission (FTC) has to weigh the possibilities and probabilities, the impact on shareholders and customers, and decide what its responsibilities and mandates are.