Lower fresh produce prices at Kroger offset gains elsewhere

06/21/2012 06:30:00 PM
Tom Karst

Aided by fruit and vegetable deflation and increased volume of produce sold, Cincinnati-based Kroger Co. officials said identical stores sales in the first quarter of 2012 exceeded the rate of inflation.

Lower prices for produce commodities offset higher prices for grocery, meat and bakery departments, company officials said in an investor conference call on June 14.

The 4.2% gain in identical stores sales represented the 34th straight quarter of identical store growth, said

David Dillon, Kroger’s chairman and chief executive officer.

“We saw extraordinary tonnage growth for produce in the first quarter,” Dillon during an investor call June 14.

Dillon said same-store sales for the second quarter are somewhat down from the 4.2% rate of gain in the first quarter, but will still be positive. In its quarterly statement, Kroger said identical supermarket sales growth — excluding fuel — is expected to range between 3% and 5% this year.

Total sales, including fuel, increased 5.8% to $29.1 billion in the first quarter of 2012, up from $27.5 billion in same period of last year. Net earnings for the first quarter totaled $439.4 million, or $0.78 per diluted share, up from $432.3 million and $0.70 per diluted share at the same time last year.

The better-than-expected results by Kroger in the first quarter led the company to raise its estimate of earning per share in fiscal year 2012, he said.

Other drivers of growth included the pharmacy department, organic and natural foods and the deli department, Dillon said.

He said the chain’s “Customer First” strategy focusing on people, product, shipping experience and price was paying dividends for the chain. Kroger has 2,425 supermarkets and multi-department stores in 31 states under two dozen banners.



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Tom Lovelace    
Columbia SC  |  June, 22, 2012 at 09:49 AM

On the surface, it appears the increased tonnage moved at Kroger during the first quarter supports what many in the industry have believed for years...lower retail prices for produce will spur increased consumption. In this situation, it appears we have a triple win: a win for consumers and wins for both Kroger and growers by selling more volume

Gary    
Cincinnati  |  June, 22, 2012 at 03:05 PM

You are so right, Tom. In addition, Kroger is also doing a great job in merchandising and quality. They have really improved the departments in the last few years.

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