DALLAS — Kroger was taken by surprise not only by the worsening of economic conditions in 2009 but by the aggressive competitive response by its competitors, the company's chief financial officer said in a presentation here Wednesday.
"The biggest issue we had in 2009 is we didn't keep our powder dry after the first quarter to allow for reaction to competitive changes and the macroecomic things that persisted throughout the year," Michael Schlotman said in remarks at the Morgan Stanley Retail Field Trip.
"There was a stronger reaction to a lot of our pricing programs than we had experienced in the last four or five years," he continued.
Reiterating the stance by company officials reviewing quarterly results earlier this month, Schlotman said making all of its planned price investments during the first quarter of the fiscal year left Kroger unusually vulnerable when the economy worsened, and led in part to reduced gross margins and earnings in the second half of the 2009 fiscal year which ended Jan. 30.
"We're adjusting that strategy in 2010," he added. "Anything we plan to do in 2010 [will be at] a measured pace, so we can manage our way through what we expect to be another volatile year in a much more rational manner."
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