NEW YORK — Kroger Co. stuck to making investments in service even as sales slowed and profits fell last year, Michael Schlotman, the company's chief financial officer, told attendees at the Barclays Capital Retail and Restaurant Conference here last week.
Schlotman said the commitment to providing extra sales help at peak shopping hours — a key driver of customer satisfaction, according to company surveys — illustrates the long-term perspective of the strategic initiatives at Kroger. Service, Schlotman noted, is one of four areas in which Kroger has continually invested, along with products, shopping experience and price.
“When we speak of making investments in Kroger's business, we are talking about sustainable investments, programs that we can continue as long as they are important to customers,” Schlotman said. “When our profits were squeezed last year by significant food deflation, cautious consumer spending and heightened competitive activity, we did not cut back on the hours at the front ends.
“Cutting hours may have been helpful to Kroger's financial results in a particular quarter, but it would have damaged our long-term reputation with our customers and the experience they expect in our stores.”
Sticking to those sustainable investments helped Kroger grow sales slightly while increasing the number of loyal Kroger households and spending within those households in an otherwise difficult 2009, Schlotman said. That steady approach, he added, will ultimately pay off for investors.
“Other approaches might produce better short-term results, but we don't believe they can be sustainable,” he said.
Asked about Wal-Mart reportedly taking a more aggressive stance on price, Schlotman said he felt the Bentonville, Ark., discounter was behaving more like a traditional supermarket competitor than an everyday discounter, using temporary price reductions mainly to drive excitement.
“We watch Wal-Mart as closely as we watch anybody, maybe more because they're so big. They continue to be promotional. Their rollback activity is actually more like a traditional competitor than they've ever been, because they're going in and out of rollbacks more regularly,” he said.
“It's like a temporary price reduction that we would do, where it eventually goes back to a regular retail price,” he added.
