Kroger CEO: Economic Environment Unpredictable

MARK HAMSTRA

CINCINNATI — Kroger Co. is better prepared than some supermarket operators to weather the ongoing economic slump, the company's chief executive officer said at a meeting for analysts here last week.

“Kroger's been in a really good position, but some others have not weathered it as well,” David Dillon said, citing the company's willingness to be flexible and its focus on low prices.

Asked whether he expects to see some supermarket companies go out of business if the economy, as expected, enters a prolonged downturn, he said the current conditions do not lend themselves well to forecasting.

“I think we are in for some surprises,” Dillon said. “It is in our hands, whether we are successful or not. I know things are going to be unpredictable for a while. This is not your typical everyday recession — you cannot look in a textbook to see what a recession looks like [in order to evaluate the current environment]. We are going to have to be light on our feet.”

Asked about whether the company's strategy of sacrificing margins to gain market share through pricing was the right one for the current environment, he said the company had a strong opportunity to pick up sales from existing customers by doing so. Even some of Kroger's most loyal customers, he said, go elsewhere to buy half of the things they could be buying at Kroger.

“We see tremendous opportunity for us there,” he said.

In a statement issued before the conference, Kroger said sales trends have continued to improve in its fiscal third quarter. In the first eight weeks of the quarter, which began on Aug. 17, same-store sales were trending “above 5%,” excluding fuel. Sales in the second four weeks of the quarter were stronger than sales in the first four weeks of the quarter, which were trending stronger than the second quarter. The results include stores that were closed after Hurricane Ike.