Kroger Says Inflation Pressures to Continue

ELLIOT ZWIEBACH

CINCINNATI — Kroger Co. here said yesterday that inflation in core grocery “is at a level not seen in several years,” with more of the same anticipated in the third quarter. Accordingly, Kroger said it decided to pass through higher product costs during the second quarter — in contrast to the first quarter — to ease pressures on gross margins. Selling gross margin on non-fuel sales rose 38 basis points during the quarter ended Aug. 18, compared with a decline of 45 basis points in the first quarter, the company said, though selling gross margin, excluding fuel, declined 11 basis points on a year-to-date basis. Rodney McMullen, Kroger vice chairman, said product cost inflation during the second quarter was 2.6%. In a conference call, David Dillon, chairman and chief executive officer, said that, going forward, “some unusual fluctuations in margins” may occur, depending on what happens with inflation and what items are involved. Net income for the quarter rose 27.9% to $267.3 million on sales gains of 6.6% to $16.1 billion. Identical-store sales growth, excluding fuel, was 5.1%. For the half, net income rose 17.2% to $603.8 million, with sales climbing 6.7% to $36.9 billion and identical-store sales, excluding fuel, up 5.1%.

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