Kroger Sales Creep up 1% as Shoppers Grow More Selective

Kroger’s revenues ticked up slightly last quarter as its shoppers felt increased financial strain.

“The customer is under pressure,” Greg Foran, chief executive of America’s largest traditional supermarket chain, said Thursday (June 18) as Kroger reported earnings showing revenues up 1%, compared to a 3.2% rise in the same quarter last year.

“High gas prices and reduced SNAP benefits are squeezing budgets,” Foran continued. “Customers are managing spend carefully and shopping with real intent. That pressure is showing up in the market.”

SNAP, he said later in the call, is impacted the most in three states in particular, a phenomenon that shows up in terms of the price of fuel impacting “when that price gets up to what it has.”

“I think we see that some of the basket sizes, some of the items that people buy tend to be traded down a bit. I think that helps probably with Our Brands and how we’re operating,” he added, referring to the company’s private label products.

Those brands outpaced national brands by 175 points during the quarter, said Foran, a Walmart vet who became CEO in February. The quarter also saw Kroger’s eCommerce business turn a profit, with revenues from that unit up 19% and attracting a record number of new households.

Foran also noted that Kroger’s omnichannel customers — those who shop both online and in person — spend nearly two and a half times more than in store-only shoppers. And 95% of all transactions, he said, are tied to the company’s loyalty card.

The selective behavior Kroger is witnessing from its shoppers is in keeping with PYMNTS Intelligence research, which found that financially stressed consumers across generations continually cite grocery prices as a hardship.

Foran told Bloomberg News in May that the company was considering significant price reductions as it tries to reclaim market share from companies such as Walmart that have pushed into the traditional grocery space.

During Thursday’s call, the executive spoke of opportunities for Kroger to “sharpen” its pricing and “make value simpler” for its shoppers.

“Over time our promotions have gotten too complicated and our price position has not kept pace where it needed to,” Foran said.

“Let me be clear on what this means. We do not need to be the lowest price retailer. We need to be more competitive, more consistent and easier for customers to understand. When a customer is deciding where to shop, we want more of them.”

Meanwhile, rival grocery chain Aldi is spending $9 billion as it tries to compete with Kroger in the U.S. According to a Financial Times (FT) report Thursday, the German company plans to have 4,000 stores nationwide, giving it more locations than Kroger.

“We don’t know what the ceiling is,” Scott Patton, Aldi USA’s chief commercial officer, told the FT. “We’re trying to take market share from anyone who sells groceries.”