Kroger will find its footing in the long term

Grocery industry eyes will be on The Kroger Co. Friday when the Cincinnati-based grocer is scheduled to announce its second-quarter earnings. Stock analysts and the business media suggest Kroger’s second-quarter performance could be a bellwether of things to come for many grocery retailers in the ever-competitive grocery market, especially on the heels of Amazon’s official acquisition of Whole Foods Market, and Amazon’s promise to cut Whole Foods’ prices.

As the Wall Street Journal pointed out in an article this week, “Kroger is also considered a barometer of U.S. consumer sentiment and economic trends.”

Kroger’s stock has dropped like a bag of potatoes this year. The Amazon deal, deflation and other factors have battered the stock price of the nation’s second-largest grocer.

Kroger’s stock has also suffered from the what-have-you-done-for-me syndrome. After 13 years — 13 years! — of consecutive same-store sales quarterly growth, Kroger experienced two quarters of same-store sales decline, which helped lead to a sell off. But according to the Wall Street Journal, analysts expect Kroger to get back on track with same-store growth in the second quarter.

Kroger, long known for its successful private brands, has seemingly upped the ante with its store brands to compete in the marketplace, which is also being impacted by an influx of deep-discount retailers, most notably Aldi and Lidl, which both offer a 90 percent assortment of private brands. By the end of September, Lidl will have opened 34 U.S. stores and is reportedly scouting territory to open stores in southern Ohio, Kroger’s backyard. Aldi announced the week of Lidl’s initial store openings that it would expand from 1,600 to 2,500 stores nationwide by the end of 2022.

In July, Kroger announced it was expanding its Our Brands product lines to offer its customers greater value, variety and quality. The Cincinnati retailer currently offers more than 30,000 Our Brands items, including food, beauty, personal care, pet and household essentials. It has introduced 1,000 new food and household items in the past 20 months.

"Our Brands sold a record-setting 8.2 billion units in 2016, which equates to customers choosing to add 1.25 million of our exclusive products to their shopping carts every hour that our stores are open," Gil Phipps, Kroger's vice president of Our Brands, said in a press release. “Through innovation, we are committed to introducing new items monthly that give our customers a wide selection of choices and price points, and always guaranteed quality." 

Recently, a feature article on Cincinnati.com explored the growth of Kroger’s private brands while interviewing local shoppers who buy them, noting that “if Kroger’s private label business was its own company, it would land at about No. 127 on the Fortune 500.”

Kroger seems to be embracing its roots. As the story goes, in 1883 Barney Kroger invested his life savings of $372 to open the first Kroger in downtown Cincinnati. His motto was: “Be particular. Never sell anything you would not want yourself.”

Kroger, perhaps, is being “particular” through its private-branded offerings, including its highly successful Simple Truth organic and natural line.

Grocery industry experts have banged the drum repeatedly by saying that retailers can differentiate with innovative and exclusive private brands to become destinations and attract loyal customers. Kroger has done that and continues to do it.

Of course, price is a huge play in this game of groceries, but Kroger has also cut prices.

While Kroger’s second-quarter earnings will garner much attention, evaluation and assumption, this game of groceries is far from over. Considering its history and loyal following, Kroger will find its way in the long term.