Kroger CEO says grocer offers customers more than Wal-Mart

Kroger CEO: We offer more than Wal-Mart

CINCINNATI — Kroger Co.’s CEO said Tuesday the grocer has more weapons than price to deploy in the fight for recession-pinched shoppers.

Retail giant Wal-Mart Stores Inc. has signaled it plans to cut more prices as it and other stores try to rebound from slow or falling grocery sales. In their search for lower prices, some shoppers have shifted to warehouse clubs and dollar stores, and Wal-Mart wants to woo them — along with shoppers from standard supermarkets.

But David B. Dillon, chairman and CEO of Cincinnati-based Kroger, said the nation’s largest traditional grocer keeps adding loyal shoppers. He said at the Citi Retail Conference in New York on Tuesday that Kroger offers a better overall shopping experience than Wal-Mart or other discount competitors he says concentrate on price to attract customers.

Dillon, who rarely discusses competitors in detail, said Kroger tries to make sure price isn’t a deterrent to shoppers but also focuses on three other areas: clean stores with speedy checkout lines; well-trained, helpful employees, and a better assortment.

“So we think we stand out in those three keys, and we think we will stand out even more as years go on,” Dillon said at the conference, which was Webcast live. “I think that does distinguish us from Wal-Mart, and I think there’s plenty of room for our success, even with their success.”

A Wal-Mart spokeswoman said Tuesday that families are still feeling challenged to save, and they will get lower prices at its stores.

“We’re making it easier than ever to save by offering thousands of rollbacks on the things families need every day — including staples in our grocery aisles,” spokeswoman Linda Blakley said. “Mom will hear the message loud and clear through advertising and in-store programs that start now and will increase in intensity in the coming weeks.”

Blakley said Wal-Mart’s stepped-up effort to deliver improved and consistent shopping experiences includes new store designs that are clean, open and bright, and easier to navigate in layout and signage.

Christopher Shanahan, a research analyst with Frost & Sullivan, said Kroger keeps customers with the help of deep ties to its communities and grocery business know-how, as well as a robust line of store brands that offer low prices.

“Kroger can compete on price plus quality,” Shanahan said, adding that food shoppers want good prices but also look for value and convenience.

“You can get people to come into your electronics section because you’ve got the cheapest TV’s in town, but when it comes to food, consumers tend to be less sensitive to price and still want a higher quality,” he said.

Analysts say the grocery industry should expect price fights to continue. Hapoalim Securities analyst Ajay Jain said in a recent research note that price competition will make it difficult for grocers to rebuild earnings growth.

But Dillon said Kroger expects to be able to raise prices gradually — he called it “a gentle inflation” that should ease the discounting. And he said the strategy will help Kroger’s revenue and profit.

Lower prices have squeezed Kroger’s profits. It reported this month that its profit fell 27 percent in its fourth quarter, while sales rose 7 percent. Dillon said that while Kroger has been disappointed with its recent earnings reports, its tracking shows it is adding loyal households who are spending more in Kroger stores.

“That’s not growth through cherry-picking people who are shopping store to store, just to buy the specials,” Dillon said, adding that Kroger’s fuel discounts and special coupons for regular shoppers also have helped build loyalty.

He said stores are seeing sales starting to rebound in nongrocery areas such as jewelry, flowers and wine, indicators of improving consumer confidence.

“We think that’s a direct result of people feeling they can spend some discretionary money,” he said.

Kroger shares rose 6 cents, to close at 21.39. The company has nearly 2,500 grocery stores in 31 states.