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Kroger Sales Rise, But Private Label Volume Declines in Q3

December 6, 2010

Kroger’s total sales for the third quarter rose 5.9 percent, however private label unit share declined by nearly a point, which the company attributes to strong national brand sales in the third quarter.

kroger logoCorporate brands represented approximately 34 percent of grocery department units sold in the third quarter compared to approximately 35 percent in the same period last year, according to company executives.

Total company sales, including fuel, rose to $18.7 billion (up 5.9 percent) compared with $17.7 billion for the same period last year, while sales excluding fuel increased more modestly at 3.1 percent. Same –store sales increased 2.4 percent.

“Overall, the economic recovery is slower and weaker than we anticipated it would be at this point in the year,” said CEO David Dillon. “Job growth remains elusive and fuel prices have risen. These factors affect consumer confidence and their grocery budgets, and many of our customers remain cautious in their discretionary spending.”

Rodney McMullen, president and COO of Kroger, said private label units declined slightly compared to very high tonnage growth during the same time period last year.

“We remain very confident in the outlook for strong future growth in this important part of our business,” he said. “Kroger’s corporate brands portfolio is best in class among U.S. retailers, and we believe this is a unique competitive advantage. Our goal is to continue building this portfolio and increase sales and increase sales of national brands. We do not view these objectives as mutually exclusive. Kroger’s unique portfolio of more than 20,000 corporate brand items combined with our strong partnership with national consumer goods companies helps us offer the variety and value our diverse customer base seeks.”

The Cincinnati grocer’s net income for the quarter totaled $202.2 million compared to a net loss of $874.9 million in the same period last year. (Fiscal 2009 results included non-cash asset impairment charges totaling $1.05 billion after tax that primarily resulted from a goodwill write-down. Excluding these impairment charges, net earnings for the quarter would have been $176.7 million, according to the company).

Although inflation is hitting some departments –– particularly meat and produce –– “de-inflation is persisting in our grocery department largely due to increased promotional spending by national brand suppliers. This promotional spending masks some of the list price increases we have received. The level of deflation is about 50 basis points if you exclude milk.”

Although slow to develop McMullen said grocery inflation is coming. Kroger is “passing on product cost increases from national brand suppliers in the grocery department today, and we will continue to do so,” he noted.