Kroger 1Q17 Earnings Call Notes

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Rodney McMullen – Chairman and Chief Executive Officer

We think we have the scale to compete with Amazon

“From everything – from our perspective, we would have plenty of scale and certainly $115 billion revenue Company, we would have the scale. The other thing is, if you look at like our own brands, the strength of our own brands and the strength of the experience the customers enjoy, all those things obviously add to that scale as well.”

Michael Schlotman

Increase starting wages

“As Rodney outlined earlier we’ve made conscious decisions to increase starting wages in certain markets to improve associate engagement and retention that will create a better experience for our customers. We continued invest and grow our digital business. Our digital revenue more than doubled in the first quarter compared to last year. This includes revenue from ClickList, Harris Teeter’s ExpressLane and Vitacost.com.”

Deflationary environment was less severe

“The deflationary environment was less severe in the first quarter compared to the fourth quarter, coming in at 20 basis points deflationary without fuel. Grocery was essentially flat during the quarter but had fluctuations up and down during it. Meat continued its deflationary trends. And produce, while deflationary for the quarter, showed inflation in the last four weeks of the first quarter and pharmacy was inflationary.”

Transition from deflation to inflation creates challenging environment

” there is a lot of change in the retail food industry. That, coupled with the transition from deflation to inflation creates a challenging operating environment.”

We don think there could be a little more inflation than we originally thought

“We do think there could be a little more inflation by the end of the year than we originally thought”