Kroger 2Q15 Earnings Call Notes

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While customers continue to feel optimistic about the economy throughout the second quarter, they also continue to tell us they want to spend less. More and more, they want retailers to help them save money with sales and coupons.

Our identical supermarket sales growth of 5.3% in the second quarter demonstrates the strength of our core business.

Another factor that we are actively managing is product costs. While inflation continued at a lower rate during the second quarter, which we estimate was approximately 1.4% without fuel, some commodities had high inflation and others had deflation.

as I said in my prepared comments the produce picture, actually, the deflation slowed. And actually if you were to look at the very end of the quarter was a slight bit of inflation in the last several weeks. Nothing to write home about. But it was deflationary for the quarter but got less and actually turned a bit towards the end of the quarter. You continue to see other categories out there that have a mixed bag. Grocery is still let’s call it just north of flat. Just a little bit of inflation and that’s a big driving factor in it. The other one to keep out, to keep in mind as you think about inflation is pharmacy is a big inflationary area that I spoke of as well. The generic costs continue to go up.

I wouldn’t say there’s been change. The thing that’s probably the biggest difference is the leadership team at 84.51 is involved in every meeting now. And it’s things when you’re trying to make a decision on what you do, the folks who are around the table and they have great insights so you really having those insights as part of the decision at the front end rather than at the back end of the conversation

The wage pressures I would say aren’t really any different than what we spoke of in the first quarter. There continues to be some out there. We’re cognizant of trying to deliver the right overall package to our associates from a solid wage, a good healthcare package and a retirement plan as well. And we’re a little different than a lot of our competitors where we’re balancing all three of those for all of our associates.

it really appears to be much different than just economy based. When you talk to customers they are definitely interested in saving money. There is no doubt about that.

when we look at competition we always assume that competition’s going get more aggressive going forward than it’s been in the past. And we always find that if that doesn’t happen then life’s easier. It’s just the way we’ve years ago learned to do our business plan.

if you talk to people in the oil industry today, oil’s only going do one thing and that’s go down. When oil prices are going up and you talk to somebody in the oil industry, they’re only going do one thing and that’s go up forever.