Kroger may be the nation's largest traditional grocer, but it still must watch out for falling prices; Wal-Mart long ago overtook Kroger as the largest seller of groceries in the US. While Kroger has diversified through acquisitions, adding jewelry and general merchandise to its mix, supermarkets still account for more than 90% of sales. The company operates about 3,575 stores, including some 2,435 supermarkets and multidepartment stores, under two dozen banners, in about 30 states. It also runs 790 convenience stores under names such as Quik Stop and Kwik Shop. Kroger's Fred Meyer Stores subsidiary operates about 130 supercenters, which offer groceries, general merchandise, and jewelry, in the western US.
Kroger (either directly or through its subsidiaries) operates a wide variety of store formats and banners that divvy up the retail market by size, price point, and geography. Its combination-food-and-drug stores account for 86% of its stores base, followed by price-impact warehouse stores (6%), large multidepartment stores (5%), and Marketplace stores (3%). The company's 70 Marketplace stores, which trade under the Dillon's, Fry's, Kroger, and Smith's banners, capitalize on Fred Meyer's general merchandise expertise. While similar to multidepartment stores, Marketplace stores are generally smaller and don't stock apparel. They offer full-service grocery and pharmacy departments and an expanded general merchandise section that includes outdoor living products, electronics, home goods and toys. Kroger's 145 price-impact warehouse-style stores operate under the Food 4 Less and Foods Co. banners and cater to the thrifty with no-frills, low-cost shopping for grocery and health and beauty care items. Kroger is also a major pharmacy operator, with pharmacies in about 80% of its food stores. Kroger operates about 40 manufacturing plants, including 15 dairies and two ice cream plants, which supply its stores with breads and baked goods, dairy products, meat, and thousands of other grocery items, including organic foods. Kroger's supermarkets typically stock about 11,000 of its own-brand products, about 40% of which the company manufactures. Kroger also has a personal finance business (launched in 2004).
Kroger operates supermarkets in about 30 US states from coast to coast. Key markets include California, Ohio, Texas, and Georgia, which combined are home to more than a third of its supermarkets. Its Fred Meyer subsidiary does business in the Pacific Northwest and Alaska. All of Kroger's sales are rung up in the US.
Kroger's sales topped $90 billion in fiscal 2012 (ends January), a 10% increase vs. the prior year. Sales at the company's supermarkets grew 5%, while fuel sales climbed more than 42% over the same period due to a 26% increase in average retail fuel prices and a 13% jump in gallons sold. (Fuel sales accounted for nearly 19% of total sales in fiscal 2012, up from less than 12% two years ago.) Same-store sales, excluding fuel, at Kroger's supermarkets increased 5%. While sales were up in fiscal 2012 net income fell by 46%, although the company was still profitable. Unlike many other traditional US grocery operators, including ailing SUPERVALU, Kroger has seen its sales increase every year over the past decade. Indeed, as of September 2012 the company achieved 35 consecutive quarters of positive same-store sales growth, excluding fuel.
Kroger is fighting to defend its share of the US grocery market from increasing competition from big-box retailers, drugstores, and specialty grocers. Indeed, Kroger is the only traditional grocery company among the top four sellers of groceries in the US. (The others are Wal-Mart, Costco, and Target.) Increasing its market share is an important part of the company's long-term strategy. To that end, Kroger launched a loyalty program that offers discounts to customers based on their past purchases and has been cutting prices while improving service and product selection to hang on to customers. It has also whittled the wait time at the checkout stand to an average of about 30 seconds, from as long as four minutes in the past. Private-label products, which help to differentiate supermarket chains from their competitors and foster customer loyalty, are a pillar of Kroger's merchandising strategy. The grocer's 11,000 private-label products account for more than 25% of its grocery sales. With pharmacies in many of its stores nationwide, Kroger announced plans in late 2012 to purchase specialty pharmacy company Axium Pharmacy Holdings, based in Florida. The move satisfies Kroger's long-term growth plans and allows the grocery chain to serve customers that require complex drug therapies. – less