Kroger profit dips as costs rise

Associated Press Modified: September 7, 2012 at 4:45 pm •  Published: September 7, 2012

NEW YORK (AP) — The Kroger Co. said Friday that its profit dipped slightly in the second quarter, as the nation's largest traditional grocer faced higher expenses and an increased tax rate.

The Cincinnati-based company said a key sales figure rose during the period as its loyalty program helped attract shoppers. But merchandise costs — which includes advertising, warehouse and transportation expenses — also rose 4.3 percent.

Like other supermarkets, Kroger has been paying more to stock its shelves as a result of rising commodity costs. The company has tried to offset the impact by introducing more store-brand items, which lessens its need to stock up on brand-name products.

Kroger is also fighting to hang onto shoppers as it faces intensifying competition from big-box retailers, drug stores and specialty grocers. To hang onto customers, Kroger's loyalty program offers customers discounts based on their past purchases.

Rodney McMullen, Kroger's president and chief operating officer, noted that the company is also working to improve other parts of the shopping experience.

For example, he said the company has whittled the checkout wait time to an average about 30 seconds. In the past, McMullen said the average wait time was as long as 4 minutes.

The efforts seem to be paying off, with sales at supermarkets open at least a year up 3.6 percent, when excluding fuel. The metric is a key gauge of health because it excludes the impact of newly opened and closed locations.

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