CINCINNATI — Kroger says grocery prices are rising slightly, and it is passing along those hikes, but it may benefit from fuel prices going up because the discounts it offers on gasoline could attract more shoppers.
At the Barclays Capital analyst conference in New York on Tuesday, CEO David Dillon said grocery prices have gone up roughly 2 percent, in what he described as "the low side of moderate" inflation, since late last year as suppliers deal with higher commodity and energy costs.
Dillon said it's too soon to assess the impact on household spending from the expected continued increases in gas prices, but that "spells opportunity" for Kroger because it has more than 1,000 stores with gas stations and a rewards program that has expanded in the last year to tie in with Shell stations.
Regular shoppers can get a discount of 10 cents a gallon at Shell pumps in most markets, and they can accumulate rewards points from store purchases to roll back Kroger store gas prices even more.
Dillon said high gas prices can cause households to cut back on restaurant spending and trade to lower-priced store brands, and that could benefit Kroger, too.
"All of those behaviors for the most part work to our advantage," he said, adding that they could hurt Kroger's sales of discretionary items such as flowers, high-end coffee and deli meats.
Dillon told analysts that Kroger's size, competitive lead in most of its markets, and the consumer insights from tracking data from shopper cards enable it to take advantage of current economic trends.
He said more than half of U.S. households now have Kroger cards, and the penetration rate is some 85 percent in its markets. Cincinnati-based Kroger has nearly 2,500 grocery stores in 31 states, including local banners such as Ralphs, Fred Meyer, Fry's and King Soopers.
Dillon said that some customers are showing with their spending that their personal economic situations have recovered, with sales up in many categories. However, he also said the numbers of shoppers using food stamps remain at all-time highs.