Kroger shares blunt talk on prices (it's not just eggs), shoppers
The grocery chain just lost its CEO to a "personal conduct" scandal, but the interim boss wants to reassure customers, investors, and employees.
Kroger sits at a crossroads.
The company accepted the resignation of CEO Rodney McMullen on March 3 after a board investigation of his personal conduct. He was found to have violated the chain's business ethics policies, but the company clearly pointed out that those violations were not Kroger (KR) -related.
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"McMullen's conduct is not related to the company's financial performance, operations, or reporting, and it did not involve any Kroger associates," the company shared in a press release.
That's very vague, but Ron Sargent, a board member since 2006, was elevated to the job on an interim basis. Sargent takes the helm of the company at a challenging time.
Like all grocery chains and retailers, it's dealing with the looming threat of tariffs, an uncertain economy, and the wild card of having Donald Trump in the White House. Sargent had a lot to say during the chain's fourth-quarter earnings call, but his first comments were designed to lower the temperature in the room.
Kroger needs to reassure its customers
McMullen's departure was sudden, and when you add in the collapse of Kroger's planned merger with Albertsons (ACI) , it's easy to see why the company wanted a familiar, steady hand as interim CEO.
Sargent did not speak much during the call, but when he spoke, it was an effort to reassure investors, customers, and employees that the store was in good hands.
"Kroger has always been committed to its enduring values. This has been true for Kroger since my first job in the summer of 1974, working in the Fort Mitchell, Kentucky store. In many ways, I grew up at Kroger, working summers in college and then full-time for 10 years following business school. I've held various roles in stores and manufacturing, human resources, marketing strategy, and sales," he shared.
The interim CEO was basically trying to move the company past its unusual recent history and reset it back to its traditional values.
"As a board member, I know Kroger's strong leadership team well, and they support the unique culture that powers the company's long-term success. We care for people, and we love food, the most important elements of successful grocery retail," he added.
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Sargent does not appear to be a candidate for the full-time job and will serve until a new CEO is selected by "a search committee and has engaged a nationally recognized search firm," he said. Image source: Jeremy Hogan/SOPA Images/LightRocket via Getty Images
Consumers are spending less money
"The effect of multiyear inflation and higher interest rates pressured spending from budget-conscious households," according to Interim CFO Todd Foley.
That's not the full story.
"Meanwhile, spending from less budget-conscious households was more resilient, and our most favorable household trends were driven by our core mainstream customers," he added.
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He believes that Kroger has positioned itself well with all of its customers.
"We helped customers save in multiple ways through fresh, affordable products and promotions, including loyalty discounts, personalized offers, and fuel rewards, and also through Our Brands' products, which are priced well below national brands at equal or greater quality," he shared.
Inflation is real for Kroger
While consumers often overestimate the impact of inflation, Foley shared a real number that impacts countless households.
"External factors continue to pressure certain fresh commodities, including eggs. Notably, the Avian flu resulted in egg inflation of approximately 70% during the quarter," he said. "Inflationary pressures are not new to our business, and we're confident in our ability to navigate any inflationary environment."
Inflation is not limited to eggs.
"I think eggs are getting a lot of the headlines, but there's a couple of other fresh categories, maybe beef and some of the other meat categories where you're seeing that," Foley added.
Foley was appearing at his final earnings call as interim CFO. He will be replaced by long-time PepsiCo Europe executive David Kennerly on April 3.