The Kroger Co. (NYSE:KR) Q3 2022 Earnings Call Transcript

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Scott Mushkin: Great. Thanks. Rodney. And then my second question is a little bit more short-term. I mean we’ve heard some retailers, not necessarily in the food industry, but some retailers that the consumers behave or kind of changed somewhat abruptly as we work through the fall. I mean, is that something you guys have seen? And if yes, do you think it’s started to leak into the competitive environment?

Rodney McMullen: Yes. It’s a great question, Scott. And when we talk to our customers, they are telling us they are changing. But so far, they are changing on purchases other than food. So it’s €“ they are still prioritizing food. It gets a little bit back to one of the comments I made. It’s still 3x or 4x cheaper to eat at home versus going out to a restaurant and so many more people have learned how to cook. So if you look at the behavior changes other than the movement to our brands and being much more aggressive on downloading digital coupons and engaging with some of our promotional offers. That’s really the only behavior we’ve seen in our business outside of the comment I made earlier on our general business, but that’s a much smaller part of our business than many of our competitors.

Scott Mushkin: And the competitive environment has it changed?

Rodney McMullen: No. It’s all €“ as you know, it’s any place you look across the country, you will see it in different stages and €“ but overall, what we see is pretty similar to what €“ how it’s been.

Scott Mushkin: Thanks, guys. Appreciate it.

Rodney McMullen: Thanks, Scott.

Operator: Thank you. And the next question goes to John Heinbockel of Guggenheim Partners. John, please go ahead, your line is open.

John Heinbockel: So Rodney, I want to start with a big picture here. When do you guys think about €“ because you’ve got the data, if you think about growth in households, right? So if you’re going to comp, let’s say, I don’t know, 3% or 4% longer-term, household growth would be what of that and comp growth with comp households would be what? How do you think about that? And then when you €“ is there any way for you to dive into your penetration right with your deciles and where the biggest opportunity is?

Rodney McMullen: I will start and then Gary, please add any color you want. But if you look long-term, we always build our business model around 1% to 2% inflation. And if you €“ as you know, any given year will be different than that. But longer-term, we’ve always felt that, that’s kind of where fundamental inflation will be. Obviously, over the last couple of years, it’s been completely different than that. As I shared in my prepared remarks, our loyal household growth was very strong this quarter, and it’s been moving in the right direction. When customers first become a loyal household, what we find is, over time, we get a higher share of that household growth. And we really are seeing that what we define as our seamless experience where a customer can engage with us where we deliver where they pick up in store and shop in store it’s that combination together that earns us the right.

So as our loyal household grows, we get a higher share and that should be a tailwind to our identical sales growth over time. And that was the reason that we talked about it, and it’s something, internally, we spend a lot of energy on it. And I know, Gary, is there any other color that you think would be helpful for people to understand.

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