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

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Gary Millerchip: I think you covered it well, Rodney. I guess the only couple of extra points, John, I would maybe add, I do think, as you know, our core strategy is to grow existing loyal customers and what was really pleasing in the quarter as we saw 2.5% growth in loyal customers. So we’re seeing customers move through the loyalty curve and that’s always been carry the strategy to really deeply reward customers and grow that relationship. I think what we are also seeing though is that as Rodney mentioned, we are building that seamless capability with digital, we are starting to now attract a larger number of households too and the investments we are making in digital are creating that capacity to grow households as well. I think the one thing on the loyal house, as I would say, too, is what we saw during the quarter we have seen the last couple of quarters is that maybe that more affluent customer that has shopped maybe a larger number of retailers before that’s consolidated more of their trips and total basket with Kroger as they may not need to adjust their budget because of inflation.

But they feel it’s the sensible and responsible thing to do, and they see Kroger as a great place to get the right quality at a great value as well, and we are seeing that consolidation happen.

John Heinbockel: And just one more quick thing. Just conceptually, I know you don’t want to talk about anything beyond this year, but right? You have raised the EBIT guide quite a bit right now you are up in the high-4s. When you look at €˜22, what was in there, maybe the good guys and the bad guys that kind of work against each other. I am sort of wondering how sustainable is that new level of profitability grant, the margin is not up as much as the dollars are. How do you think about that in terms of how representative of that performance is and what goes and comes next year off the P&L from this year?

Rodney McMullen: John, as you know, we manage our business on dollars. And for us, growing dollars is what creates a sustainable business model long-term. And we always view that the better offer that we can be able to afford to give to our customers the more sustainable that is, and the only way we can do that is by managing our costs and continuing to find and identify areas of waste so that we can reduce that and fund that. Fundamentally, as you look at Kroger, we still would have that same strategy and we would still expect that over time because what we find is that really connects well with the customers. We €“ that allows us the capacity to continue to invest in our associates and support our communities. And when we do those three things right, the shareholders benefit.

So, I know broad picture, that’s what we would do, the way we look at things. And obviously, with everything we do, we try to make sure we are doing it in a way that’s sustainable long periods of time.

John Heinbockel: Okay. Thank you.

Rodney McMullen: Thanks John.

Operator: Thank you. And the next question goes to Kenneth B. Goldman of JPMorgan Chase. Kenneth, please go ahead. Your line is open.

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