After what has quite possibly been the craziest week in Wall Street history, many people are trying to figure out where to go in this market. While this may or may not be the bottom, it seems like Wall Street has gotten what it has asked for from the government: a solution for all the banks’ problems with bad debt, as opposed to the government just bailing out one firm at a time. Whether or not this was a good move is up for debate, but I will leave that for another time. As I have stated before, in such volatile markets, it is important to minimize at least some of the risk that you take on. That is where Kroger Company (KR: 26.62, 0.00 (0.00%)) comes in.
Company Description
Kroger Co. is a one of the largest US supermarket chains, operating about 2,500 supermarkets, some of which operate fuel centers as well. The company operates stores in the following formats: combo stores, which are the local neighborhood supermarkets that you shop at; multi-department stores, which are larger than combo stores and have a similar offering to a store such as Wal Mart; and price warehouses, which are one stop shops for low priced goods in a warehouse setting. The firm also has 782 convenience stores and 394 fine jewelry stores.
The firm has three tiers of private label items: Private Selection, meant to meet or beat the gourmet brands, “banner brands”, which attempts to be equal or better to the national brand and Kroger value, designed to deliver goods at affordable prices for the consumers. Another important point of note is that all of the firms revenues are generated domestically, which can be both good and bad. With the recent surge in the dollar and possibility of a continued bull market for the dollar, the lack of international exposure should not hurt the company.
Customer 1st Strategy
While most retail stores have a collection of data on consumer shopping habits to support their supply chain, Kroger has taken this a step further with their loyalty program. Tracking what each individual consumer buys, where they buy and when they buy it allows the firm to shift strategies in an ever changing marketplace almost instantaneously. I think CEO David Dillon summed it up best during the last conference call:
“One of the most sophisticated tools we use to leverage opportunities in any economy is our vast collection of consumer data derived from our customer loyalty cards. We use this data to anticipate and respond to changes in consumer behavior. We’ve been building our extensive collection of consumer data since 1999.
