Kroger Proves Recession Doesn't Stop Grocery Shopping

(MoneyWatch)  Kroger, one of the country's largest supermarket operators, is proving that consumers aren't shying away from grocery stores during the recession. In fact, the retailer had what few in the industry can boast -?€" a financial quarter with sales and earnings increases.

The necessity to buy food is not the only factor powering the Cincinnati-based outfit, which operates 2,481 stores under the banners Kroger, Ralphs, Fred Meyer and others.

During their fourth-quarter conference call, executives pointed to a number of things that are helping the supermarket giant:

• People are eating out less. Don't just take Kroger's word for it. Restaurants are hurting.
• In efforts to save fuel, consumers are going to a one-stop place like a Kroger store to buy food instead of multiple outlets.
• Instead of going out for fun, more people are entertaining at home, meaning that they will grocery shop for party favors.
• The chain's cheaper, and more profitable, private-branded grocery items, which now number more than 14,400, are taking off.

The grocer is counting on that last point to gain more traction in the future. Private brands now account for 27 percent of all grocery sales at the chain, and management expects that number to increase. "We continue to see our own brands as a strategic asset in growing our business in 2009 and beyond," said David Dillon, Kroger's chairman and chief executive officer, during its fourth-quarter conference call.

And it doesn't hurt that Kroger is performing well against Wal-Mart's grocery-carrying Supercenter stores. In 33 markets where the Supercenters have a third-place marketshare in the grocery sector, and Kroger is either number one or two, Kroger's share of grocery sales in those areas rose 8.6 percent year over year during the fourth-quarter period.

Another sign that Kroger is performing well is that the retailer is actually adding jobs during a time when layoffs are grabbing daily headlines. Last year the company added 16,000 new employees, bringing its total workforce up to 326,000.