As part of an effort to maintain sales growth and operating efficiency, Kroger Corp. (Cincinnati) announced that it will reduce administrative and operating costs by more than $500 million during the next two years. As part of the plan, the country's largest supermarket retailer said it will eliminate approximately 1500 positions — primarily management and clerical — over the next 12 months.
“We deeply regret having to announce staff reduction plans, especially at this time of year, and we understand this news will be painful for some of our associates,” said chairman and ceo Joseph Pichler. “However, economic conditions make it necessary for us to implement these actions quickly to maintain Kroger's long-term competitive advantages.”
The announcement came as part of a third quarter report in which the company announced that total sales for the third quarter ending Nov. 10, 2001, increased 3.8 percent. Total food store sales rose 4.3 percent and comparable food store sales rose 1.4 percent. Based on consumers'shopping behavior so far in the fourth quarter, Pichler said Kroger continues to experience softer-than-expected sales in jewelry, floral and general merchandise categories because of the recession.
“We were not satisfied with Kroger's sales,” he said, “which were softer than expected because of the weak economy and challenging competitive conditions in certain markets. We have assumed that, for the next two years, the economic situation and competitive situations will not improve.”
During the quarter, Kroger opened, expanded, relocated or acquired 33 food stores. Food store square footage increased 4 percent over the prior year. Including acquisitions, capital expenditures for the quarter totaled $530 million.
Acting quickly to implement its plan, the retailer said it will merge its Nashville division into division offices in Atlanta and Louisville early next year. The Nashville division operates 85 stores in Tennessee, Kentucky and Alabama. As a result of the Nashville merger, the Louisville division will become the Mid-South division, headed by Louisville division president John Hackett. Though the division office will remain in Louisville, there will also be a regional office in Nashville to insure that local marketing and operating decisions be kept close to the customer. Ron Spurlock, currently vp of operations for the Nashville division, will become vp of the Mid-South division and will head the office in Nashville.
“We are operating in the most challenging economic and competitive environment of the past 20 years,” said Pichler. “Fortunately, Kroger has the financial strength to make the investments necessary to build our business, remodel and expand our store base. Our industry is consolidating rapidly and we believe that Kroger's strategic advantages will enable us to enhance market share as further consolidation occurs.”