Dive Brief:

• During last week’s earnings call, Kroger executives attributed their first same-store sales slip in 52 quarters to price deflation and store investments, according to Supermarket News. CEO Rodney McMullin also pointed to the company’s competitors, saying they are “improving and running better stores.”
• Analysts interviewed by SN tended to agree with McMullin, emphasizing that competitors have begun to adopt Kroger's multidimensional strategy, which includes price investments, private label growth, enhanced fresh departments and an increasing focus on consumer data.
• Kroger should expect to see stiff competition going forward, analysts noted. “I don’t think Kroger needs to reinvent itself, but they need to look around and find out where is the next place they need to innovate,” said Diana Sheehan, director of insights at Kantar Retail.

Dive Insight:

As the saying goes, every streak has to end eventually.

But to many industry observers, Kroger didn’t appear ready to end its run of same-store sales growth quarters. Its multidimensional strategy and incremental wins like speedier checkout service seemed poised to keep delivering.

As dynamic as Kroger’s strategy has been, however, competing retailers haven’t exactly been slouches. They’ve consolidated and innovated and brought in top executive talent. Ahold Delhaize has effectively leveraged its vast resources while keeping stores relevant on a local level. Publix executes exceptionally well and has become a customer favorite throughout the southeast U.S. Many of these retailers have emulated Kroger’s strategy and are beginning to see gains from it.

So does the slip indicate significant problems for the country’s largest supermarket? In a word, no.

The real question is, where does Kroger go from here? To that, the company has many promising answers. It’s aggressively expanding its Click List e-commerce service, establishing itself as the online grocery leader in markets around the country. Its recent purchase of Murray’s Cheese, meanwhile, gives it another advantage in the fresh foods space.

Kroger is also investing in state-of-the-art store technology, including a new store pilot that tracks shoppers as they walk the store and delivers targeted offers to their mobile phones.

With price deflation still impacting the industry, this year could continue to be challenging for Kroger, but the retailer's recent investments indicate the company is ahead of the curve in key areas.