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Kroger Egg Pricing Turns Merger Trial Into Inflation Fight
I don't think this merger should be approved, but for reasons very different than mythical "gouging" of their customers.
If all FTC lawyers have is that on a given day/week at a given location/region on a given food item (eggs) the prices haven't been lowered "enough," when Walmart lowered it by $0.14 [more], then they are only making Kroger's case for merger and should be laughed out of court... so I hope FTC will bring real, much better and less "populist, sensational" arguments. What about days/weeks when Kroger had average egg prices lower than this or other grocers in the area?
Kroger has more than 2,400 grocery stores which typically carry over 45,000 SKUs, over 40 manufacturing plants, and 17 regional retail divisions, with buyers guided by Kroger's Merchandising Group (KMG) in Cincinnati about regional demographics and preferences, to ensure that those products are always available in local stores.
Inflation always causes "record profits" in $ terms, not the other way around - don't need MBA to understand why:
libertystreeteconomics.newyorkfed.org - What Was Up with Grocery Prices? July 16, 2024
|------- New York Fed analysis - written before Harris' "anti-gouging" comments - showed rising profit margins aren't to blame.
Research by Thomas Klitgaard, PhD, laid the blame on two factors.
One was the huge spike in agricultural and livestock prices. "... grocery prices seem to only respond noticeably when commodity prices make big moves, like the jumps in 2008 and 2011 and the collapse in 2015. The rationale is that there are many other input costs dictating food prices so it takes unusual swings in commodity prices to affect grocery prices."
... Part of the reason was Russia's war against Ukraine, which hurt fertilizer supplies as well as wheat supplies.
The other factor behind the surge in food prices was the large wage increases for grocery workers. Since 2019, industry wages have risen by 15 percentage points more than those in the food-manufacturing sector, or than the workforce as a whole.
... "... significant moderation in food inflation since the start of 2023 is due to still-high wage inflation for grocery workers being offset by the retreat in commodity prices."
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Stock buybacks are just good money management by CFOs - market interest rates were near 0% due to Fed's NZIRP QE, so most profitable companies were buying back stock because it provided higher ROR than cash "in the bank." Buybacks with profits they couldn't reinvest in products or expansion were giving them (and shareholders) >3% after-tax ROR instead of near 0% (if not negative) in cash.
Warren Buffett's Berkshire-Hathaway routinely buys back stock when it can't invest cash more profitably, and to shrink the "natural dilution" - does that mean all the companies who buy back stock are "gouging" their customers and/or engage in "predatory" behavior?
Look at the pitiful condition of so many "dollar stores" or any but the largest "discounters" (Walmart or Target) who have/had much higher margins than Kroger (lowest in the industry at GM 20% / NM 1.4%):
99c Stores (40% / -7%) is bankrupt and closed more than 300 stores (170 of them were acquired by Dollar Tree),
Big Lots (33% / -10%) was worth more than $2B in 2021 but will soon go bankrupt and shut down about 1,400 stores,
Dollar Tree is shutting down 1,000 stores ...
... while Target and Walmart bought up the inventory and use targeted discounts and loss-leaders to pick up "dollar stores" share of growing number of "downsizing" penny-pinching middle-class consumers, hit by inflation and high level of credit debt.
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