- In an effort to cut costs, Kroger Co. announced it will offer early retirement to approximately 2,000 corporate employees due to rising competition from both traditional stores and online merchants, according to the Wall Street Journal.
- Kroger, the second largest seller of food in the U.S., is also dealing with falling food costs, which it reported hurt its sales and drags down profits over time. A few weeks ago, Kroger lowered its expectation for its annual profit for the second time in 2016.
- Last quarter, Kroger revealed comparable supermarket sales (excluding fuel sales from its branded gas stations) were basically flat compared to the 5.4% increase it saw last year.
Announcing a round of cutbacks during the holiday season — even in the form of early retirement — is never looked at fondly, but it’s a reality that many in the grocery industry face as prices shrink and online competition grows.
One bit of good news is that the Consumer Producer Price Index figures released earlier this week suggests conditions may improve by spring, and analysts believe prices should start rising again by mid-2017.
While early retirement offerings do cut costs, some business analysts argue it could result in a loss of tacit knowledge over the long run, which could hurt a store in the future. Kroger has announced it won’t replace the jobs of those who accept early retirement, but many other corporations replace those workers with people who have more of a 21st century skill set, and can help the company in the future.
The way the grocery industry is trending, other retailers may follow Kroger’s lead.