Is the next Sam Walton running Kroger?

Wal-Mart's growth is slowing while things are booming at the much smaller retailer. Wall Street is taking notice.

By TheStreet Staff Aug 16, 2013 2:38PM

thestreet logoPoster proclaiming Sale up to 50% off and shoppers silhouetted in foreground copyright Michele Constantin, PhotoAlto Agency RF, Getty ImagesBy Dana Blankenhorn

 

Wal-Mart (WMT) had a disappointing quarter, missing analyst estimates on sales and revenue and suffering a fall in comparable-store sales (TheStreet).

 

The company's official release cited "softer-than-expected sales," and some analysts were quick to blame slow global growth.

 

But at some point, reasons turn into excuses. When sales and profits failed to meet forecasts in the first quarter, analysts blamed the payroll tax hike and late tax refunds. The company also failed to meet analyst estimates in the fourth quarter of last year.

 

So far this year, Wal-Mart shares are up slightly less than 10%, against a 26% gain for the Dow Jones Industrial AverageCostco (COST) shares are up 13.5% and Target (TGT) is up 16.5%.


Kroger (KR) is up 47%.

 

At $96 billion in annual sales, Kroger is just 22% of Wal-Mart's size. But its sales are up 26% over the last three years, against 15% for Wal-Mart.

 

While Wal-Mart has famously been moving into fresh groceries over the last years Kroger, based in Cincinnati, has been increasing its sales of department store merchandise. It does this by copying the layout of its successful Fred Meyer stores in Oregon in other markets, like the Kroger Marketplace stores in Texas and Dillons Marketplace stores in Kansas.

 

The Dillon name is important here, because the CEO of Kroger, since 2003, has been David Dillon, part of the grocery family acquired by Kroger in 1983. Dillon has a law degree from Southern Methodist, but more important may be his Univerity of Kansas degrees in accounting and business administration. And there's his family heritage.

 

David Dillon, you see, is a fourth-generation grocer. A family history, printed in the home town Hutchinson News recently, describes a dynasty of men happy to copy other stores' innovations, from employee stock purchases to bakeries. Kroger made its first attempt to buy out the Dillons in 1957, and while they finally succeeded in 1983, it's more like the Dillons conquered Kroger.

 

While Wal-Mart builds supercenters to which people have to drive, Dillon's strategy has been to build smaller markets closer to customers. While Wal-Mart mainly operates under two brands -- the Wal-Mart department stores and Sam's Club warehouse stores -- Kroger operates under dozens.

 

In addition to 15 different grocery chains, like Ralph's in California and (now) Harris-Teeter in North Carolina, Kroger has a half-dozen convenience store chains, with names like Kwik Stop, Loaf 'n Jug, Tom Thumb, and Turkey Hill. It has low-price stores like Food 4 Less, and four different types of jewelry stores.

 

Many of Kroger's employees work under union contracts, and Dillon offers a great deal of local autonomy. While he lives a fairly quiet life in Cincinnati, he did draw 500 people to his latest annual meeting, where he talked about expanding into areas Kroger can serve with its present infrastructure, and enhancing "digital marketing," which in this case means computer-delivered coupons and loyalty cards.

 

While tech people are always looking for the "next Steve Jobs," retailers are always looking for the "next Sam Walton." Could it be he's been under our noses all along?

 

At the time of publication, the author owned a little over 100 shares of COST.

 

 

More from TheStreet.com

9Comments
Aug 16, 2013 9:08PM
avatar
The only reason Dillon is CEO is because he was runnibg his family heirloom stores into the ground,Kroger stepped in to help and that put Dillon at the top thus now repeating the cycle he did before. Theywant to take away workers 40 hour work weeks and give them 20 hours per person so they do not have to pay benefits. This in turn will generate more money for the CEO and his pals thus making sure the employees fail to live normal lives because they are disrupted by having to work two or three jobs part time to survive.
Aug 16, 2013 9:04PM
avatar
CEO DIllon and his cronies use Wally World as their teen Idol. Such a sad thing because if Barney Kroger were still here he would have ****ned every on in the marketing approach today and the CeEO also would go. They do not live to the Standards Mr Kroger set when he first opened. Money rukes now and there is no compassion for employees because the top dogs want money money money.
Aug 17, 2013 9:16PM
avatar
These days every company is taking advantage of the government handout. Look at Walmart who is laying off 15,000 plus employees just to take advantage of tax credits to hire military vets. I'm not saying that we don't owe our vets a great deal of gratitude, we do. But to displace thousands of families for a tax credit is shameful. Like Walmart needs a tax credit, they've push out just about every real run family store around. And don't think we are out of the recession yet, with the government printing money at an alarming rate. The next downfall we will face is the inflation that will come along with it. If you thought the housing and stock market crash was bad, just wait to see the effect from the coming inflation.
Aug 17, 2013 3:13PM
avatar
Well you can look elsewhere now. Apparently Kroger is reducing weekly hours to 28 in rebellion to the Healthcare Act. That's a CEO who is making millions sitting in an office suite running community food and grocery stores hands-off, condemning the personnel (our neighbors) to accept inadequate pay. In spite of being unionized, individual workers will need to hire lawyers to contest the ridiculousness that this is. If you didn't Found it, you are just an employee too, and what good for the minions needs to happen in the penthouse suite. Don't like it... jump. Eat the rich, they are tender and prime fed, while we get GMO'd.  
Aug 16, 2013 3:22PM
avatar
Ugh... what stupidity. It isn't WHO... it's HOW BIG. The world has no use for BIG anything. It needs BETTER EVERYTHING and that comes from smaller more conscientious and hands-on focused on QUALITY. I wouldn't pay a penny to any Wall Street analyst who hasn't marked where BIG is in their analyses and kisses off any platform that crosses the line.
Aug 16, 2013 3:27PM
avatar

"(Reuters) - AOL Inc said on Friday that it would cut a substantial number of jobs at its money-losing Patch local news site business, and a source close to the company said about half of the staff of 1,000 was being laid off."

 

You really need to subscribe to Comments portals, Reuters. Your articles suck and public comment is vital to express how bad they stink. Instead of dissing AOL, this article should be highlighting the not so bright people that resurrected AOL from the dead to turn it into a toxic business platform that will lose 100% of investor's money this coming week. Don't we get it yet? There is NO SUCH THING as a talent in paper and button pushing, just an affliction. As fully evidenced with AOL.  

Aug 16, 2013 9:02PM
avatar
The NEXT WHAT???, I'm not even going to read anything that stupid.
Aug 17, 2013 7:11AM
avatar
Overpriced with crappy stores. Kroger runs C Stores that are junky and dark inside. You risk your life going into them.

They also buy local chains and run them into the ground.

Aug 16, 2013 3:23PM
avatar
would you like to make money wild drinking a cup of coffee? email:
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

113
113 rated 1
279
279 rated 2
416
416 rated 3
647
647 rated 4
548
548 rated 5
513
513 rated 6
669
669 rated 7
516
516 rated 8
317
317 rated 9
113
113 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
KOGKODIAK OIL & GAS Corp10
UPLULTRA PETROLEUM Corp10
TAT&T Inc9
COPCONOCOPHILLIPS9
DVNDEVON ENERGY CORPORATION9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.