Kroger’s Profits dropped as they Struggled to Provide Inexpensive Groceries for Middle Class and Low-Income Families

Posted by PITHOCRATES - September 9th, 2012

Week in Review

People like to complain about the high price of groceries.  And a lot of people are doing that today.  Some even demand that the president do something about it to help the poor and middle class.  And he is.  He’s greatly expanded the food-stamp program.  As well as causing the high price of groceries in the first place (see Kroger profit dips but tops expectations by Associated Press posted 9/7/2012 on the Los Angeles Times).

Kroger Co., operator of Ralphs and other supermarket chains, said its profit slipped slightly in its second quarter on higher expenses and an increased tax rate.

The Cincinnati-based company said a key sales figure rose during the period as its loyalty program helped attract shoppers. But merchandise costs — which include advertising, warehouse and transportation expenses — also rose 4.3%.

Like other supermarkets, Kroger has been paying more to stock its shelves as a result of rising commodity costs.  The company has tried to offset the effect by introducing more store-brand items, which lessens its need to stock up on brand-name products…

Kroger is also facing higher costs. Its tax rate in the latest quarter rose to 34.5%, from 27.6% a year earlier.

I heard a kid call in on a talk radio show.  I think it was Rush Limbaugh.  Because I just left after having lunch.  Some young kid probably repeating what he heard his parents said.  He said something about the bags of chips he bought had fewer chips in them these days.  And he blamed President Obama for that.  The radio host laughed.  But said he did not believe it was the president’s fault.  Of course, the radio host was wrong.

All the Obama administration has done to stimulate economic activity is to encourage consumer spending.  With stimulus spending.  Deficit spending.  Lowering of interest rates.  Printing money (quantitative easing).  More low-income benefits.  Anything and everything to encourage people to spend, spend, spend.  But nothing to create a more business-friendly environment.  High taxes and high regulations and high energy costs increase the cost of doing business.  Forcing them to raise their prices to cover their costs.  Or to put fewer potato chips in bags of chips these days.  Because they just can’t raise their prices anymore.  So they have to lower the portion of chips in those bags to cover their costs.

Higher taxes on those ‘who can most afford to pay them’ (i.e., businesses) INCRESE the cost of living for everyone who buys from those businesses.  Like Kroger.  If the Obama administration cut tax rates businesses could more easily pay their advertising, warehouse and transportation expenses.  If the Obama administration eliminated the ethanol requirement for our gasoline there would be more corn available to feed our chickens and cattle.  Which would lower the prices of milk, eggs, cheese and hamburger.  If the Obama administration didn’t print so many dollars the dollar wouldn’t have depreciated so much and increased prices.  And potato chip manufacturers would not have to put fewer chips in their bags of potato chips to cover their costs.

So, yes, young talk radio caller.  You are right.  It is President Obama’s fault there are fewer potato chips in your bag of chips.


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