WESTCHESTER COUNTY, N.Y. (TheStreet) - With commodity prices skyrocketing, you'd figure a supermarket--with its congenitally tight margins--would be in trouble, deep. Yet Kroger (KR) - Get Kroger Co. Report reported good earnings yesterday, lifting the stocks of other supermarkets like Safeway (SWY) and Winn-Dixie (WINN) . Kroger even waxed positive about future earnings, a rarity indeed.
All around good earnings for a supermarket chain these days? If they are not raising prices hand over fist to cover their increased costs (and they are not) what gives? Though sales were solid--for Kroger, it was also largely a story of cost controls. Unfortunately, though, that's not the story the media is telling, leaving traders in the lurch.
Submit Marketwatch for your disapproval. They didn't even mention cost controls. Boo-hiss. Barron's did one better. In a short article, they managed to make a passing reference to a successful cost cutting campaign in an age of swiftly rising commodity costs. But even they didn't go far enough.http://blogs.barrons.com/stockstowatchtoday/2011/06/16/kroger-earnings-lift-supermarket-sector/?blog_id=53&post_id=22504http://www.marketwatch.com/story/krogers-outlook-lifts-supermarket-chains-2011-06-16
Cost cutting is admirable and instructive, as well as a bit of a long-term risk. Only an organized management can cut costs on demand. Korger accomplished it. Bravo. But the fact that Kroger needed to concentrate on costs to this degree is evidence of its bind. Moreover, costs cuts come harnessed with risk. Just what are you cutting and where? Does any of it put you in bad stead going forward? Is the thin dime you're saving today going to cost you a buck tomorrow? These are all the questions traders need to ask, but you can't if the media don't deign to mention the importance of cost cuts in this--or any other case.
At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.
Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page. For his "Business Press Maven� column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers. Fuchs appreciates your feedback;
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