The Troubles at Kroger: Frugal Consumers

Did you all catch the time article: The troubles at Kroger: Frugal Consumers?

Apparently Kroger's stock has fallen because they had an unexpected loss of nearly $875 million and doesn't expect improvement until the 3rd quarter of 2010. This loss was not limited to Kroger, all major grocery retailers have taken a hit.

The best part of this short article:
"Grocery retailers began slashing prices in the spring in an effort to lure cash-conscious shoppers into their stores, says Mushkin. "People have been trading down aggressively — from sirloin steak to hamburger — which affects grocery sales," he says, and many consumers are actively price-shopping for individual items."

"'We need the unemployment rate to start falling," he says. "You can't have people shopping at four different stores [to get the best price for a single item] — they need to get back to work and convenience needs to trump price" for grocery retailers to see a significant rebound."

Both Fred Meyer (Kroger) and CarrsSafeway in my area have just started a new campaign: lower prices - look for the yellow sign. Should we expect these price wars to continue? Will we see some stores get bought out? Or will unemployment ease and people get back to "business as usual"? what do you think?

Another question: Did retailers really slash prices or were they just bringing prices back to the levels they were two years ago? For example, we experienced a 25% increase in the cost of milk in 2008 due to the high cost of fuel (remember $5.25/gallon of diesel). So, have grocery prices been slashed, or have we merely seen a "correction"?