They actually increased their gift cards to 4x points before Christmas. $250 in gift cards buys you 1,000 points or $1 off per gallon. Gas was around $2/gallon when they did that. I can’t imagine that they would open themselves up to that kind of a loss knowing that everybody and their brother would be maxing out their discounts for Christmas between gift cards and groceries. They have to be at least close to breaking even.
They do this every year, for a couple of weeks.
$250 in gift cards buys you 1,000 points or $1 off per gallon.
Do the math. If the average gas tank fill is $15, the average savings would be $15. The maximum is actually $35, if you read the fine print.
That means if you spend $250, you get $15 in a "rebate". If Kroger only pays 94 cents for every $1 gift card they sell, they actually paid $220.90 for those gift cards, and their gross profit on the gift card sale was $29.10 -- more than enough to cover your "rebate".
Do I know that Kroger only pays exactly 94 cents on the dollar? No, I don't. But, Kroger doesn't sell those gift cards for cost -- there's no profit in it. The merchants sell them to Kroger at below face value to get your recipient into THEIR store.
A specific example of this: you can take a bucket of coins into various places and feed them into the CoinStar machine. It will give you a cash voucher that is worth only about 90% of what you fed into it. Or, you can choose a gift card at some place like Chili's, for full value. Do you think that Coinstar is waving their percentage, or do you think that Chili's is agreeing to only a partial payment?
Even the VISA and Amex gift cards provide a profit to Kroger, because they share the merchant fee when your recipient uses it. And, I expect they also share in the $1-$2 that most people leave on a VISA/Amex card when they don't try to spend that last bit. Why do you think that so many businesses are giving you a VISA gift card for rebates?
They have to be at least close to breaking even.
They are. But, it's not because the discounted price of gas is close to their wholesale cost.