I know this isn’t what the OP is asking, but it does serve to bracket the big picture.
Looking at Kroger’s latest 2010 Income Statement:
Pre-Tax Margin after COGS = 23% (17.8 / 76.7)
Pre-Tax Margin after COGS and SG&A = 1.3% (1.1 / 76.7)
I didn’t bother to grab comps besides Kroger, but they can be computed in a similar fashion.
1.3% pre-tax margin doesn’t seem like a lot of cushion. In the portfolio some individual products will have really big margins and others will be loss leaders. If you get the portfolio mix and margins wrong, you might get killed on the volumes.
As others have noted, some stores don’t compete on cost, but they still have to manage a huge portfolio of margins on individual products.