April 19, 2024

Kroger’s Profit Falls Short of Analyst Estimates

“The sluggish economy continues to strain household budgets while increasing consumer anxiety. In fact, customers tell us their expectations for the economy are more pessimistic now than at any time this year,” David Dillon, the chief executive, said in a conference call.

While shoppers are visiting more often, they are spending less per trip by buying fewer items, shifting from national brands to private-label products, and avoiding expensive produce, executives said.

Kroger said it earned $280.8 million, or 46 cents a share, in the period, up from $261.6 million, or 41 cents a share, a year earlier. Sales in the period, which ended Aug. 13 and was the second quarter of Kroger’s fiscal year, rose 11.5 percent, to $20.9 billion from $18.8 billion. Same-store sales rose 5.3 percent, Kroger said.

Excluding a tax adjustment in the most recent quarter, Kroger earned 41 cents a share, falling short of the 43 cents expected by analysts.

Shares of Kroger, which is based in Cincinnati, fell $1.33, or 5.7 percent, to $22.02.

Kroger, which has been gaining market share, said it used a tax benefit in the quarter to make price reductions earlier than planned.

That contributed to the profit miss and intensified worries that Kroger could reignite the industry’s profit-sapping price war of recent years.

Kroger and its rival Wal-Mart, which sells more groceries than any other food retailer in the nation, largely set prices for the industry.

“I don’t think either one of them has any incentive to launch a price war,” said Walter Stackow, senior research analyst at Manning Napier, which holds Kroger shares.

Scott Mushkin, a Jefferies Company analyst, said Kroger’s results and the commentary around consumer behavior did not bode well for Safeway and SuperValu.

“This is not a good sign for them,” Mr. Mushkin said. Price competition could heat up again if food sellers simply decide to begin absorbing some of the higher food costs they had been passing through to shoppers, he said.

Kroger raised its full-year growth forecast for identical supermarket sales because of the healthy second-quarter number, and repeated its forecast for full-year earnings at the top of a range of $1.85 to $1.95 a share.

Article source: http://feeds.nytimes.com/click.phdo?i=7cd70275cae3c6c86f1b10fffa10b60c