Kroger Stock Tumbles on Weak Sales, Lowers Guidance

Shares of Kroger Co. (NYSE: KR) tumbled 8.2% in last week after the company posted weak sales and lowered its full-year guidance.

Kroger posted net income of $303 million, or 32 cents per share, in the first quarter, down from $696 million in the same period last year. Adjusted earnings per share came in at 58 cents.

Kroger

Sales in the quarter were up 4.9%, from $34.6 billion to $36.3 billion. Sales beat estimates of $35.6 billion. Total sales, with the exclusion of fuel, rose 2.9% compared to the same quarter last year.

Kroger’s acquisition of ModernHEALTH helped to drive sales growth.

The grocery chain struggled with same-store sales, which fell 0.2%. Analysts were expecting a 0.5% decline.

“We remain focused on our strategy,” said Kroger CEO Rodney McMullen in the earnings press release. “This will make a difference for our customers and create value for our shareholders. We are running the business with an eye toward where the customer is going. Customers tell us they want to connect with us in multiple ways with the help of friendly associates to easily provide meals to their families at prices that enable them to stretch their budgets. We are committed to providing that experience, and we will not lose on price.”

Koger in $25 million LIFO Charge

 

The company recorded an LIFO charge of $25 million in the first quarter, higher than the $15 million LIFO charge in the same period the previous year.

In the long-term, Kroger says it will leverage its financial flexibility to return capital to shareholders and drive growth.

With same-store sales on the decline, Kroger lowered its full-year guidance, which sent shares tumbling this morning. The company reduced its GAAP net earnings guidance to $1.74-$1.79 per diluted share.

Kroger now expects earnings of $2 to $2.05 per diluted share.

The guidance includes an $80 million LIFO charge, which is higher than the $25 million LIFO charge previously estimated.

Previous adjusted net earnings guidance was between $2.21 and $2.25 per diluted share.

Kroger expects capital investments (excluding purchases of leased facilities and mergers and acquisitions) to be between $3.2 billion and $3.5 billion.

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Anthony Young