Kroger Beats Expectations but Cuts Its Outlook

Kroger Co. posted earnings above expectations in the latest quarter but slashed its guidance for the year, the latest grocer to cite food-price deflation for weakness.

Shares in the supermarket chain, which have slipped 25% so far this year, lost another 1% premarket to $31 apiece.

Kroger, which said its core business remains strong despite a "transition to a deflationary environment," now anticipates 2016 earnings of $2.10 to $2.20 a share, down sharply from its previous guidance for $2.19 to $2.28 a share. The new guidance includes a 7-cent charge from restructuring some pension obligations.

A persistent slide in food prices is putting pressure on more U.S. grocers and distributors, weighing down their stocks and prompting some to revise full-year earnings outlooks.

Kroger, the second-largest retail food seller in the U.S. after Wal-Mart Stores Inc., has been investing to attract customers for its organic products from rivals such as Whole Foods Market Inc. It has also cut its prices on staples like bread and milk.

Excluding fuel sales, identical-supermarket sales increased 1.7% in the latest quarter, compared with a 5.3% rise a year earlier.

In all, Kroger reported a profit of $383 million, or 40 cents share, down from $433 million, or 44 cents a share, a year earlier. Excluding charges related to the pension obligation restructuring, adjusted earnings rose to 47 cents a share.

Revenue climbed 4% to $26.57 billion. The Cincinnati-based company has integrating the stores it added with its Roundy's Inc. acquisition last year. Excluding fuel sales and the addition of Roundy's, total sales improved by 2.9%.

Analysts polled by Thomson Reuters had expected adjusted per-share earnings of 45 cents on $26.74 billion in revenue.

Write to Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

September 09, 2016 09:35 ET (13:35 GMT)

Whole Foods Market, Inc. (NASDAQ:WFM)
Historical Stock Chart
From Aug 2024 to Sep 2024