CINCINNATI (AP) — Kroger reported weaker-than-expected revenue Friday and said it was hurt by falling prices for eggs, meats and other products, forcing it to lower its sales forecast for the year.
The supermarket operator said it expects the price weakness to continue into next year, but CEO Rodney McMullen expressed confidence that it “won’t last forever.”
Shares of Kroger Co. were up slightly at $31.32 in Friday trading.
Kroger Chief Financial Officer Mike Schlotman told business news channel CNBC that the drop in prices for eggs, meats and milk have affected the price of ice cream and other products that use such ingredients. Kroger, based in Cincinnati, has nearly 2,800 grocery stores around the country, including its namesake Kroger as well as Ralphs and Dillons.
Like other grocers, Kroger has also been trying to keep prices low to fend off competition. Analysts have noted the increasingly competitive environment in the grocery industry, with chains such as Wal-Mart Stores Inc. pushing aggressively to win over customers with lower prices. Restaurant groups including Wendy’s have also said cheaper groceries have crimped their business, because people are opting to eat at home more as a result.
For the second quarter ended Aug. 13, Kroger said sales rose 1.7 percent at locations open at least 15 months. The metric is considered a key indicator of financial health because it strips out the impact of newly opened and closed locations.
For the full year, the company said it expects sales to be up 1.4 percent to 1.8 percent. That’s down from its previous forecast for growth of 2.5 to 3.5 percent.
Kroger’s profit for the second quarter fell nearly 12 percent to $383 million, or 40 cents per share, as it made changes to its employee pensions. A year ago, it earned $433 million, or 44 cents per share.
Earnings, adjusted for non-recurring costs, were 47 cents per share, beating the 45 cents per share Wall Street expected, according to Zacks Investment Research.
Total revenue rose 4 percent to $26.57 billion in the period, which missed Wall Street’s forecast for $26.78 billion.
Kroger said it now expects earnings for the year between $2.10 per share and $2.20 per share, compared with its previous forecast between $2.19 per share and $2.28 per share. Analysts expected earnings of $2.20 per share, according to FactSet.
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