Kroger (KR) fell short of Wall Street's second-quarter revenue expectations, citing a challenging environment for consumers as they face reduced federal benefits, inflation and higher interest rates.
"The strength and diversity of Kroger's business model is delivering consistent results in what remains a challenged environment,” Kroger CEO Rodney McMullen said in a statement. “By investing in price and providing more personalized offers, we are helping customers stretch their budgets and manage the ongoing effects of reduced government benefits, inflation and higher interest rates.”
For the quarter ended Aug. 12, Kroger reported $33.9 billion in sales, compared to $34.6 billion in the same period last year. The grocery store giant posted a net loss of $180 million, compared to a net gain of $731 million in the same year-ago period. Adjusted net earnings per share (EPS) rose 6.7% to 96 cents compared to the same year-ago period.
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The results included a $1.4 billion charge related to a nationwide opioid settlement framework, Kroger said.
Identical store sales, excluding fuel, increased 1% in the quarter. Digital sales increased 12%, driven by growth in both pickup and delivery service.
Kroger CFO Gary Millerchip said he expects the environment to remain difficult for shoppers and that inflation will continue to decelerate.
Planned merger with Albertsons 'on track'
"We therefore expect identical sales without fuel will be at the low end of our full-year guidance range and slightly negative in the second half of the year,” Millerchip said.
The company reaffirmed its full-year guidance, calling for identical sales without fuel of 1% to 2%, adjusted net EPS of $4.45 to $4.60, and adjusted free cash flow of $2.5 billion to $2.7 billion.
The company also said that its proposed merger with rival Albertsons is on track to close in early 2024, pending regulatory approval. Hoping to satisfy antitrust regulatory concerns, the companies also announced an agreement to sell 413 stores, eight distribution centers and five private label brands to privately held C&S Wholesale Grocers.
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