Kroger shares plummet 10% as Q2 sales disappoint
Kroger stock dropped more than 10% after second quarter results disappointed, with reporting same-store sales that have disappointed analysts as the US retail giant made investments in online services to compete with Amazon and Walmart.
The firm reported store sales, excluding fuel, up 1.6%, which was shy of the 1.9% that was expected by Wall Street. Total revenue of $27.9bn for Q2 was up slightly from $27.6bn last year but short of the $28bn consensus forecast.
Kroger, the largest US supermarket chain by stores and sales, also sacrificed profit by trimming prices to help drive up sales and investing in online offerings to try and boost its digital service, including investments in Ocado. May's deal with Ocado, will see the UK online grocery technology company provide its online grocery expertise across up to 20 distribution warehouses across America, with Kroger buying a 5% stake in the company, which cost it £183m in the first quarter.
Net adjusted earnings fell 5% to $336m but earnings per share were up 5% to 41 cents a share, beating analyst expectations of 38 cents a share.
The main second quarter adjustment items relate primarily to the change in the market value of Kroger's investment in Ocado, which securities.
Net debt of $14.bn was up $939m from the previous year’s same period. The grocer said it was committed to reducing its leverage.
Chairman and CEO Rodney McMullen said: "We are only two quarters into our three year Restock Kroger plan, and we are making solid progress. Kroger customers have more ways than ever to engage with us seamlessly through our recently-launched Kroger Ship, expanded availability of Instacart, successful ClickList offering, and selling Simple Truth in China through Alibaba's Tmall.
"We feel good about our net earnings per diluted share and ID sales results in the second quarter. We expect our investments in space optimization during the first half of 2018 to become a tailwind late in the third quarter.
"We are on track to generate the free cash flow and incremental FIFO operating profit that we committed to in Restock Kroger for 2018-2020, and to deliver on our long-term vision to serve America through food inspiration and uplift."