Kroger shares get clobbered after new earnings report
Company, which is market leader in state, has seen stock price fall 30% in past year
Intense price competition dragged The Kroger Co.’s profits lower in the second quarter compared with the same time a year ago, and investors responded Friday by dumping the company’s stock.
Kroger’s shares were down nearly 10% in morning trading before finishing the day down $1.71, or 7.5%, at $21.06. The company’s shares have fallen 30% in the past 12 months.
Kroger is the parent company of Milwaukee-based Roundy’s Inc., which operates the Pick ’n Save, Metro Market and Copp’s stores in Wisconsin and the Mariano’s chain in northern Illinois.
Kroger, the world’s thirdlargest retailer behind Walmart and Costco, is the grocery market share leader in Wisconsin and Milwaukee.
Roundy’s has no intention of backing down to competitors, said spokesman James Hyland.
“It’s a long-term approach, and we’re not done yet,” Hyland said. “We put a stake in the ground here in Wisconsin, and we’re going to serve notice to everyone that we’re going to get market share back.”
Cincinnati-based Kroger has been slashing prices to remain competitive, and the situation recently grew potentially more complicated when Amazon.com Inc. acquired Whole Foods and cut prices on many items almost immediately.
Kroger CEO Rodney McMullen has said the company does not intend to lose market share to competitors and will cut prices and adjust sales strategies accordingly.
All of that has put pressure on Kroger’s profit margins, but may be working to keep shoppers coming into its stores. Kroger’s revenues rose 3.8% to $27.6 billion in the quarter, topping Wall Street expectations, according to a survey by Zacks Investment Research.
Sales at stores open at least a year increased slightly.
But profits fell 7.8% to $353 million, or 39 cents per share, a penny short of analyst projections.
“While we see continued price pressure as unfortunate, we believe that Kroger is in a much better position to weather this storm than many other players,” wrote Neil Saunders, the managing director of GlobalData Retail. “Its size and scale afford the company much more flexibility on pricing and provide more scope for cost savings elsewhere in the business to offset such reductions.”
Kroger reaffirmed its fullyear outlook for earnings between $2 and $2.05 per share, but that does not include any potential impact from hurricanes Harvey and Irma.