CINCINNATI — Kroger Co. stock on Thursday declined by more than 9% after the company said continued consumer caution led to lower margins in the third quarter, and that annual earnings would come in below the top end of previous guidance, despite hitting its targets on quarterly sales and income.
“Some say the great recession is technically over. For Kroger, it's not over until our customers say it is, and many of our customers continue to be cautious in their spending,” David Dillon, chairman and chief executive officer of Kroger, said in a conference call discussing results for the third quarter.
The slower than expected recovery prompted the company to narrow annual earnings estimates, saying that earnings would be in the range of $1.65 to $1.78 per share, vs. previous expectations of $1.60 to $1.80. “We're striving for a result in the upper half of this range,” Dillon noted.
Kroger reported net earnings of $202.2 million on sales of $18.7 billion in the quarter, which ended Nov. 6. Sales increased 5.9% overall and identical-store sales, excluding fuel, increased by 2.4%. The sales exceeded consensus estimates of $18.5 billion, while earnings of 32 cents per share matched consensus estimates, according to Thomson Reuters.
Karen Short, an analyst with BMO Capital Markets, told SN that the stock decline followed “unrealistically optimistic” expectations for the third quarter that had driven Kroger stock to yearly highs leading up to the earnings announcement.