(Reuters) -Kroger on Thursday cut its annual sales forecast, pinched by moderating food and grocery prices at a time when volumes have come under pressure from consumers keeping a tight lid on spending.
Its third-quarter same-store sales also came in slightly below Wall Street expectations, sending Kroger’s shares about 1% lower premarket.
Food prices are now moderating, with grocery inflation trending lower throughout the quarter as fresh food products go into deflation mode while packaged food items hit the ceiling on price hikes.
That has started to limit some of the revenue benefits enjoyed by food retailers over the past year, while consumers become increasingly thrifty and pick cheaper alternatives even in groceries.
Competition has also heated up in the grocery space with retailers looking to rein in prices and offer more low-cost food items to attract inflation-hit consumers.
Still, Kroger’s tight rein on expenses has helped protect profits and lower input costs, with margins getting a boost from increased demand for higher-margin private-label items and a let-up in supply chain snags.
The company lifted the lower end of its annual per-share adjusted earnings target by 5 cents, to between $4.50 and $4.60, with a midpoint of $4.55. Analysts on average expect $4.53, according to LSEG IBES data.
Kroger now expects fiscal 2023 identical sales, excluding fuel, to grow 0.6% to 1%, down from its prior forecast toward the low end of a 1% to 2% rise. Analysts estimate a 0.9% increase.
The grocer, which has struck a nearly $25 billion deal to buy smaller rival Albertsons, posted an adjusted profit of 95 cents per share for the third quarter, beating estimates of 91 cents. Same-store sales, without fuel, dropped 0.6% while Wall Street expected a 0.5% drop.
(Reporting by Deborah Sophia in Bengaluru; Editing by Devika Syamnath)
