Kroger trims annual sales view as price-conscious shoppers tighten spending

This June 15, 2017, file photo shows bagged purchases from the Kroger grocery store in Flowood, Miss. (AP Photo/Rogelio V. Solis, File)

Kroger narrowed its annual sales forecast on Thursday on signs of shoppers becoming more selective in spending on groceries and fresh produce even as it topped third-quarter profit expectations on the back of cost savings.

The supermarket chain operator is facing pressure from low-income shoppers pulling back and trading down amid cuts to food-stamp benefits.

SNAP benefits, which provide food assistance to those with tighter wallets, briefly lapsed for the first time ever on Nov. 1 during the federal shutdown, squeezing household budgets.

Roughly 10 per cent of all U.S. spending on shopping trips that use food stamps takes place at Kroger, the second‑highest share after Walmart, and about six per cent of its total sales come from such transactions, according to Jefferies analysts.

Competition has also intensified, with bigger rivals such as Walmart and Target slashing prices to win customers. Kroger too cut prices on 3,500 items, including fresh produce and meat to retain budget-conscious shoppers.

Its interim CEO Ron Sargent and newly appointed CFO David Kennerley have shut plants and cut jobs to lower costs, while revamping its ecommerce plan to navigate the macroeconomic uncertainty following the ouster of CEO Rodney McMullen in March.

Kroger has also cut back its costly push into automated fulfillment centers with British partner Ocado, saying it would close three of eight sites and take a US$2.6 billion charge as it shifts to a hybrid network and deepens ties with third-party delivery firms such as Instacart, DoorDash and Uber Eats.

Its shares fell about four per cent in early trading as the company also missed quarterly sales estimates.

Kroger’s identical sales, excluding fuel, rose 2.6 per cent in the third quarter, compared with expectations of 2.91 per cent, according to data from LSEG. It earned $1.05 per share on an adjusted basis, beating expectations of $1.03.

The retailer expects 2025 identical sales, excluding fuel, to grow in the range of 2.8 per cent to three per cent, the midpoint of which is below expectations of a 3.14 per cent rise. In September, it had expected sales growth in the range of 2.7 per cent to 3.4 per cent.

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Reporting by Savyata Mishra in Bengaluru; Editing by Arun Koyyur