Kroger misses same-store sales estimates as revamp deters customers

FAN Editor

(Reuters) – U.S. supermarket chain Kroger Co missed quarterly same-store sales estimates on Thursday, sending shares down 9.2 percent in premarket trading, as changes to the way it stocks merchandise on shelves kept some customers away from its stores.

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Under its “Restock” program launched this year, the largest U.S. supermarket operator with $123 billion in 2017 sales has been adjusting product assortments, rearranging store layouts and highlighting private label brands on its shelves.

However, analysts have said that the short-term disruption and inconvenience the program has caused could lead some customers to shop for their groceries elsewhere.

Traditional grocery chains are wrestling with Amazon.com Inc’s aggressive expansion into groceries through its purchase of specialty retailer Whole Foods Market and other efforts.

Kroger has responded with a series of initiatives, expanding home delivery, curbside pickup and self-checkout services. It has also invested heavily in technology, including a deal with British online grocer Ocado to build automated warehouses.

The company, based in Cincinnati, Ohio, said its adjusted gross margin fell 36 basis points in the second quarter from a year earlier, hurt by price cuts and higher freight costs.

Same-store sales, excluding fuel, rose 1.6 percent in the quarter. Analysts on average had expected a 1.86 percent increase, according to Thomson Reuters I/B/E/S.

Kroger said its net income jumped 44 percent to $508 million, or 62 cents per share, in the quarter ended Aug. 18, from $353 million, or 39 cents per share, a year earlier.

Excluding one-time items, Kroger earned 41 cents per share. Analysts had estimated a profit of 38 cents.

Total sales rose 1 percent to $27.87 billion, compared with analysts’ estimate of $27.95 billion.

The company’s shares fell 9.2 percent to $31.73 in premarket trading.

(Reporting by Uday Sampath in Bengaluru and Melissa Fares in New York; Editing by Maju Samuel and Susan Thomas)

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