Kroger, the U.S. supermarket chain, posted same-store sales Thursday (Sept. 13) that fell short of Wall Street views, sending the stock lower in trading.
According to a report in Reuters, Kroger is changing the way it stocks merchandise in the stores, which it blamed for the decline in foot traffic. The program, dubbed Restock, was launched earlier this year in an effort to adjust product choices, rearrange store layouts and highlight private-label brands. But it was feared that those disruptions could hurt traffic for good, as the customers left for other grocery stores.
“Pricing pressure continues to negatively impact comparable sales and margins, and we expect competition to remain intense in 2018,” Moody’s Vice President Mickey Chadha wrote in a note on Thursday, covered by Reuters.
For the second quarter, Kroger's adjusted gross margins declined 36 basis points, impacted by price cuts and increased freight costs. The company's Chief Financial Officer John Schlotman pointed to the EPS outlook, which wasn't changed and is solid given an environment in which the company is “making dramatic investments to reshape the future of the company."
Same-store sales, excluding fuel, increased 1.6 percent during the second quarter. Analysts, according to Reuters, had expected a 1.86 percent increase. Meanwhile, net income in the second quarter increased 44 percent to $508 million or $0.62 a share. That compares with $355 million or $0.39 a share in the year-earlier second quarter. Excluding items, Kroger's earnings came in at $0.41 a share, which is higher than the $0.38 a share Wall Street was seeking.
Ever since Amazon acquired Whole Foods Market, Kroger has been in reinvention mode, launching new services to match the eCommerce giant. In August, the company rolled out a delivery service called Kroger Ship that uses third-party carriers, which will debut in Houston, Louisville, Nashville and Kroger’s hometown of Cincinnati, Chain Store Age reported at the time.
“Kroger Ship is our next step in creating a seamless experience that allows our customers to shop when and how they want,” Chief Digital Officer Yael Cosset said in an announcement. “Our new service is just one more way we are redefining the customer experience as part of Restock Kroger, bringing more convenience and options to shoppers across America.”
With the service, consumers can buy 4,500 private-label products from the retailer, which are not otherwise available online, along with 50,000 different grocery items and household products. The choices were informed by data from Kroger’s 84.51° customer insights division. As the service rolls out, Kroger is offering customers a discount with a one-time promo code.