Kroger
FINANCE

Kroger Q2 mixed as profit tops Street, but sales come up short

BY Marianne Wilson

Kroger Co.’s second quarter profit topped estimates, but its sales came in below estimates amid ongoing intense competition in the grocery sector.

Net income rose 43.9% to $508 million, or 62 cents a share, from $353 million, or 39 cents a share, in the same period a year ago. Excluding non-recurring items, adjusted earnings per share came in at 41 cents, above estimates of 38 cents.

Sales increased to $27.87 billion from $27.60 billion, below estimates of $27.93 billion. Same-store sales rose 1.6%, below expectations.

On its quarterly earnings call, Kroger management said that its ongoing efforts to adjust store layouts and rearrange brands on the shelves, with an emphasis on its own labels, impacted same-store sales.

“This effect is not a surprise to us,” said CEO Rod McMullen on the call. “We expect the headwinds from space optimization during the first half of 2018 to become a tailwind late in the third quarter.”

Looking ahead, the company raised its net EPS guidance range to $3.88 to $4.03 from $3.64 to $3.79, but affirmed its adjusted EPS outlook of $2.00 to $2.15.

Kroger has been investing in a slew of initiatives to grow its online business as it faces fierce competition in the space from Amazon and Walmart.

“We are only two quarters into our three-year Restock Kroger plan, and we are making solid progress,” McMullen stated in a release. “Kroger customers have more ways than ever to engage with us seamlessly through our recently-launched Kroger Ship, expanded availability of Instacart, successful ClickList offering, and selling Simple Truth in China through Alibaba’s Tmall.”

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