From Pymnts · PYMNTS · · 1m 30s
Kroger cuts its outlook as shoppers buy only what they need
A grocery giant just told Wall Street its shoppers are down to essentials, and the numbers back it up.
In brief
A grocery giant just told Wall Street its shoppers are down to essentials, and the numbers back it up. Kroger's same-store sales growth nearly vanished this quarter, and the company says squeezed household budgets are the reason. Originally reported by Pymnts.
Kroger cuts its forecast
On Friday's second quarter call, Kroger lowered full-year guidance for identical sales without fuel to 0.2% to 0.8%. In June it had promised 1.0% to 2.0%.
Growth all but stopped
Identical sales without fuel rose just 0.2% in the quarter that ended Aug. 15. A year earlier the same measure grew 3.4%.
Shoppers buy on need
CEO Greg Foran said traffic actually rose, but customers are trading down to essentials. SNAP cuts, pricier fuel and weak confidence are all squeezing household budgets.
“Customers remained under pressure, and that has affected the industry broadly.”
Four headwinds, 265 basis points
CFO David Kennerley broke down the drag: 140 basis points from Inflation Reduction Act drug pricing, 60 from generic prescriptions, 35 from a cyclospora outbreak and 30 from egg deflation.
Inflation propped up the numbers
Grocery units slowed further from the first quarter. What softened the blow was food inflation running modestly higher, meaning dollars held up better than the volume did.
“In terms of units, grocery units decelerated slightly compared to the first quarter.”
Third quarter starts cautious
Kennerley said cyclospora effects are still lingering into the opening weeks of Q3. Trends are improving, but the company baked in more sales headwinds rather than bet on a fast recovery.
“We have taken a cautious view of how long the impact may last.”
What matters most
Kroger's same-store sales growth nearly vanished this quarter, and the company says squeezed household budgets are the reason.
