Kroger Tumbles After Grocer Predicts Slower Growth This Yearby
Roundy's stores weigh on growth following December acquisition
Same-store sales increase misses estimates last quarter
Kroger Co. fell the most in more than five years after the grocer predicted slower growth this year, hurt by pressure on prices and its merger with the Roundy’s chain.
Excluding fuel, same-store sales will rise 2.5 percent to 3.5 percent this year, the Cincinnati-based company said in a statement Thursday. The increase was 3.9 percent on that basis in the fourth quarter. Analysts had predicted a gain of 4.5 percent in the period, according to Consensus Metrix.
Record production of food has brought lower prices to U.S. supermarkets -- good news for consumers, but a challenging situation for retailers. Beef, pork, chicken and milk output is expected to rise this year, according to data from the U.S. Department of Agriculture. Digesting the Roundy’s business also is a hurdle for Kroger. That chain, which Kroger bought in December, pulled down its sales growth last quarter.
Kroger fell 7 percent to $37.80 on Thursday in New York after releasing the report, marking the biggest drop since December 2010. The shares are down 9.6 percent this year.
Earnings in the current fiscal year will be $2.19 to $2.28 a share, Kroger said. That compares with an average analyst estimate of $2.23, according to data compiled by Bloomberg.
Kroger, the largest U.S. supermarket chain, has been growing by scooping up smaller retailers across the country. The company spent about $800 million, including debt, for Roundy’s, a Midwestern chain. In 2014, Kroger bought Harris Teeter, giving it more locations in the Southeast. There’s also been speculation that the company is interested in buying Fresh Market Inc.