Kroger digs in with food prices tumbling

CINCINNATI – Kroger lowered its profit expectations for the year as it fights with other grocers for more of the customers’ dollar even as food prices fall.

Also read, Grocery competition heats up as new chain arrives in Winnipeg.

The nation’s largest grocery chain has historically had leverage in the industry with suppliers because of its size, but now it’s competing with companies like Wal-Mart and Target as well.

And even some of the largest retailers in the world are unable to lure more customers given the trend in food prices.

According to U.S. statistics released two weeks ago, prices for the food that Americans take home fell 2.3 per cent over the past 12 months, the largest decline since 2009 when the nation was staggering through the worst economic downturn in decades.

Given the economic recovery, food should cost more, but tumbling commodity and energy prices are pushing most grocery prices lower.

The consumer price index for meats, poultry, fish, and eggs declined for the 14th consecutive month in October, according to the Bureau of Labor Statistics.

On Thursday, Kroger lowered its 2016 per-share profit expectations by a nickel on the high and low end, to between $2.10 and $2.15.

That figure excludes a 7 cent charge related to pensions.

Its profit during the third quarter was $391 million, down almost 9 per cent compared with $428 million last year.

On a per-share basis, the Cincinnati company’s profit was 41 cents, matching Wall Street expectations, according to a survey of industry analysts by FactSet. A smaller survey by Zacks Investment Research had an average estimate of 42 cents per share.

Kroger, however, beat expectations on revenue, which rose nearly 6 per cent, to $26.56 billion.

Shares of Kroger Co. rose $1.06, or 3.3 per cent, to close at $33.36, but have fallen 20 per cent since the beginning of the year and about 13 per cent in the last 12 months.

Kroger has nearly 2,800 grocery stores around the country, including its namesake Kroger as well as Ralphs and Dillons.

SOURCE The Associated Press