CINCINNATI - The Kroger Co. exceeded expectations on profit in the second quarter but fell short on revenue growth – causing shares to fall more than 10 percent to $28.22 in early morning trades.
Kroger reported a $508 million profit on sales of $27.9 billion in the three months ending June 30. Kroger’s adjusted net earnings of $0.41 per share was 3 cents better than analysts expected. But revenue fell $100 million short of estimates. Kroger’s identical-store sales growth was 1.6 percent, short of the 1.9 percent grow that analysts were forecasting.
That growth looks especially weak compared to recent results by Walmart and Target, both of which reported their strongest quarterly sales growth in more than a decade.
Kroger Chief Financial Officer Mike Schlotman told CNBC Thursday morning that revenue was impacted by the remodeling of 600 stores to optimize space for products that have the best potential for growth.
“The stores are disrupted and it naturally lowers sales a little bit when there’s less product and disruption in the store,” he said. “That peaked in the second quarter.”
Kroger told analysts at the start of the year that it would achieve identical-store sales growth of 2 percent to 2.5 percent for the year. And it maintained that guidance in Thursday’s earnings report.
It also boosted one of its profit projections for the year, with 2018 US GAAP EPS of $3.88 to $4.03 now expected, up from a range of $3.64 to $3.79 in the first quarter.
“We’re really happy with where the business sits today and we’re poised to have a great second half,” Schlotman said.