Kroger might already be feeling the effects of deflation, as the Cincinnati-based grocer reported a relatively soft third quarter and revised its yearly outlook.
Same-store sales for Q3 were 0.6% lower than they were at the same time last year. Wall Street was projecting a decrease of 0.5%.
In its most recent quarterly statement, released Thursday, Kroger attributed the mediocre performance to declining prices.
For fiscal year 2023, Kroger is forecasting same-store sales to increase 0.6% to 1% year-over-year, which is down from its original projection of an increase of 1% to 2%. Wall Street is predicting a 0.9% increase.
The retailer’s net earnings for Q3 were $646 million, almost twice of what they were a year ago when they were $398 million. Over the first three quarters Kroger has recorded net earnings of $1.428 billion, a slight decrease year-over-year ($1.793 billion).
Kroger’s operating profit for the third quarter was $912 million, which is a slight increase vs. Q3 2022, when it was $841 million. For the year, the grocer is lagging behind its fiscal year 2022 performance—$1.902 billion vs. $3.3 billion.
Kroger had some separate news earlier this week — Pasadena, Calif.-based ghost kitchen company Kitchen United, which has operated a portion of Kroger’s ghost kitchens since 2021, announced it would pull out of that deal to focus on software.
Q3 also saw the launch of a new store concept and private label brand for the grocer.
In September, the grocer broke ground on its first Marketplace store in Plano, Texas. The store will feature Kroger’s largest footprint at 124,000 square feet and is designed to compete against Walmart’s Supercenter format. Marketplace stores also will carry a wider assortment of products including clothing and jewelry. In October, Kroger launched its Hispanic-inspired private label brand, Mercado, which consists of over 50 food products.
Kroger’s third quarter results did not include an update on its pending $24.6 billion merger with Albertsons Companies, Inc.
In September, Kroger and Albertsons announced that they would sell off a total of 413 stores to C&S Wholesale Grocers, in an effort to meet the divestiture requirements of the FTC.
That deal came with mixed reactions in the industry. Former Federal Trade Commission Policy Director David Balto has said he doesn’t believe the deal with C&S will be enough for the FTC to approve the merger.
