Kroger 2Q Commentary On Pricing Sends Supermarket Stocks Down

The grocery store Kroger’s stocks tanked in trading on Friday (Sept. 8), taking other supermarket stocks down with it.

The sell-off in shares wasn’t due to second quarter earnings, in which the company met expectations on the earnings side and came in with revenue that was slightly higher. What hurt Kroger’s stocks was comments that it would be operating in a slower growth environment, thanks to Amazon and its acquisition of Whole Foods Market, according to news from CNBC, noting that of the grocery store chains, Kroger has been taking the most hits from investors ever since Amazon announced its multibillion-dollar buy of Whole Foods.

Same-store sales during the second quarter, excluding the company’s fuel centers,  increased 0.7 percent, one percentage point less than Kroger’s comps during the same period last year, reported CNBC.

“We appreciate how hard it is for a company of Kroger’s scale to engineer even a modest rise in same-store numbers,” GlobalData Retail Managing Director Neil Saunders wrote in a note to clients covered by CNBC. “The principle weapon of choice has been to invest in price cuts, something that has impacted gross margins. In our view, this is a necessary evil, and we believe that Kroger is right to maintain its competitiveness and dominance in the sector.”

The report noted that a day before Amazon announced its acquisition of Whole Foods Market, Kroger reduced its full-year adjusted earnings outlook, blaming deflation in food prices and increased competition.

“As our business continues to improve, we remain committed to delivering on our guidance in 2017 and believe we have the ability to grow identical supermarket sales and market share in 2018,” noted the report.

Kroger’s commentary on pricing weighed on other supermarket stocks in trading Friday, including Smart & Final Stores, SUPERVALU, Weis Markets and Natural Grocers by Vitamin Cottage, noted Seeking Alpha.