Sept 11 (Reuters) – U.S. grocer Kroger cut its annual identical sales forecast on Friday, underscoring cautious consumer spending even in categories like staples such as food and household items amid growing macroeconomic uncertainty.
Shares of the company were down about 1.5% in premarket trading.
U.S. consumer sentiment weakened in August, while retail sales unexpectedly declined in July for the first time in nine months, as middle- and lower-income households increasingly prioritize essentials and value purchases in the face of persistent inflation.
The lowered sales outlook from one of the largest U.S. grocers raises concerns about the health of the American consumer and adds pressure on CEO Greg Foran, who took the helm in February.
While Kroger’s ability to maintain its profit forecast highlights its cost-control efforts, the slowing sales underscore intense competition from rivals such as Walmart and Aldi.
Retail bellwether Walmart last month reported a rare quarterly sales miss and its slowest sales growth in six years, highlighting weakness in consumer spending, while U.S. President Donald Trump has warned that fuel prices could remain high as the war in Iran drags on.
Kroger expects full-year identical sales without fuel to increase in the range of 0.2% to 0.8%, compared with its prior forecast of a 1% to 2% rise.
It said its updated sales forecast includes a roughly 140-basis-point headwind from the Inflation Reduction Act, which lowered prescription drug prices for Medicare beneficiaries, impacting revenue at its pharmacies. Walmart had flagged a similar hit.
Kroger’s gross margin for the three months ended August 15 was 22.4% of sales, lower than 22.5% a year ago, partly due to higher fuel and transportation costs, as well as the grocer’s move to lower prices on some products.
Second-quarter identical sales growth slowed to 0.2% from 3.4% a year ago, and missed estimates of 0.9% growth, according to data compiled by LSEG.
On an adjusted basis, the company posted quarterly profit of $1.09 per share, compared with estimates of $1.06.
(Reporting by Sanskriti Shekhar in Bengaluru; Editing by Devika Syamnath and Christian Plumb)
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