Kroger Lowers Guidance. Food Inflation Is Slowing.

Kroger

lowered guidance on Thursday, blaming a slowdown in food inflation and broader economic pressure.

The grocery chain said it expects full-year same-store sales excluding fuel to increase in the range of 0.6% to 1%. In September, it communicated a range of 1% to 2%.

“The [same-store] sales slowdown is directionally consistent with moderating food at home inflation trends and with competitor commentary on the recent sales moderation,” wrote Oppenheimer analyst Rupesh Parikh.

Parikh reiterated his Perform rating, despite looking “very favorably” on

Kroger

‘s management team and the company’s overall execution in a tough macroeconomic environment. He is standing firm because inflation is trending lower.

Slower prices gains are an encouraging sign for Americans burdened under the weight of rising costs over the past few years, but they make it harder for stores like Kroger to maintain profit margins.

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The official inflation rate has slowed markedly since peaking around 9% last year. In October, the consumer price index rose 3.2% from a year earlier, compared with 3.7% in September. The personal-consumption expenditures rate, published Thursday, came in below expectations at 3% for October.

Kroger said it expects $4.50 to $4.60 a share in earnings for the fiscal year ending in January, updating the range of $4.45 to $4.60 a share from previous guidance.

While the stock initially ticked down after the report was released, it picked up in mid-morning trading following the earnings call, during which management said they expected to exit the fourth quarter with “stronger sales” than the third quarter.

For the fiscal third quarter, the company reported adjusted earnings of 95 cents a share, higher than the 91 cents expected by analysts tracked by

FactSet
.

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Sales of $34 billion for the quarter ended in October matched expectations. Same-store sales in the period declined by 0.6%, without considering the impact of fuel, again matching forecasts.

Shares were up 2.7% to $44.82 in mid-morning trading. The stock is up 0.5% so this year.

Kroger is completing a merger with former rival

Albertsons Cos
.

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In September, Kroger said the merger was on track to close in early 2024, subject to regulatory approval. Earlier this fall, Kroger and Albertsons announced they would sell a little over 400 stores to C&S Wholesale Grocers in a bid to get regulators on board.

Write to Karishma Vanjani at karishma.vanjani@dowjones.com



This article was originally published by a www.barrons.com . Read the Original article here. .