Kroger shares plunge 10% after earnings, revenue miss

Kroger shares plunged 11 percent before the markets opened Thursday after the grocer reported quarterly earnings and revenue that fell short of analysts’ expectations.

Here’s what the company reported compared with what Wall Street was expecting, based on average analyst estimates compiled by Refinitiv:

Earnings per share: 48 cents, adjusted, vs. 52 cents expectedRevenue: $28.09 billion vs. $28.38 billion expected

The grocer reported fiscal fourth-quarter net income of $259 million, or 32 cents per share, down from $854 million, or 96 cents per share, a year earlier.

After adjusting its earnings to exclude expenses from its pension plan, a derivatives loss and other items, Kroger earned 48 cents per share, missing the 52 cents per share expected by analysts surveyed by Refinitiv.

Net sales during the quarter ended Feb. 2 dropped 9.5 percent to $28.09 billion, falling short of expectations of $28.38 billion. However, excluding fuel, an extra week in 2017, the convenience store divestiture and a merger with meal kit company Home Chef, sales increased by 1.6 percent.

Outgoing CFO Michael Schlotman said on CNBC’s “Squawk Box” that the roughly 10-cent drop in gas prices compared to the same time last year accounted for the majority of the quarter’s revenue decline.

Sales at stores open for at least five quarters, excluding fuel, grew by 1.9 percent.

The grocer grew digital sales by 58 percent during fiscal 2018 and expanded its pickup or delivery programs to reach 91 percent of its customers, all part of its efforts to compete with retail giants Walmart and Amazon. During the fourth quarter, the company opened more warehouses for the division.

“We’re very bullish on our digital business,” Schlotman said on CNBC.

Looking to fiscal 2019, the grocer is targeting same-store sales sales growth, excluding fuel, of between 2 and 2.25 percent. It expects to earn between $2.15 to $2.25 per share for the full year, a more pessimistic range than expected by analysts. Wall Street was forecasting the company to earn $2.26 per share this year.

While consumer packaged goods companies like Hershey and Procter & Gamble have been hiking prices, Schlotman said that Kroger has been able to negotiate the cost of goods.