'Disinflation': Kroger sales stall as grocer hints at lower prices

Kroger reported Thursday its third-quarter profits jumped even as total sales dipped slightly − and the grocer hinted lower food prices would slow sales growth as inflation cooled.

Overall Kroger sales in the latest quarter dropped 0.7% to just under $34 billion. Identical store sales excluding fuel declined 0.6% during the quarter – a key metric that measures sales growth excluding new or closed stores.

Last year, Kroger posted a $398 million profit on sales of $32.4 billion in the third fiscal quarter.

On Thursday, Kroger lowered its sales guidance for the year as the grocer said it needed to deal with consumers' struggles and falling grocery prices. Kroger said its identical sales without fuel growth would range between 0.6% to 1%, down from a 1% to 2% range forecast three months ago.

Kroger noted its identical sales results are negatively affected by its split last year with pharmacy provider Express Scripts.

Chief executive Rodney McMullen said Kroger faced a "challenged operating environment" as "consumer spending tightens." Consumer sentiment has been battered amid some of the highest inflation since the early 1980s.

"We are focused on providing customers with exceptional value. By maintaining our long-term commitment to lower prices, personalized promotions and rewards, we are growing households and increasing loyalty," McMullen said in a statement, adding that Kroger could "navigate many economic environments."

The chief financial officer Gary Millerchip said in a statement that the guidance change reflected "near-term economic pressures and food-at-home disinflation."

The Cincinnati-based supermarket giant posted a $646 million profit for the three months ending Nov. 4 − a 62% increase from the same period a year ago. The improved bottom line was not due to cost-cutting, but because last year's period was marred by an outsize charge on the company's investment in British online grocer Ocado Group.

Despite the sales decline, Kroger results beat Wall Street expectations. Excluding one-time items, analysts predicted Kroger would earn 90 cents per share or about $647 million profit on $33.9 billion in sales, according to Zacks Investment Research in Chicago.

The results follow a $180 million loss in the second quarter when Kroger took a $1.4 billion one-time charge in connection with its opioid settlement with several state and local governments announced in September.

In addition to Kroger stores, the Cincinnati-based grocer operates several regional supermarket chains in 35 states, including Fred Meyer, Harris Teeter, Ralphs, Mariano's, Fry's, Smith's, King Soopers, QFC and others. The company has more than 2,700 stores and employs 430,000 workers.

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This article originally appeared on Cincinnati Enquirer: Kroger lowers sales outlook as inflation cools