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Kroger Shares Drop Due to Outlook that Disappoints

On Thursday, Kroger posted earnings for the fourth quarter that were in-line with estimates on Wall Street, but its disappointing profit outlook helped to drag down shares.

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Shares were down by over 8% during trading before the opening bell after the supermarket chain released its financials.

Net income during the fourth quarter that ended February 3 reached $854 million equal to 96 cents per share, in comparison to $506 million equal to 53 cents per share for the same period one year ago.

Excluding one-off items, Kroger’s earnings were 63 cents per share, matching estimates by analysts.

Revenue was up 12.4% to end the quarter at $31 billion, which slightly surpassed that of $30.8 billion estimated by analysts. The company posted sales that reached $27.6 billion for the same period one year ago.

For its fiscal 2018, Kroger said earnings would be from $1.95 to $2.15 a share, which was below for the most part the average of $2.15 that analysts expected.

Kroger announced that it is planning $3 billion of capital investments in 2018, that excluded acquisitions, mergers, and buying leaded buildings back.

CEO of the grocery chain Rodney McMullen said he is expecting that the new tax legislation in the U.S. would allow the company to speed up its plan of a turnaround that was announced in October of 2017. The plan includes investments in employees, increasing private label brands as well as expanding its “Clicklist” where its shoppers are able to pick up their online orders at stores.

The grocery industry in the U.S. has come under heavy pressure from many sides which have left Kroger in a combative mode.

Whole Foods owner Amazon and Walmart are using their size and scale to their advantage with big investments in tech, while Lidl and Aldi two discount chains from Europe continue expanding footprints and have in some areas forced their competitors to lower prices.

In addition, online upstarts are appearing such as Fresh Direct and that has reimagined the way groceries are being delivered.

In the last couple of weeks, Amazon and Walmart’s push into groceries has increased in speed. Walmart will make a larger investment in the meal-kit business it has and is remodeling stores in order to help support orders taken online.

Amazon has expanded its Prime delivery through Whole Foods, and that includes in areas where Kroger has its headquarters in Cincinnati, Ohio.