Kroger Co. (KR) experienced a significant drop in its stock price, reaching a six-month low in premarket trading on Friday. This decline followed the company’s report of fiscal second-quarter sales that fell short of expectations. Adding to its challenges, Kroger also announced a $1.4 billion charge to settle opioid claims.
During the quarter ending in July, Kroger recorded a net loss of $180 million, or 25 cents per share. This is a significant decrease compared to the net income of $732 million, or $1.00 per share, reported during the same period last year. Adjusted earnings per share, excluding one-time items like the opioid settlement charge, came in at 96 cents, surpassing the FactSet consensus of 91 cents.
Despite these earnings per share figures beating expectations, net sales saw a decline of 2.3%, reaching $33.85 billion, falling short of the FactSet consensus of $34.12 billion. Same-store sales grew by 1.0%, but this also missed the projected increase of 1.3%.
Looking ahead, Kroger maintains its fiscal 2023 outlook, with an adjusted EPS expectation ranging from $4.45 to $4.60 and same-store sales growth anticipated to be between 1.0% and 2.0%.
Addressing the opioid claims settlement separately, Kroger agreed to pay $1.2 billion to states and subdivisions and $36 million to Native American tribes in installments over the course of 11 years—aiming to resolve the majority of these claims. Despite this significant financial commitment, Kroger emphasizes that the settlement will not impact its ability to finalize the proposed acquisition of Albertsons Cos. (ACI), which has encountered regulatory obstacles.
Over the past three months leading up to Thursday, Kroger’s stock has experienced a slight decline of 0.5%, while the S&P 500 has seen a gain of 3.7%.
It is clear that Kroger faces multiple challenges currently, including disappointing sales and the settlement of opioid claims. However, the company remains committed to its growth projections and is determined to overcome these obstacles in pursuit of success.
