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On Tuesday, Kroger (KR) reported third-quarter earnings -- and missed the Street's estimate.
The grocer announced that it lost $1.35 per share during the quarter, down sharply from a 36-cent profit during the same quarter a year ago. Taking one-time costs out of the equation, the grocer earned 27 cents per share during the quarter. These results were far short of the Street's expected 36 cents per share.
Kroger blamed the shortfall on deflation, increased competitive activity, and cautious spending behavior from its customers. Unfortunately for Kroger, the company doesn't see this pattern changing, as its 2009 forecast comes in at $1.60 to $1.70 per share, far short of the Street's expected $1.96 per share.
UBS took note of the grocer's issues, downgrading Kroger to neutral from buy and lowered the company's price target to $22. UBS cited margin pressure thanks to increased competition as a reason for the downgrade.
Technically, shares of Kroger are bouncing sideways between the $19 and $23 regions. The equity has occupied this range since the start of 2009, and it doesn't look like it will break out of these doldrums anytime soon. Not only are there these technical hurdles for the company, but the competition is really heating up.
I know that here in Kroger's back yard (Cincinnati), Kroger is popular, but its competition is really making some strides. In fact, I used to shop at Kroger but now go to a competitor because of (A) better prices and (B) the store I go to is nicer than its Kroger counterpart. The prices are a given, my family is on a rather tight budget so we are going to shop where the prices are the best. The nicer store layout may seem a bit petty, but let me explain. First things first, the new Kroger stores are very nice, but I am set in my ways now. The grocer I go to is very large and wide open; you don't have to worry about not fitting down an aisle because of a crowd -- I can't say the same for Kroger. Plus, I am very used to the way my grocery is laid out. I know right where everything is, and that is how I make my grocery list (yes, I do the grocery shopping in the Fightmaster household).
Not saying that I won't go to Kroger if it has a better price than my current grocer, but that is a rare happening. Kroger has a lot of work to do in the price department -- and once they can wrench market share away from its competitors the stock may be able to start its own turnaround.
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Reader Comments (Page 1 of 1)
12-09-2009 @ 1:11PM
Daniel said...
GOOD! If they weren't sp stingy with their credit cards they might have more customers! Hope the go out of business!
12-10-2009 @ 8:29AM
chuck spong said...
PRICES MARK- youre out of your mind. that is why they missed their number. kroger is the one that began this value pricing half a decade ago.That is why their loyal shoppers are returning and growing.That is why their tonnage is at near record numbers. They not only have begun many of the programs that their competiters have mirrored but also have matched those that made sense.
Kroger is an amazing buy right now and will continue its amazing run over the last 4 decades of a stock thats return is unmatched in the industry. Become a loyal shopper mark and lower your grocery costs chuck