Kroger Co. ’s investments in store renovations and technology hurt profit again in its latest quarter, when the grocer tempered its overhaul plans to boost future sales.
The Cincinnati-based chain on Thursday posted its fifth consecutive profit decline for the quarter, a 17% decrease over that period last year to $263 million. Kroger said profit at pharmacies in its grocery stores fell due to pressure from the spread of lower-margin generic drugs across the industry. The company also said it expects to write down by $238 million the value of the Lucky’s Market natural grocer that it invested in three years ago.
Shares fell 4.3% to $26.45.
But same-store sales, which leave aside fuel sales and take stock only of stores open at least 15 months, grew a better-than-expected 2.5% in the quarter. That comes as the company has tempered its overhaul plan, called “Restock Kroger,” to renovate stores at a slower pace so that operations aren’t disrupted drastically overall. The company posted total sales of $28 billion for the third quarter, slightly up from $27.8 billion from a year earlier.
“We are proud of the progress we’ve made and we have learned from the challenges we experienced,” Chief Executive Rodney McMullen said on a call with analysts. “We are on track with a stable and growing supermarket business.”
Produce and store-branded products drove sales in the quarter, Kroger said. Digital sales increased 21% in the third quarter, a slower pace from a year earlier. Kroger is broadening its digital operations with more pick-up and delivery services. It is building automated warehouses with British retailer Ocado Group PLC and offering free pick-up through January.
After adjustments, Kroger reported a profit of 47 cents a share, 2 cents less than expected. The company said a charge related to a change in a pharmacy contract lowered its adjusted earnings by 3 cents a share.
The company maintained its 2020 guidance. It expects same-store sales growth of at least 2.25% and earnings per share of $2.30 to $2.40.
Write to Jaewon Kang at jaewon.kang@wsj.com
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