Kroger has cut its 2025 sales outlook due to a more prudent consumer buying behavior, particularly for fresh groceries. Although the group posted quarterly EPS of $1.05, above market expectations ($1.03 according to LSEG), same-store sales, excluding fuel, rose only 2.6%, below the consensus of 2.91%. The stock is down about 5% today.
The retailer is weighed on by weaker spending amongst low-income households, exacerbated by the temporary suspension of the SNAP program during the federal shutdown on November 1. This program, representing around 6% of Kroger's revenue, saw beneficiaries curb their spending. In this environment, competition is intensifying, notably with Walmart and Target, which are lowering prices. Kroger responded by cutting prices on 3,500 food references to try to preserve its most price-sensitive customers.
To address these pressures, management has launched a cost-cutting plan including plant closures, job cuts and a revision of its logistics strategy. The group is partially abandoning its costly partnership with Ocado and will close three automated centers out of eight, generating a charge of $2.6bn. Kroger is moving toward a hybrid model, relying on its own facilities and expanded collaborations with Instacart, DoorDash and Uber Eats. For 2025, perimeter sales growth is expected to be between 2.8% and 3%, a midpoint below previous guidance and market expectations.
