Kroger shares sink as subdued 2018 outlook disappoints the market

Kroger shares slumped as the grocer's 2018 outlook disappoints investors.

Kroger shares sink as subdued 2018 outlook disappoints the market

Kroger shares closed in the red Thursday, as the US grocer’s latest results reported a 2017 performance in line with expectations. However, investors and analysts were disappointed with its 2018 outlook; its targeting the same rate of earnings growth for 2018 as it achieved in 2017.

Kroger shares ended the US Thursday trading session 12.39% lower at $22.98. The stock has generally been moving lower since the end of January and is now around 5 cents below its 2018 starting point.

2017 sales performance

Kroger’s fourth quarter and full year results for 2017 showed the grocer achieved a 2017 performance, in line with expectations.

The US business said Q4 net earnings totalled $854 million, while adjusted net earning hits $562 million. Adjusted net earnings in Q4 2016 were €506 million. Total Q4 sales, meanwhile, grew 12.4% from a year earlier, to €31 billion.

Looking at the full year performance, Kroger’s net earnings were $1.9 billion, or $2.09 per diluted share. Total sales, meanwhile, rose 6.4% to $122.7 billion in 2017 from 2016.

“We launched Restock Kroger in the fall of 2017 and finished the year with positive momentum in our sales and overall business,” said Kroger CEO Rodney McMullen.

“Customers are letting us know that they see, feel and appreciate our efforts to redefine the customer experience – and they are rewarding us with growing loyalty. This is the cycle that creates long-term value for shareholders,” he added.

Kroger’s 2018 outlook

While the store’s 2017 performance was positive, the response to the company’s 2018 was one of disappointment.

“Kroger is targeting identical supermarket sales growth, excluding fuel, to range from 1.5% to 2.0% in 2018,” it stated in its earnings release. “The company expects net earnings to range from $1.95 to $2.15 per diluted share for 2018.”

The company also said it anticipates the sale of its smaller convenience stores to close in the first quarter of 2018 – so in the next few weeks. It added it plans to use the proceeds of the sale to reduce debt and repurchase some shares.

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