Kroger’s latest quarterly results disappointed investors, causing the stock to fall on Friday.
Kroger now expects same-store sales, excluding fuel, to grow between 0.2% and 0.8% this fiscal year. This is lower than its previous forecast of 1% to 2% growth. The company said the change is mainly due to a 140-basis-point hit from the Inflation Reduction Act, which lowered prescription drug prices for Medicare patients and reduced pharmacy revenue. Kroger kept its full-year earnings forecast at $5.10 to $5.30 per share.
Kroger reported second-quarter earnings of $1.05 per share, just below Wall Street’s estimate of $1.07. Sales reached $34.6 billion, which was about what analysts expected.
Kroger shares dropped 2.6% in premarket trading, while the overall market saw a small gain.
These results come at a time when ongoing inflation is causing many middle- and lower-income families to focus on essentials instead of non-essential purchases. U.S. consumer confidence also fell in August after July retail sales unexpectedly dropped for the first time in nine months.
Other major retailers have also felt the impact of the Inflation Reduction Act’s changes to pharmacy pricing. The law lets Medicare negotiate prices on some prescription drugs and set new price caps on 10 medications for chronic conditions starting in January. Walmart, for example, reported similar pressure in its latest earnings, as the policy change affected its same-store sales more than expected.
Earlier this quarter, Kroger increased its dividend by 11%, making it the 20th year in a row the company has raised its payout. Kroger also bought back $1 billion in shares during the quarter, bringing total buybacks this year to $1.2 billion out of a $2 billion program announced late last year. The company expects to finish the remaining buybacks by the end of the fiscal year on January 30, 2027.
