Kroger announced a $1.4 billion charge for a national drug settlement in the quarter and issued a sales warning for the rest of the year as it expects more challenges with customer spending.
The settlement by Kroger follows a $13.8-billion collective settlement agreed to last November by other retailers including CVS Health Corp., Walgreens Boots Alliance and Walmart.
Kroger, which is merging with smaller rival Albertsons in a $25 billion deal, also said it would sell 413 grocery stores to C&S Wholesale Grocers as the companies seek clearance from U.S. regulators for their proposed $24.6-billion merger. want to get
Kroger said it may need C&S to buy an additional 237 stores in certain geographies to get regulatory approval for the deal, which is expected to close in early 2024.
“We heard a significant bearish argument on KR and ACI that the companies were likely to have trouble finding buyers… Now that’s a big hurdle,” said JPMorgan analyst Ken Goldman. is in the past.”
Kroger shares rose 4.3 percent, reversing pre-market losses, while Albertsons stock rose 3 percent in early trade.
Cincinnati, Ohio-based Kroger, which is still seeing pressure on consumer spending due to high inflation, also missed same-store sales in the second quarter. It expects the environment to remain “challenging”.
“Like-for-like sales without fuel are expected to be at the low end of our full-year guidance range and slightly negative in the second half of the year,” CFO Gary Millerchip said.
Kroger posted a loss of $180 million, or 25 cents per share – its first quarterly loss after nine consecutive quarters of profits – compared with a profit of $731 million, or $1.01 per share, a year earlier, related to opioids. Calculating charges.
Another positive for Kroger despite the sales decline was that its earnings were holding up, said Joe Feldman, an analyst at Telsey Advisory Group.
On an adjusted basis, it reported earnings of 96 cents per share, compared with LSEG’s estimate of 91 cents per share. Gross margin has also improved by 35 basis points over last year.
