The Zhitong Finance App learned that the well-known US retailer Kroger (KR.US) announced quarterly results data and future prospects before the US stock market on Friday. Financial reports showed that the company's sales growth was under pressure and profit improvements occurred at the same time. The company lowered its year-on-year same-store sales growth guide from 1% to 2% to 0.2% to 0.2% — 0.8%; in the second quarter, the company's same-store sales after excluding fuel sales increased by only 0.2% year over year, far lower than 3.4% in the same period last year, and falling short of Wall Street's consistent 0.9% growth forecast compiled by LSEG.
Kroger CEO Greg Forland is competing for consumers by cutting prices, improving services, investing in the workforce, and developing e-commerce, but whether these measures can continue to increase customer traffic and market share still needs to be verified. Furthermore, the company claims that the latest sales guidelines include a drag of about 140 basis points caused by the prescription drug price policy. Therefore, the slowdown in sales growth also involves changes in competition, consumer behavior, and drug prices, which cannot all be explained as a decline in the number of purchases and consumer spending of American consumers.
Shopping cart battle heats up: Kroger lowers sales expectations, retail giants compete for consumers' “shopping carts”
Kroger lowered its full-year sales guidelines, indicating that intense competition over consumer spending on groceries is putting pressure on the retailer.
The company's management also predicts that the maximum expected upper limit of the comparable sales increase range for the same store excluding fuel is about 0.8%, lower than the previous high of 2% predicted by Wall Street analysts; this indicator measures the cumulative sales performance of the same store for at least 15 months after opening.
The downgraded outlook puts even more pressure on CEO Greg Foran. He is seeking market share by lowering prices, improving store services, and investing more in the company's workforce. Kroger is also looking to boost online sales.
Wall Street remains skeptical: By the close of the US stock market on Thursday, Kroger's stock price had fallen by about 9% this year. In contrast, the S&P 500 index had risen 11%. After the results were announced, the stock fell close to 5% in the premarket on Friday.
In the quarter ending August 15, Kroger's same-store comparable sales indicators fell short of Wall Street's unanimous expectations, but adjusted profits exceeded expectations, driven by improved e-commerce business profitability, tariff refunds, and other factors.
Although American consumers are still generally resilient, they are more picky when shopping after years of high inflation. Americans buy discounted food, or prefer lower-priced retailers' own brands, and are willing to shop around or even wait to get the best price.
In recent months, the war in Iran has caused gasoline prices to rise, making consumers' budgets even more tight, and particularly impacting low-income households facing cuts in government food aid benefits at the same time. Meanwhile, the summer outbreak of parasitic infections suppressed demand for fresh agricultural products, and some consumers avoided leafy vegetables and berries as a result. This situation is expected to improve over the next few months.
Food inflation has been relatively stable, but some companies warn that prices will rise further in the second half of the year, partly because rising energy costs are gradually being transmitted to consumers. Some products, such as beef, are still a major pain point for consumers due to their high prices.
Walmart, Albertson and other retailers said they plan to keep food prices competitive to attract price-sensitive consumers and increase market share.
Flan, who became Kroger's CEO in February of this year, has signalled significant change. The company has agreed to acquire Giant Eagle to expand its business presence in the northeastern United States, and has appointed a number of new senior executives, including people who have worked at Walmart like Fran.
With grocery supermarkets as the core, Kroger operates fresh, packaged foods and daily necessities, and is equipped with pharmacies and gas stations, which mainly satisfy families with high-frequency daily purchases.
In contrast, Walmart, the largest retail giant in the US, is a comprehensive retailer, with products covering food, clothing, home appliances, etc., attracting a wide range of customers through large-scale procurement, low price strategies, and online and offline channels, while operating Sam's member stores; Costco focuses on paid membership-based warehousing and retail, providing cost performance by streamlining product categories, large package sales, and low price increases. Membership fees are an important source of profit. Therefore, the three focus on food supermarkets, comprehensive low-cost retail, and membership-based warehousing and retail, respectively.
American consumers are still buying and buying, but retail giants' stock prices and performance fundamentals are diverging
Kroger's revenue for the second quarter of fiscal year 2027 increased 2% year over year to US$34.62 billion, slightly lower than LSEG's consensus estimate of US$34.64 billion; net profit was approximately US$641 million, compared to US$609 million in the same period last year; adjusted earnings per share were US$1.09, higher than the forecast of US$1.06 billion. The company maintained its annual earnings of $5.10-5.30 per share and repurchased approximately $1 billion of shares in the second quarter of the fiscal year. Combined with e-commerce profit improvements and tariff refunds, it can be seen that the slowdown in Kroger's revenue and same-store sales growth has yet to be simultaneously transformed into a decline in profit guidelines.
The performance of the US retail giants shows that consumer spending, which accounts for about 70% of US GDP, is still growing resilient. American consumers are continuing a strong spending trajectory, but consumption growth is clearly concentrated in companies with more price, convenience, and channel advantages. Walmart's total revenue for the second quarter of fiscal year 2027 increased 5.9% year on year. Comparable sales in the US business excluding fuel increased 2.6%, and US e-commerce increased 24%; the company also pointed out that the drug pricing policy dragged down the comparable sales growth rate of the same store by about 125 basis points.
Target's sales increased by 5.3% in the second quarter of 2026. Comparable sales at the same store increased by 3.8% and passenger flow increased by 3.6%, indicating that improving products and store operations can still attract consumers, but its profits were also boosted by about US$994 million in pre-tax tariff refunds. Amazon's North American business revenue increased 16% to about US$116.2 billion in the second quarter. Strong growth in its e-commerce business shows that online consumer spending channels continue to expand. However, Amazon segment revenue is different from the supermarket's same-store sales volume, and the move of Prime Day to June affected the distribution of quarterly sales. This set of performance data can be described as actively strengthening the judgment of retail stocks in a market where “consumer spending is quite resilient and retail enterprise differentiation is intensifying.”
According to data from the US Bureau of Economic Analysis, personal consumption expenditure (PCE) increased 0.2% month-on-month in July, but actual consumption after excluding price changes remained almost flat, with an increase of less than 0.1%; actual disposable income increased by 0.4%, and the personal savings rate was 3.0%. In the same period, retail sales in the US fell 0.6% month-on-month, partly affected by early promotions and changes in gasoline prices.
US employment is still providing support: non-farm payrolls increased by 162,000 in August, the number of jobless claims at the beginning of the week ending September 5 was 206,000, and the level of layoffs is still low. As a result, the soft landing scenario still has an income and employment base, and overall US consumer spending remains resilient, yet consumer demand is clearly redistributed and divided among products, services, and different channels.
On September 9, Barclays raised the S&P 500 target from 7,800 points to 7950 points. The bullish basis includes 86% of the 492 S&P 500 companies that have announced second-quarter results, and that corporate profits in the context of resilient consumer spending growth are expected to continue to be stronger than expected. In addition, the AI investment boom continues to unfold. This is why the market's screening focus on retail stocks and the expected growth trajectory after excluding special income fell further to passenger flow, sales volume, market share, and operating profit after excluding special income: companies that can support low price strategies with improved efficiency, and more Opportunities expand growth advantages as consumption becomes more cautious.