Kroger shares fall despite Q1 sales beat

Today’s headlines

What’s happening: Shares of Kroger fell on Thursday after the company reported its first-quarter results.

What happened: Although the grocery retailer reported higher-than-expected sales for the quarter, its earnings missed estimates.

Kroger also warned of higher inflationary pressure during the back half of the year.

How were the results: The Cincinnati, Ohio-based company reported healthy sales growth for the latest quarter.

• Revenue climbed to $46.12 billion in the first quarter, topping consensus estimates of $45.47 billion.
• Adjusted earnings came in at $1.58 per share, below Wall Street expectations of $1.59 per share.

Why it matters: Excluding fuel, Kroger’s same-store sales rose 1.0% year-over-year, while adjusted ecommerce sales jumped 19% and profits from Kroger Precision Marketing surged more than 20% in the first quarter.

Kroger has been making investments in private-label brands and new stores to increase traffic, but higher transportation costs impacted its margins. The company’s gross margin shrank to 22.7% from 23.0% in the year-ago period.

Kroger joined its main rivals in highlighting the impact of conservative consumer behaviour, as shoppers spent more cautiously due to rising cost-of-living.

US consumer inflation surged at its fastest rate ⁠in three years in May, with a rise in energy costs resulting in higher grocery prices.

Kroger plans to announce price cuts on several products in a bid to recapture market share from key rivals like Walmart and Costco.

Kroger’s board approved another $2 billion in share buybacks, with the company looking to complete the repurchases by the end of fiscal 2026.

Management reiterated their fiscal 2026 forecast for comp sales, excluding fuel, to grow 1%-2%. They guided to adjusted earnings of $5.10-$5.30 per share, versus market estimates of $5.27 per share.

How shares responded: Kroger’s shares fell 8.4% to close at $56.61 on Thursday following the release of quarterly results. The stock has lost more than 17% over the past month.

What to watch: Investors will continue monitoring overall consumer behaviour and inflationary concerns, which are expected to impact the company’s overall results ahead. Investors will also keep an eye on rising competition.

The markets today

The Canadian dollar in focus today ahead of some major economic reports

Context: The Canadian dollar fell against the US dollar this morning as investors digested the latest economic data.

Details: Data released on Thursday showed that producer prices in Canada rose 1.2% in May, representing a fifth straight month of growth. However, the figure marked a deceleration from April’s 1.6% and came in better than market estimates of 1.8%.

Disruptions to the key Strait of Hormuz route continued to weigh on global commodity markets, impacting supply chains.

Canada’s raw material prices gained 0.7% in May, compared to 2.6% growth in the previous month. The figure came in below market estimates of 1.1%.

Weakness in the US dollar lent support to the Canadian currency this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, declined around 0.1% to 100.79.

Higher prices of crude oil, one of Canada’s major exports, also lent slight support to the loonie. Spot prices for WTI crude oil gained 0.5% to $76.80 per barrel this morning.

The USD/CAD pair rose slightly to 1.4141 this morning.

What to watch: Investors will continue monitoring developments related to the US-Iran peace deal.

Data on Canada’s CFIB business barometer (1500 UAE Time) and retail sales (1630 UAE Time) will be released today. Canada’s CFIB business barometer long-term index, which tumbled to 46.3 in May from 58.0 in April, is expected to rise to 56.5 in June. Analysts expect retail sales in Canada to grow 2.9% year-over-year in April following a 3.4% gain in March.

Other Markets: US trading indices closed higher on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.14%, 1.08% and 2.48%, respectively.

The news shaping the markets

Ukrainian drones hit an oil refinery in Moscow for the second time ⁠this week. The news sent the USD/RUB pair slightly higher in forex trading this morning.

UK’s GfK consumer confidence index came in unchanged from the previous month at -23 in June. However, the latest reading slightly topping market estimates of -24 lent support to the GBP/USD forex pair.

New Zealand’s trade surplus fell to NZ$0.8 billion in May from NZ$1.1 billion in the year-ago month. This missing market estimates of NZ$0.875 billion sent the NZD/USD pair lower in forex trading this morning.

Argentina’s trade surplus rose to a record $3.5 billion in May, climbing from $607 million in the year-ago period. The latest reading coming in higher than market estimates of $2.2 billion exerted pressure on the USD/ARS forex pair.

South Korea’s producer prices surged 8.5% year-over-year in May, accelerating from 7.2% in the previous month. However, the USD/KRW pair fell in forex trading this morning.

What else to watch today

Italy’s construction output (1200 UAE Time), Russia’s interest rate decision (1430 UAE Time), India’s monetary policy meeting minutes (1530 UAE Time) and foreign exchange reserves (1530 UAE Time) as well as Argentina’s retail sales (2300 UAE Time).