Kroger falls on margin concerns, drags on grocery names

Jun. 16, 2022 10:13 AM ETThe Kroger Co. (KR)WMK, IMKTA, GO, SFM, ACIBy: Kevin P. Curran, SA News Editor3 Comments

The Kroger Company Corporate Headquarters. The Kroger Co. is One of the World"s Largest Grocery Retailers.

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Kroger’s (NYSE:KR) concerns on supply chain and margin erosion are rippling across the grocery sector on Thursday.

The largest US grocery chain by sales reported an overall strong first quarter, adding to optimism by raising its full year forecasts for EPS and same store sales. However, a broad-based selloff and a jittery market moved shares sharply downward on what might otherwise be minor concerns in the context of the full report.

Chief among these concerns was margin contraction amid cost increases, according to Bloomberg Intelligence analysts Jennifer Bartashus and Gopal Srinivasan.

“Despite better-than-expected fiscal 1Q sales and earnings and higher full-year guidance, we believe Kroger faces a tough road balancing growth initiatives while keeping operating costs low amid a highly inflationary environment,” the team explained. “Concerns about gross-margin erosion persist, as higher costs for products, transportation and labor may not be fully offset by savings goals.”

Given Kroger’s (KR) issues with inflation and supply chain problems, a similar impact is anticipated at many of its peers.

Albertsons Companies (ACI), Weis Markets (WMK), Sprouts Farmers Market (SFM), Ingles Markets (IMKTA), and Grocery Outlet Holding Corp (GO) were among notable decliners in the grocery space on the day.

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