Kroger Co. revised its annual profit guidance downward as rising expenses from store modernization and delivery system upgrades impacted financial results. The Cincinnati-based grocer reported a 10% decline in fourth-quarter revenue to $28.09 billion, marking its first quarterly earnings miss since October 2017.
Fourth-quarter net income fell to $259 million from $854 million in the same period of 2018, with adjusted earnings per share at 48 cents compared to a 52-cent forecast. The company attributed the shortfall to costs associated with new warehouse construction, in-house delivery initiatives, and expanded digital infrastructure.
CFO Michael Schlotman highlighted investments in autonomous vehicle pilot programs, Microsoft-integrated interactive shelves, and automated warehouses as part of efforts to compete with Amazon and Walmart. Kroger plans to allocate $3 billion to $3.2 billion in 2019 for these initiatives, up from $3 billion in 2018.
Despite the challenges, Schlotman emphasized Kroger's retail footprint, stating, "Eleven million people a day come through our stores on average, they live within two miles of one of ours." The company now projects full-year earnings between $2.15 and $2.25 per share, below the $2.26 analyst consensus.
The revenue decline partly stemmed from higher gas prices reducing fuel sales. Kroger's shares fell 12.4% in morning trading as investors reacted to the revised outlook.
