Shares of Kroger (KR +0.36%) sank on Thursday after the supermarket operator's earnings fell a bit short of investors' expectations.
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Q1 challenges
Kroger's adjusted sales inched up 0.5% year over year to $46 billion in its fiscal first quarter, which ended on May 23.
Excluding fuel, the retailer's identical sales, which measure revenue at stores open for at least five full quarters, rose by 1%.
During a conference call with analysts, CEO Greg Foran said he's working to bring more consistency to the supermarket chain's operations.
"Today, the gap between our best stores and the rest of the fleet needs to improve," Foran said. "Closing it is one of our biggest near-term opportunities."
NYSE: KR
Key Data Points
Kroger's gross margin declined to 22.7% from 23% in the year-ago quarter, driven in part by higher shipping costs and price reductions. Higher labor costs further impacted the company's operating margin.
All told, Kroger's adjusted operating profit increased by less than 2% to $1.5 billion. Its adjusted earnings per share, boosted by stock buybacks, rose 6% to $1.58. That was slightly below Wall Street's estimates, which had called for per-share profits of $1.59.
Leadership is laser-focused on stripping out costs
Still, Kroger said it's on track to achieve its full-year financial forecast. Management continues to expect an adjusted operating profit of roughly $5.1 billion and earnings per share of $5.10 to $5.30.
Foran noted that operating costs have been growing faster than Kroger's sales, a trend he intends to reverse.
"Taking costs out of this business is not optional," Foran said. "It's the starting point for everything else we want to do."
