Plunging Margins Add to Kroger Stock Slide

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Part 4
Plunging Margins Add to Kroger Stock Slide PART 4 OF 6

Kroger’s Guidance Policy Change and the Aftershock

Kroger’s stock slides 7.5% after 2Q18 results

Kroger’s (KR) stock tumbled on September 8 after the supermarket giant announced its plan to scrap the practice of providing long-term guidance. The decline came despite the fact that the company delivered a top-line beat, better-than-anticipated comps, and in-line earnings. The company also reaffirmed its fiscal 2018 earnings guidance of $2 to $2.05 per share.

The investors took the change in Kroger’s guidance policy as a sign of confirmation that the grocery industry was grappling with fierce competition. “It’s a sign of pessimism about the industry,” said Jennifer Bartashus, an analyst at Bloomberg Intelligence. “There’s a lot of uncertainty about the impact of the Amazon-Whole Foods deal and the impact of Wal-Mart’s strategy — right now, it’s highly competitive,” she added. Kroger’s stock dropped 10% on Friday, September 8, to hit a new 52-week low of $20.41. The company finally closed at $21.06, 7.5% below the previous day’s closing price.

Kroger’s Guidance Policy Change and the Aftershock

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The company also drove down the stock prices of other food retailers and wholesalers. Supervalu (SVU), Target (TGT), and Walmart (WMT), for instance, lost 6.8%, 2%, and 1.5%, respectively.

Discussing Kroger’s YTD performance

Kroger is currently among the worst-performing food retailer stocks. The company is down 39% YTD (year-to-date) and is trading 73% below its 52-week high. Supervalu has also lost close to 40% this year, while Sprouts Farmers Market (SFM) and Walmart (WMT) have risen 8.2% and 14%, respectively.

Investors looking for exposure in Kroger through ETFs can choose to invest in the First Trust Consumer Staples AlphaDEX Fund (FXG), which invests 3.2% of its portfolio in the company.


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