Kroger’s Guidance Policy Change and the Aftershock

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.

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.

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.