Kroger cut its full-year identical sales forecast on Friday to between 0.2 and 0.8 percent excluding fuel, down from the 1 to 2 percent it had been guiding. It left its profit forecast exactly where it was, at adjusted earnings of $5.10 to $5.30 a share. Quarterly sales came in at $34.6 billion against $33.9 billion a year earlier, adjusted earnings per share were $1.09 against an estimated $1.06, and the shares reversed premarket losses to rise about three percent in morning trading.
Read the two halves of that sentence separately, because they are describing two different businesses.
The sales half says the American consumer has gone careful in the one category where careful is supposed to be impossible. This is groceries. People eat. Kroger’s chief executive Greg Foran, who took over in February, told analysts unit growth had slowed since the start of the year and described the customer as disciplined rather than absent. Still showing up. Buying what they came for. He pointed at reduced SNAP benefits, climbing fuel costs and softening confidence. A chunk of the guidance cut, about 140 basis points, is the Inflation Reduction Act pulling down pharmacy pricing rather than anything a shopper did.
The profit half says the company saw this coming and rebuilt where the money comes from. Adjusted e-commerce sales grew twenty percent. Retail media and higher-margin businesses carried the quarter. Own brands outperformed national ones, with Private Selection up more than fourteen percent on new ready-to-eat and ready-to-heat lines. Evercore’s Greg Melich called it managing a choppy backdrop relatively well.
Now translate the whole thing into a coffee shop, because the same week is happening in cafes everywhere and most owners are reading it wrong.
Your covers have not fallen. The queue at eight is the same queue. What has changed is what is in the cup. The oat milk caramel thing with the extra shot has quietly become a single flat white. The pastry has become nothing. Average ticket is down eleven percent while headcount is flat, and the temptation at that moment is to panic about footfall, which is the one thing that is not broken.
The correct reading is that the customer is still loyal and has become deliberate, and deliberate customers are not lost customers. They are customers telling you precisely what they value. They kept the coffee and dropped the extras, which means the coffee is the relationship and the extras were an accessory to it.
What you do with that is the entire game, and Kroger has just shown it. You do not chase the missing ticket with discounts. You go and find margin somewhere the customer does not feel it. Kroger found it in own brand, e-commerce and retail media. A cafe finds it in a house blend it roasts or buys direct instead of reselling someone else’s, in wholesale beans to the office down the road, in a lunch trade that uses a kitchen already paid for at eleven.
The thing all of those have in common is that the customer’s smaller order stays exactly as good as it was. Nobody gets a worse flat white to fund the recovery.
One more detail worth stealing. Foran suggested the strain could intensify in the back half of the year, and he said it while reiterating the profit number. That combination, honest about the environment and specific about the commitment, is what a forecast is supposed to sound like.
The cart is lighter. The customer is still pushing it.
Source: Reuters, “Kroger trims sales target as shoppers pull back, sticks to profit forecast”
