Existing store sales surprisingly dropped in the latest quarter. As Fred Katayama reports, price wars and falling grocery prices are hurting the largest U.S. supermarket chain.
Price wars pressuring Kroger. The largest U.S. supermarket chain surprised Wall Street with a drop in existing store sales in the latest quarter. Analysts had expected a slight increase. It comes as rival Wal-Mart has intensified the price wars by launching a price comparison test in 11 states aimed at closing the pricing gap with Kroger and discount grocery chain Aldi. Falling grocery prices are also hurting Kroger whose brands include Ralphs and Fred Meyer. The disappointing same-store sales pushed its stock lower in early trading. Its shares have dropped by more than a fifth over the last 12 months, vastly underperforming Wal-Mart. First Standard Financial's chief market economist Peter Cardillo says price conscious consumers will keep pressuring retailers. SOUNDBITE: PETER CARDILLO, CHIEF MARKET ECONOMIST, FIRST STANDARD FINANCIAL, (ENGLISH) SAYING: "The consumer remains very cautious. Even though personal income is quite strong and spending is pretty good, they're not just going to throw their money down the drain without looking for a bargain And so that brings us to the question of discounting. And discounting in many ways hurts a lot of the retailers.." 8:42:27 Kroger's falling profit and rising net sales topped expectations. But the retailer doesn't see much sales growth this year with a forecast ranging from flat to 1 percent growth.