Citi opens downside watch on Kroger ahead of earnings

Investing.com -- Citi opened a short-term downside Catalyst Watch on Kroger ahead of the company's second-quarter earnings report.

The bank expects Kroger to post second-quarter identical sales and comparable sales of 1.0%, matching consensus estimates. Earnings per share are projected at $1.05, also in line with consensus.

Citi anticipates management will reduce fiscal 2026 comparable sales guidance to a range of 1.0% to 1.5% from the previous 1.0% to 2.0%. Consensus estimates stand at 1.4%. The bank also expects earnings per share guidance to be lowered to $5.00 to $5.20 from $5.10 to $5.30, compared with consensus of $5.20.

The expected guidance reduction reflects price investments in the market that are likely to pressure both comparable sales and margins, according to Citi.

Walmart's approximately $3 billion tariff refund is being invested primarily in food and grocery prices to drive market share gains. Walmart management expressed hope that price investments will be funded by vendors beyond the third quarter, as vendors would not want to lose the increase in unit volumes that accompany price investments.

Walmart's $3 billion price investment compares to Kroger's overall earnings before interest and taxes of $5 billion. Citi noted this competitive dynamic appears more pronounced than when Kroger management last reported during the first quarter, and may not be as short-term as previously expected.

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