Kroger Extends Disappointing Week for Retail Sector Earnings Reports

Shares of Kroger KR were down nearly 10% in early morning trading Thursday after the grocery giant's fourth-quarter earnings disappointed investors. As a result, Kroger added its name to the list of sluggish reports from the retail space this week, creating fresh volatility and caution in the evolving sector.

Kroger's Latest Results

For the fourth quarter, Kroger reported adjusted earnings of $0.63 per share, matching the Zacks Consensus Estimate and increasing nearly 19% on a year-over-year basis. Total quarterly revenues reached $31.03 billion, surpassing our consensus estimate of $30.83 billion and expanding more than 12% from the year-ago period.

Kroger also said that same-supermarket sales, excluding fuel, increased 1.5%. The company now expects fiscal 2018 earnings per share in the range of $1.95 to $2.15 per share. Headed into the report, our Zacks Consensus Estimate was calling for 2018 earnings of $2.11 per share (also read: Kroger Reports In Line Q4 Earnings, Sales Beat Estimates ).

Guidance on the low end of previous expectations and slightly-sluggish comps growth was enough to send investors into a panic on Thursday morning. Any concerns about the upcoming year will be exacerbated as competition from Amazon AMZN and other online sellers continues to heat up. Kroger is also facing margin pressure from rising commodity prices, increased freight costs, and higher wages.

Recent Retail Reports

This week's reports mark the end of the traditional fourth-quarter report season, and overall, we have seen mixed results from the retail sector. Total earnings growth from the sector's S&P 500 members broke 9% on the back of 9.6% higher revenues, which is an impressive trend.

But of the 195 companies in our " Retail and Wholesale " that have reported so far, only 56% have managed to surpass earnings estimates. Meanwhile, the sector has witnessed 43 total negative estimate revisions recently, outpacing its 36 positive revisions.

Interestingly, some of retail's most-disappointing reports have come within the past few days. This week's sluggishness started with big-box behemoth Target TGT , which missed the Zacks Consensus Estimate on Tuesday. Target did manage to generate respectable comps growth of 3.6%, but investors ditched the stock. Shares of TGT are down almost 5% on the week.

Wall Street also saw a concerning double miss from Costco COST on Wednesday afternoon. The membership-based wholesale retailer reported adjusted earnings of $1.42 per share, missing the Zacks Consensus Estimate by three cents. Quarterly revenues came in at $32.28 billion, lagging our consensus estimate of $32.72 billion.

One of the week's most-concerning earnings announcements came from Dollar Tree DLTR . Shares of the discount retail company crashed more than 15% shortly after the release of its Q4 report. Dollar Tree reported adjusted earnings of $1.89 per share, missing the Zacks Consensus Estimate by a penny. Meanwhile, same-store sales growth of 2.4% missed Street estimates.

Dollar Tree was showing signs of strength over the previous six months, emerging as one of retail's top picks over that time. Analysts pegged the company as an outperformer based on the presumed health of its core customer base: lower income families in suburban and rural areas. Investors will hope that Dollar Tree can shake of its weak quarter and rebound as its shoppers start to realize their new tax breaks.

Bottom Line

The latest earnings reports from the retail sector underscore the multitude of challenges facing even its biggest names. Sure, tax reform will be a relief-but across the board, retailers are facing rising overhead costs and new competition.

Want more market analysis from this author? Make sure to follow @ Ryan_McQueeneyon Twitter!

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Amazon.com, Inc. (AMZN): Free Stock Analysis Report

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Costco Wholesale Corporation (COST): Free Stock Analysis Report

Kroger Company (The) (KR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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