Kroger Co. (NYSE:KR) shares dropped 5% on Thursday, while Costco Wholesale (NASDAQ:COST) fell about 1% and Target (NYSE:TGT) slid 1.3%. The selling followed disappointing takeaways from Walmart's (NYSE:WMT) results, which contributed to a roughly 3% decline in that company's shares and put pressure on peers. Comments from Kroger's chief executive regarding planned, substantial price reductions across categories added to investor concern.
Walmart's stock fell 2.9% after the retailer offered guidance for second-quarter adjusted earnings per share that came in below the analyst consensus. Management projected adjusted EPS of 72 cents to 74 cents, missing the consensus estimate of 75 cents. The company's annual outlook remained intact, but the market consensus for adjusted EPS stands 7 cents higher than the top end of Walmart's provided range.
Kroger's CEO Greg Foran, who took the helm in February, told Bloomberg News the company is formulating plans to trial and roll out significant price cuts across multiple product categories. The move is framed as an effort by the largest U.S. grocery operator to reclaim market share from rivals, including Walmart, where Foran previously worked.
Walmart's results for the first quarter contained a mix of line-item beats and confirmatory metrics. First-quarter adjusted EPS came in at 66 cents, matching estimates, while revenue reached $177.75 billion, a 7.3% year-over-year increase and above the $175.06 billion consensus. Comparable sales at Walmart-only U.S. stores excluding fuel rose 4.1%, narrowly exceeding the 4% estimate, and Sam's Club U.S. comparable sales excluding gas increased 3.9%, topping the 3.59% forecast.
Walmart's eCommerce segment showed notable growth, with online sales up 26%, well ahead of the 18.6% estimate, paced by expansion in store-fulfilled pickup and delivery and marketplace activity. On the traffic and ticket side, transactions at Walmart U.S. climbed 3%, while average basket size increased 1.1%.
For the full year, Walmart reaffirmed guidance for net sales in constant currencies of plus 3.5% to plus 4.5% and maintained adjusted EPS guidance of $2.75 to $2.85, a range below the consensus estimate of $2.92.
Market participants reacted to the combination of Walmart's conservative near-term EPS outlook and Kroger's price-cut strategy, which together signaled heightened competition and near-term margin pressure for U.S. food and general merchandise retailers.