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Kroger sinks 13% on outlook warning; CFO blames deflation and competition

  • The supermarket company says it will cut its full-year adjusted earnings range to $2 to $2.05 per share.
  • Kroger CFO Mike Schlotman tells CNBC the outlook was hurt in part by "deflation on top of deflation."

Kroger CFO Mike Schlotman told CNBC on Thursday the grocer's weak profit outlook was because of deflation in food prices and increased competition in the grocery industry.

"In the quarter, we had about 20 basis points of deflation, excluding fuel. That was a little bit less deflation than the prior year and the prior quarter. But keep in mind that's deflation on top of deflation," Schlotman said on "Squawk Box."

He added it appears deflation is ending and sees inflation creeping back in certain segments.

Schlotman spoke after the Cincinnati-based supermarket chain said it will cut its full-year adjusted earnings to a range of $2 to $2.05 per share, down from its previous guidance of $2.21 to $2.25. The company cited a bigger-than-expected increase in product costs. Analysts had expected $2.49 per share, according to Thomson Reuters.

Shares of Kroger fell 13.5 percent in early trading. The company reported better-than-expected revenue and earnings that met estimates in the first quarter. Sales at established stores fell for the second straight quarter after more than seven years of consecutive growth, however.

The CFO said like the rest of the industry, the company is making investments in digital, and will eventually add home delivery too its options.

Kroger CEO Rodney McMullen said the company is focusing on its strategy for lowering its own costs so that it can keep prices affordable for shoppers.

—The Associated Press contributed to this report.

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