Shares of The Kroger Co. (NYSE: KR) dropped more than 5 percent on Tuesday after the nationâ€™s largest supermarket operator reported a quarterly profit below Wall Street expectations, due in part to labor unrest.
Shares tumbled $1.67, or 5.6 percent to $27.99 in trading volume more than double its daily average.
Net income for the companyâ€™s first fiscal quarter which ended May 26 rose 9.9 percent to $336.6 million, or 47 cents per share, from $306.4 million, or 42 cents per share, a year earlier. Charges from a union strike at a Louisville, Ky. distribution center reduced earnings in the quarter by about 2 cents per share, it said.
Earnings fell a penny short of an average of estimates from analysts polled by Thomson Financial. Sales rose 6.7 percent to $20.73 billion, exceeding expectations of $20.4 billion.
During the quarter, Kroger, which owns Ralphs, Food 4 Less, and other brands, said its capital investments in store remodels, new stores and technology surged nearly 24 percent to $555.8 million.
The largest grocery store operator is negotiating new contracts with union workers in Seattle and Toledo, Ohio.
In southern California, grocery workers this week voted to authorize a strike by their union if stalled negotiations with Ralphs and two other chains fail. A labor standoff in 2003 cost Kroger millions of dollars.
Cincinnati-based Kroger, kept its annual profit forecast intact and said it would increase its stock buyback to $1 billion.