Kroger Co (NYSE: KR) in the first quarter of FY 17 reported that the sales at established stores fell for the second straight quarter after more than seven years of consecutive growth, signaling that competition for the supermarket is growing more intense. Further, KR has cut its profit outlook as there is heightened competition in the grocery industry, with German discounters Aldi and Lidl attempting to draw more shoppers through low prices. As a result, the stock crashed this morning and lost over 12.7% (as of 10:14AM EDT on June 15th, 2017; Source: Google finance)

But the group reported that they are focusing on its strategy for lowering its own costs so that it can keep prices affordable for shoppers. KR in the first quarter of FY 17 has reported the adjusted earnings per share of 58 cents, while the adjusted revenue rose 2.9 percent to $36.28 billion in the first quarter of FY 17, beating the analysts’ estimates for revenue of $35.51 billion. The recent merger with ModernHEALTH contributed to sales growth.

Moreover, Kroger has posted the gross margin of 22.1% of sales for the first quarter. Excluding fuel, ModernHEALTH and the LIFO charge, the gross margin has decreased 45 basis points from the same period last year. Kroger has recorded a $25 million LIFO charge in the first quarter of 2017, compared to a $15 million LIFO charge in the same period last year.

Additionally, Kroger has used the free flow over the last four quarters to repurchase $1.5 billion in common shares, while pay $438 million in dividends, invest $3.4 billion in capital, and merge with ModernHEALTH for approximately $390 million.

On the other hand, for the full year, Kroger expects the earnings per share to be in the range of $2 to $2.05, down from its previous guidance of $2.21 to $2.25 per share.Kroger continues to expect identical supermarket sales growth, excluding fuel, of flat to 1% growth for 2017. The company continues to expect capital investments excluding mergers, acquisitions, and purchases of leased facilities, to be in the $3.2 to $3.5 billion range for 2017. Over the long term, Kroger has planned to achieve net earnings per diluted share growth rate of 8 – 11%, plus a growing dividend.

Kroger stock has fallen 26% in the last one year (source: Google Finance).