Kroger Cuts Forecast; Sales Rise 3.8%

Kroger Co. said annual earnings would fall short of its forecast as the largest U.S. supermarket chain lowers prices to compete with discount retailer Wal-Mart Stores Inc.

Earnings per share this year will increase 5% to 7%, less than a previous estimate of as much as 12%, the owner of Kroger, Fred Meyer and Ralphs stores said. Second-quarter net income was $264 million, or 33 cents a share, compared with $255.7 million, or 31 cents, a year earlier. Sales rose 3.8% to $11.9 billion.

Shares of Cincinnati-based Kroger fell $2.25, or 12.5%, to $15.76 on the New York Stock Exchange.