Kroger Cut Its Sales Forecast to 0.8% and Kept Its Profit Target

Kroger now expects identical sales, excluding fuel, to grow just 0.2% to 0.8% this year — down from a prior forecast of up to 2%. The company told investors that in September, according to business columnist David Finkel, co-author of 'Scale: Seven Proven Principles to Grow Your Business and Get Your Life Back.'

Second-quarter identical sales rose 0.2%. That's down from 3.4% a year earlier and well short of the 0.9% analysts expected. Management said customers are under pressure and unit growth has slowed since the start of the year.

The detail Finkel keeps returning to is what Kroger left alone. It cut one number and held its profit target, because cost controls and higher-margin businesses are covering part of the gap.

Why does that precision matter?

That kind of accuracy is only possible when a forecast is written down line by line. Kroger knew which assumption broke, roughly how big the miss was, and what offset it. That made it easier to adjust when things started to fall short.

Finkel argues most owners can't do this because most owners' forecasts live in their heads. And that can be changed in any business planning model.

What's wrong with going by gut?

"When your gut says the quarter is soft, it hands you a feeling instead of a diagnosis," Finkel writes.

Is new business slow? Are current clients buying less? Is it costing more to deliver the same work? A feeling can't answer those questions. So owners react to everything at once — freezing hiring, discounting, then lying awake wondering which move was wrong.

Kroger's finance team got to say "sales slowed, profit is holding" because they had the pieces separated.

The macro backdrop makes this more pressing. Late last month the 10-year Treasury yield hit 5.135%, its highest level since 2007, with the Fed's latest rate hike and stubborn inflation keeping borrowing costs high. If a business carries a line of credit or any variable-rate debt, one of its cost lines just moved — whether the plan was updated or not.

How do you build a forecast that diagnoses a miss?

Finkel's prescription takes one page. He lists the steps:

• List expected revenue by client — or by pipeline stage if you sell projects — and put the month you expect the cash to land next to each line.
• Below that, list your main costs.
• When actual numbers drift, you'll see which line moved instead of just feeling uneasy.

Then add one downside check. What happens if your biggest client pays 30 days late, or your costs run 5% over? The point is to learn whether you could absorb a bad month before you have one.

Show the page to someone who isn't you — a bookkeeper or a partner — and ask them to poke holes in it. A forecast only you have seen has the same blind spot as the one in your head.

What comes next?

In a few more weeks, Kroger's management will update investors on its long-term financial outlook. Finkel's advice: pay attention to how specific they are about which assumptions changed. "The companies that can name what moved are the ones that can fix it," he writes.

His closing instruction to owners is concrete. Write your fourth-quarter forecast down before then. Put a date in January on the calendar to compare it with what actually happened.

The takeaway in plain words: a written, line-by-line forecast turns a vague sense of trouble into a named, fixable problem — something Kroger demonstrated the moment it cut one number and held the other.