Kroger's Rotten Quarter = Doom for Grocers

CINCINNATI (TheStreet) -- Kroger's(KR) earnings report, released today, provides more proof that the supermarket sector is in for a rough second half of the year.

The grocery chain cut its full-year guidance on Tuesday after missing analysts' expectations in the second quarter.

The news sent shares tumbling 7.6% to $20.49 just after the opening bell Tuesday.

During the quarter, the company earned $254.4 million, or 39 cents per share, down from $276.5 million, or 42 cents per share. Analysts expected the company to earn 44 cents a share.

Sales slipped 2% to $17.74 billion from $18.09 billion.

Kroger cut its full-year earnings guidance to $1.90 to $2 per share from a prior forecast of $2 to $2.05.

The company has been viewed by analysts as the best of one of the worst economic sectors. If that is the case, it doesn't bode well for rivals like Safeway(SWY) or Supervalu(SVU).

Traditional grocers have been struggling to retain customers who are looking to trade down to discounters like Wal-Mart Stores(WMT), Costco Wholesale(COST) and BJ's Wholesale(BJ).

-- Reported by Jeanine Poggi in New York

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