Kroger is struggling to keep up with the rush of online grocery delivery that’s hitting supermarkets in the pandemic.

The company saw a dip in digital sales compared to last quarter. It also missed its target for revenue.

Kroger’s sales miss makes it clear that its customer base isn’t growing fast enough – in an extremely competitive environment, many shoppers are simply choosing to shop elsewhere. And as the pandemic nears the one year mark, Kroger has maxxed out the benefits of its customers new stay-at-home lifestyle.

The Cincinnati, Ohio-based grocer reported $29.72 billion in sales for the third quarter, according to a release from November 7th. Kroger beat analyst estimates for adjusted EPS, net income and identical store sales in the quarter. 

The “Restock Kroger” initiative, a three-year project focused on leveraging data to give customers more of what they want, has boosted profitability through increased cost savings measures and alternative profit streams. 

Kroger’s stock price dove by 4.36% on Thursday to $30.88. Investors were disappointed by the missed sales benchmark, and with the vaccine advances in recent weeks, “safe” stocks are losing popularity and investors are moving back towards companies that will excel post-pandemic. 

“It’s a bit of a rotation starting to happen,” said Joe Feldman, senior managing director of the Telsey Group, who’s seen the same thing with similarly recession-proof companies like Dollar General and Home Depot in recent days.

Kroger’s stock has been all over the place this year, but is ending 2020 only slightly up from where it started. (Chart from Yahoo Finance)

Net income at Kroger more than doubled to $631 million, up from $263 million during the same quarter last year and beating the analyst estimates of $543.6 million. Adjusted earnings per share were $0.71, higher than last year’s $0.47 and the expected $0.61. Overall sales were $29.72 billion, more than the $27.97 billion Kroger saw during the same quarter last year but less than analyst estimates of $29.97 billion.

Kroger’s identical store sales excluding fuel grew by 10.9% in the third quarter, beating expectations of 10.6% and shattering growth from a year ago, which was 2.5%. Digital sales were up 108% from last year, down from 127% last quarter.

Kroger raised its guidance for 2020, citing a strong expected performance as the pandemic continues. Guidance for identical sales without fuel growth went up from 13% to 14%. Adjusted EPS is now expected to be between $3.30 to $3.35 per share, compared to the previous guidance of $3.20 to $3.30.

Zain Akbari, an equity analyst at Morningstar, didn’t find the increased guidance too surprising given the growth Kroger has seen recently. But he cautions there is “certainly a lot of room for very different outcomes,” depending on how the pandemic continues and how well Kroger can compete with its rivals.