(Bloomberg) -- Kroger Co.’s shares slipped, erasing earlier gains, after executives flagged a dip in profit due to pressure in the supermarket operator’s pharmacies and an increase in promotions.

Earnings, excluding some items, will decline in the second quarter, the company said Thursday on a call with analysts. Executives pointed to challenges in the pharmacy business — including low margins and limited availability for wildly popular GLP-1 drugs, which are often used for weight loss. Kroger is now the second grocery company flagging the drugs’ low profitability. Kroger is also offering more discounts to stay competitive as promotions increase to pre-pandemic levels. 

“We expect pharmacy business profitability pressures to carry over into the second quarter,” Todd Foley, Kroger’s interim chief financial officer, said on the call. 

The stock declined 1.9% at 12:13 p.m. in New York trading, reducing the year-to-date gain down to about 12%. 

Comparable sales, a key metric for retailers, rose 0.5% last quarter, the largest US supermarket operator said in a statement earlier Thursday, topping the average analyst estimate. Growth has stalled in recent quarters as grocery sales normalize after the pandemic and gains fueled by high levels of inflation taper off. Adjusted earnings of $1.43 a share also outpaced estimates. The company reiterated its guidance for the full year. 

Kroger executives said lower-income households are spending more after that category fell off last year. Customer visits are rising in part due to personalized discounts. 

“As inflation moderates, we expect customer sentiment to continue improving,” Chief Executive Officer Rodney McMullen said. “But near-term, many customers are managing economic uncertainty.” 

Kroger’s results add to a cloudy picture of the retail landscape. US shoppers have remained resilient, but some are holding off on bigger purchases. Many are turning to cheaper store brands and visiting multiple retailers to save money. 

Walmart Inc., the world’s largest retailer, said sales rose last quarter as the big-box retailer attracted consumers looking for essentials and discounts. At Target Corp., revenue fell for the fourth consecutive quarter — in part due to pullback in discretionary spending.

“The good news from Kroger is that performance has picked up since the last quarter,” Neil Saunders, a retail managing director at GlobalData, said in a research note. “However, the not-so-good news is that performance remains anemic with overall sales and comparable revenue virtually flat over last year.”

Kroger, which owns a number of grocery chains including Ralphs and Dillons, is trying to further increase its US market share by acquiring Albertsons Cos. in a proposed $24.6 billion deal, which has US Federal Trade Commission is seeking to block. Hearings are expected to begin later this summer.

Kroger said it paused its share repurchase program to cut debt after the proposed Albertsons deal.

(Updates share move; adds comments from the call)

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