Kroger saw lower net income despite higher sales last year, which according to an analyst, reflects its tough competition with discount retailers amid the rising cost of living.

The supermarket and department store operator’s annual net income fell 3.6 per cent to $2.2 billion while sales increased 1.2 per cent to $150.04 billion.

“With more pressure on household budgets, grocery consumers are shopping around more than ever before. This has proved to be a windfall to the discount players like dollar stores and Aldi, and to Walmart, all of which have managed to pull in new shoppers,” said GlobalData MD Neil Saunders.

“There are two bits of bad news for Kroger on this front. First, while it has also secured some new shoppers from the dynamic, its gains are far shallower, and it has also lost quite a few to rivals…The second negative point is that from our tracking, once customers have switched and become used to shopping at a lower price player, not all that many switch back, even once economic conditions improve.”

In the fourth quarter, the company’s net earnings surged 63.6 per cent to $736 million while sales climbed 6.4 per cent to $37.06 billion.

For this year, Kroger forecasts sales growth (excluding fuel) of 0.25 per cent to 1.75 per cent.