Kroger on Thursday struck a cautious tone on consumer spending in the near term as it reaffirmed its full-year same-store sales and profit forecasts despite topping first-quarter estimates.

Shares of the company reversed early gains to drop as much as 4.2% as executives said they expect second-quarter earnings to decline at a level similar to the reported quarter.

Kroger posted a 5.3% drop in first-quarter adjusted profit to $1.43 per share, but still topped estimates of $1.35.

"As inflation moderates, we expect customer sentiment to continue improving, but near-term many customers are managing economic uncertainty," said CEO Rodney McMullen.

American shoppers have been searching for more deals and discounts due to strained household budgets and depleting pandemic-era savings, prompting many to purchase more affordable and lower-priced items at one-stop retailers such as Walmart .

However, Kroger's identical sales, excluding fuel, rose 0.5% in the first quarter, compared with analysts' estimate for 0.13% growth, according to LSEG data.

McMullen said the company saw a positive momentum from budget-conscious households in the quarter.

Customer visits were up 5.1% year-over-year on average between February and May this year, according to data from

Kroger has been offering promotions and lowering grocery prices in a bid to attract more consumers, while also investing in its online business and adding products to its private-label portfolio to boost sales.

Yet, it has continued to deal with expenses linked to paying wages to its employees, even as its supply chain costs have now come down from their peaks.

"Kroger's performance remains anemic ... the figures show a clear picture of a company that is struggling to generate meaningful growth," said Neil Saunders, managing director of GlobalData.

Kroger said it was prepared to defend its merger with smaller rival Albertsons, which is currently under antitrust review.

(Reporting by Granth Vanaik in Bengaluru; Editing by Saumyadeb Chakrabarty and Maju Samuel)