Kroger, the largest pure-play grocery chain in the US, has posted a 62% slump in profits for the first quarter of 2019, due to lower gains on business sales and lower gross margins in its pharmacy business.

Kroger’s net earnings before tax fell to US$989m (£779m) from US$2.6bn in the same period of 2018, as the company realised just US$176m from sale of businesses compared to US$1.8bn in the same quarter last year.

Gross margin fell by 0.4 percentage points from the same period last year to to 22.2%, primarily due to “industry-wide” lower gross margin rates in pharmacy.

The retailer’s sales in the first three months of 2019 edged down from US$37.7bn to US$37.3bn with a slight reduction due to the sale of Kroger’s convenience store business unit. Excluding the unit’s disposal, total sales rose 2%.

Organic sales, excluding fuel, grew 1.5% and digital sales grew by 42%.

“The entire company is focused on redefining the grocery customer experience, improved upon by exciting partnerships that will create value,” CEO Rodney McMullen said.

Among these partnerships, Kroger inked a deal with online grocer Ocado in May 2018, aiming to use the latter’s automated technology to ratchet up its delivery business and compete with online retail giant Amazon.

Looking ahead at the remainder of the year, Kroger kept annual expectations unchanged. The company is guiding for annual operating profit to come in between US$2.9bn and US$3bn.

“We are confident in our ability to deliver on our plans for the year and our long-term vision to serve America through food inspiration and uplift,” McMullen added.

Kroger shares were down 0.2% to US$23.59 in early trading.