Despite consumers spending less on eating out, the nation’s largest grocery chain, Kroger Co. (KR) confirmed before the opening bell on September 15 that the company’s profits during the 2Q retreated, due in large part to price cuts in order to retain their current shoppers.

For the recent period, the Cincinnati-based retailer recorded net earnings of $254.4M, or $0.39 per share, in contrast to last year’s 2Q profits of $276.5M, or $0.42 per share, a decrease in net income of nearly 8% year-over-year. Although Kroger has attracted more frequent shoppers who are purchasing more, the customers are buying cheaper items.

Quarterly revenues were down year-over-year, falling from $18.1B to $17.7B, a drop in sales of 2.2%. These totals included the sales of fuel, which greatly affected the company’s overall performance, as the price of gas was much lower this year than was last year. Excluding the revenues generated from the sale of fuel, overall revenues for the quarter would have increased 3.5%.

Analysts, within the industry, were looking for the grocer to post quarterly earnings of $0.44 per share based on overall sales of $18.2B.

David B. Dillon, Kroger’s Chairman and CEO commented on the company’s results, “We remain confident in our strategy. The number of loyal households we serve and the number of items they are buying in our stores grew during the quarter. As a result, we experienced exceptional tonnage growth. Kroger’s customer-focused strategy is generating and will continue to generate long-term value for our shareholders.”

Dillon later added, “We remain on our plan. Our approach and the investments we are making continue to strengthen Kroger today and position us well for future growth. Our customers are increasingly turning to Kroger’s family of stores to meet even more of their everyday household needs.”

Through the first six months of the year, Kroger’s profits have increased, posting net earnings of $685.5M, or $1.05 per share, up from last year’s six-month tally of $662.5M, or $1.00 per share, an increase of almost 3.5%.

Sales, however, are down year-over-year for the comparable period, falling from $41.2B to $40.5B, nearly a 2% decline.

Inside the company’s balance sheet, net total debt for the quarter totaled $7.3B, down nearly $200M from last year. Meanwhile, overall capital investment tallied $518M, up from last year’s total of $461.1M. Kroger also spent $83.6M in order to purchase leased properties during the quarter.

Throughout the quarter, Kroger repurchased 2.8 million shares at an average price of $21.58 per share. The total purchase price for that investment amounted to $60.1M. By the end of the 2Q, there is more than $424M remaining in allocated capital under the $1B repurchase program announced back in January 2008.

Looking ahead to the remainder of the year, Kroger reaffirmed their projected sales growth at established stores to increase between 3% and 4%. Nevertheless, the company did lower their overall earnings guidance for the year, reducing their projected earnings per share from $2.00 to $2.05 per share, downwards to a range between $1.90 and $2.00 per share.

The reduction in guidance from Kroger reflects the company’s expected changes in consumer behavior for the remainder of the year, as the economic environment has taken its toll on consumer sentiment.

Following a dismal quarterly report, shares of Kroger plunged throughout the September 15 trading session, falling $1.65, or 7.5%, to conclude the day at $20.46 per share.

Over the past year, Kroger’s stock has traded within a relatively narrow range, reaching a high of $29.59 per share, while falling as low as $19.39 per share.