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Changing shopping habits and aggressive discounting by competitors is causing Kroger Co. (KR) to change its pricing strategies on the fly, contributing to disappointing fiscal second-quarter earnings.

The supermarket operator also cut its fiscal 2009 earnings guidance, as sharply falling prices in areas like produce and dairy also contributed to weak sales and margins in the second quarter. Still, it maintained full-year guidance for identical stores sales of 3% to 4% at stores open five full quarters, hoping for improvement in the key metric. Shares fell $1.80, or 8.3%, in recent trading, to $20.28.

Kroger saw multiple signs of a consumer continuing to struggle, as shoppers stuck to what they need, but visit more often as their supplies run dry. Toward the end of the month, stores are noticeably emptier as consumers wait for their paychecks before making their next shopping trip. Trading down is also continuing, with customers opting for cheaper national brands or selecting Kroger's private-label items.

"It is a pretty clear picture that the consumers around the U.S. and customers at Kroger are experiencing some trauma in this environment," Kroger Chairman and Chief Executive David Dillon said Tuesday during a conference call.

Grocery stores are fighting aggressively customers, with some markets seeing more competition than others. Kroger said it is being forced to accelerate price cuts in certain regions, while pulling back in others, in response.

The grocer also saw deflation spread to "most grocery categories" for the first time in several quarters. Consumer products companies, facing declining tonnage, are lowering prices and putting more money into promotions.

All that contributes to lower prices, which squeezed Kroger's margins in the quarter and causing profit to fall 7.9% to $254.4 million, or 39 cents a share, from a year ago. Net sales fell 2.2% to $17.7 billion. Both were short of analysts estimates to 44 cents a share on revenue of $18.16 billion.

Identical-store sales rose 2.6%.

Kroger cut its full-year profit guidance to a range of $1.90 to $2 a share, down from its previous view of $2 to $2.05 a share.

Kroger entered the recession with one of the best price positions among traditional supermarket chains, having cut prices for six years to better compete with Wal-Mart Stores Inc. (WMT). Still, the chain has continued to be aggressive in lowering prices and offering deals to customers.

Kroger is seeing customers buy more items overall and is adding more "loyal households." The chain, the largest traditional U.S. grocery store chain based on sales, hopes that investments its making now with lower prices can help hook these customers for the long haul.

Kroger's results pressured shares other other supermarket operators, who are all facing deflationary pressures and lowering prices. Supervalu Inc. (SVU) shares fell 2.3% to $15.94 and Safeway Inc. (SWY) shares dropped 4.2% to $19.35. Shares of regional operators Great Atlantic & Pacific Tea Co. (GAP), Spartan Stores Inc. (SPTN) and Winn-Dixie Stores Inc. (WINN) all traded lower as well.

-By Paul Ziobro, Dow Jones Newswires; 212-416-2194; paul.ziobro@dowjones.com

(Mike Barris and Tess Stynes contributed to this article.)