(Reuters) - Supermarket operator Kroger Co KR.N surprised analysts with its first quarterly same-store sales decline in 13 years, as competition intensified in the U.S. grocery industry, sending its shares down as much as 5.6 percent on Thursday.

Kroger, like other grocers, has been struggling with lackluster U.S. economic growth and a cut-throat price war with Wal-Mart Stores Inc WMT.N and Amazon Inc AMZN.O.

Cincinnati-based Kroger said, excluding fuel, sales from stores open for at least a year fell 0.7 percent, widely missing analysts’ average estimate of a 0.1 percent rise, according to Consensus Metrix. Kroger blamed the decline on deflation.

This was Kroger’s first quarterly same-store sales drop since the first quarter of 2003, raising concerns it is losing customers to rivals.

"With peers Ahold Delhaize AD.AS, Walmart and Publix PUSH.PK reporting better comparable sales than Kroger, it is becoming increasingly likely that the company is losing overall market share," J.P. Morgan analyst Ken Goldman said.

Price competition in the industry has been increasing, with Wal-Mart reportedly running a new price-comparison test to knock out competition from German discount grocery chain Aldi Inc [ALDIEI.UL] and Kroger.

Target Corp TGT.N said on Tuesday it would sacrifice full-year margins to keep its prices competitive.

Kroger has become more promotional and aggressive on some pricing as sales were softer, CEO Rodney McMullen told analysts on a call.

“There is no doubt several competitors are improving and running better stores ... it’s much broader than just Walmart,” he added.

Kroger, whose chains include Ralphs and Fred Meyer, forecast full-year earnings of $2.21-$2.25 per share, the midpoint of which meets analysts’ average estimate of $2.23, according to Thomson Reuters I/B/E/S.

“We are disappointed in the comparable number and are starting to wonder how Kroger will get anywhere near its long-term outlook for 8-11 percent earnings per share growth in today’s environment,” Goldman added.

The No. 1 U.S. supermarket chain said it expects full-year same-store sales excluding fuel to either remain flat or rise as much as 1 percent, short of the 1.2 percent rise analysts had estimated.

Kroger’s shares, which had already taken a 4 percent hit this week after news of Wal-Mart and Target’s pricing strategies, were down 3.2 percent at $31.01 in morning trading.

The company earned 53 cents per share, in the fourth quarter ended Jan. 28, beating the average analyst estimate by one cent.

Net sales rose 5.5 percent to $27.61 billion, beating analysts’ average estimate of $27.31 billion.