Two Grocers’ Results Diverge
Two of Southern California’s grocery chains reported financial results Tuesday that headed in opposite directions.
Kroger Co., owner of the Ralphs and Food 4 Less chains, said it swung to a profit in the latest quarter from a loss a year earlier. Albertsons Inc., however, saw its sales and profits slide in the fourth quarter.
Cincinnati-based Kroger reported fourth-quarter net earnings of $282.1 million, or 39 cents a share, exceeding the 36-cent estimate of Wall Street analysts surveyed by Thomson Financial. A year earlier, Kroger reported a net loss of $652.1 million, or 89 cents a share, including a $903.8-million pretax charge primarily reflecting a write-down of the value of its Ralphs and Food 4 Less chains after the bitter California supermarket labor dispute.
Fourth-quarter sales rose 7.5% to $14.7 billion compared with the same period a year earlier.
“This growth was broad-based across all divisions and store departments,” Kroger Chief Executive David Dillon told investors during a conference call.
Dillon said the grocery company was gaining market share in most regions, including areas “where we face significant Wal-Mart supercenter competition.” Sales at stores open at least a year, a key measure of a retailer’s health known as same-store sales, rose 4.7%, excluding gasoline.
Kroger also is rebounding from the 4 1/2 -month supermarket strike and lockout in Southern and Central California two years ago that drove many customers to rivals such as Trader Joe’s, Costco and Stater Bros.
Kroger has almost 400 Ralphs and Food 4 Less stores in Southern California, making it the region’s largest grocer. Same-store sales for Ralphs and Food 4 Less in Southern California rose 3.3% in the quarter.
“That would be the highest [rate] through all four quarters last year,” Dillon said. “And we expect to see further improvement in 2006 in their overall financial performance.”
Meanwhile, Albertsons, the No. 3 grocer in the region, saw fourth-quarter earnings fall 16.5% to $162 million, or 43 cents a share, from $194 million, or 52 cents, in the same period a year earlier. Analysts surveyed by Thomson Financial had expected earnings of 45 cents a share. Sagging sales and expenses associated with the planned sale of the company contributed to the decline.
Fourth-quarter sales fell 8.1% to $10.2 billion compared with the same period a year earlier, when the fourth quarter was a week shorter. Same-store sales dipped 0.4%.
The Boise, Idaho-based company declined to answer questions about why its sales fell.
Albertsons, which also owns Bristol Farms and Sav-on stores, has been battered in recent years by competition from supermarket rivals and discount retailers such as Wal-Mart Stores Inc.
“Where Kroger has been on an upward trend for several quarters, Albertsons’ sales have languished and it has lost market share to Kroger, supercenters and club stores,” said Craig Hutson, an analyst with Gimme Credit Publications Inc., which specializes in bond analysis.
In January, Albertsons agreed to be sold for $11.1 billion to Supervalu Inc., CVS Corp. and private investment firms Cerberus Capital Management and Kimco Realty Corp., which plan to split up the operations. The deal is expected to close midyear.
Albertsons shares rose 6 cents to $25.50 on Tuesday. Shares of Kroger, which also said Tuesday that it would start paying a quarterly dividend of 6.5 cents a share beginning June 1, rose 27 cents to $20.15.
On Monday, U.S. District Judge Percy Anderson denied Ralphs’ request to quash subpoenas from a grand jury investigating whether Kroger lied when it issued a news release saying it had cooperated with a probe of its Ralphs unit’s hiring of locked-out workers. The news release was issued in December after a federal grand jury indicted Ralphs.
Bloomberg News was used in compiling this report.
