Kroger posts 18% jump in net income

Kroger Co. reported Tuesday that its fiscal third-quarter profit jumped 18% on strong sales, but margins at the nation’s largest traditional grocery chain were hurt by what it sells outside stores -- gasoline.

Shares slid more than 5% after Cincinnati-based Kroger, operator of Ralphs and Food4Less, reported a drop in fuel margins for the quarter ended Nov. 10, and only slightly raised its earnings outlook for the full year.

Kroger posted earnings of $253.8 million, or 37 cents a share, up from $214.7 million, or 30 cents, in the same quarter a year earlier. The results include a tax benefit of some $40 million, offset largely by lower margins from operations at its 678 supermarket fuel centers and spending on customer initiatives.

Kroger said that although grocery product costs increased 3% in the quarter, it passed along those increased costs to consumers with higher prices in its stores.

Revenue jumped 10% to $16.14 billion. Sales at stores open at least five quarters, considered a key indicator of a retailer’s strength, rose 7.7% in the quarter including fuel, 5.7% excluding fuel.

Analysts polled by Thomson Financial predicted a profit of 35 cents a share before one-time items on revenue of $15.66 billion.

Kroger now expects its full-year earnings to slightly exceed its previous guidance of $1.64 to $1.67 a share. Wall Street is expecting earnings of $1.71 a share.

Kroger shares fell $1.87, or 6.6%, to $26.47.