Kroger’s quarterly earnings rise 36%

Kroger Co. said Tuesday that its fourth-quarter profit rose 36% as the nation’s largest traditional grocer continued to record impressive gains.

Earnings rose to $384.8 million, or 54 cents a share, for the quarter that ended Dec. 31 from $282.1 million, or 39 cents, a year earlier. Revenue grew 15% to $16.86 billion.

Excluding a gain of 3 cents a share from adjusting certain deferred tax balances, the company earned 51 cents a share in the latest period. Analysts polled by Thomson Financial expected earnings of 45 cents a share on sales of $16.79 billion.

Kroger operates 2,468 supermarkets and multi-department stores in 31 states, under two dozen local banners that include Ralphs and Food 4 Less.

Kroger said that for the second straight year, it made gains in most of its major markets even with Wal-Mart Stores Inc.’s expanded competition.

“Needless to say, this is huge,” David B. Dillon, Kroger’s chief executive, told analysts in a conference call.

In his year-end review, Dillon said Kroger gained share in 36 of its 44 major markets, based on company estimates. Of the 32 major markets in which it competes directly with Wal-Mart Supercenters, Kroger increased share in 26, declined in five and was unchanged in one.

Dillon said Wal-Mart added 125 Supercenters, giving it 1,000, in Kroger’s markets.

Dillon said that Kroger saw strong opportunity for more growth, and that smaller players were losing market share to the big companies.

Wal-Mart, the world’s largest retailer, says it has 2,257 Supercenters nationally, with more to open this year, including in Kroger’s home Cincinnati region.

Kroger has emphasized a combined approach of discounts, improved selection and customer service. Its stores offer more organic foods and faster checkouts in a variety of formats, including Marketplace stores that offer furniture, office supplies and other nontraditional items along with groceries.

Grocers face an increasingly fragmented food sales market with retail giant Wal-Mart and specialty stores such as Whole Foods Market Inc. in a broad competitive field.

Kroger said that based on its momentum from last year, it expected earnings of $1.60 to $1.65 a share in fiscal 2007, a 9% to 12% gain over 2006 adjusted earnings of $1.47 a share. Analysts polled by Thomson Financial had projected earnings of $1.58 a share for the year.

Kroger expects same-store sales growth of 3% to 5% without fuel sales. Those are comparative sales in stores open at least 15 months, a key indicator.

For 2006, profit rose 16%, to $1.11 billion, or $1.54 a share, compared with $958 million, or $1.31, in 2005.