Kroger profit falls 16% as sales edge up
Kroger Co.’s quarterly profit tumbled 16% and its sales rose a slim 2% as it battled rising costs and tougher grocery competition.
The fiscal fourth-quarter results Tuesday still beat Wall Street estimates, but the 2008 forecast from the nation’s largest traditional grocery store chain fell short of analysts’ expectations.
Cincinnati-based Kroger, operator of Ralphs and Food 4 Less, said it earned $322.9 million, or 48 cents a share, for the quarter ended Feb. 2, down from $384.8 million, or 54 cents, a year earlier. Revenue rose to $17.23 billion from $16.86 billion.
A higher-than-expected inventory charge of 5 cents a share, which Kroger blamed on inflation, hurt results. Earnings in the same quarter a year earlier also were boosted by a tax benefit, the company said.
Still, Kroger’s profit topped the average forecast of 47 cents a share on sales of $16.81 billion, according to analysts surveyed by Thomson Financial. The earnings forecasts typically exclude one-time items.
Kroger shares rose 68 cents, or 2.7%, to $26. They have traded from $23.95 to $31.94 in the last year.
The results came as U.S. grocers face rising costs for dairy, wheat and other staples, as well as soaring fuel prices that increase costs. Kroger estimated its product cost inflation at 3.8% over the previous year.
The grocery chain forecast a profit of $1.83 to $1.90 a share for its 2008 fiscal year, below analysts’ projections of $1.91.
Sales at supermarkets open at least 15 months, a key retail indicator, increased 8.2% at stores with gas station sales and 5.3% at stores without fuel sales, Kroger said. The so-called same-store sales increases were based on the same 12-week period.
David B. Dillon, Kroger’s chief executive, said the company’s annual market share estimates showed that it had gained in 37 of its 44 major competitive markets.
Kroger has expanded its organic food offerings, sped up checkout lines and offered order-ahead kiosks for deli sections. It has also broadened loyalty card price discounts that include cheaper gasoline at Kroger stations and added different store formats such as “marketplace,” which double the size of a typical Kroger location. Those stores sell furniture, office supplies and other non-grocery merchandise.
Kroger has 2,486 supermarkets and multidepartment stores in 31 states, operating under two dozen banners that include Ralphs, Food 4 Less, Fred Meyer, Fry’s, King Soopers, Smith’s, Dillons, QFC and City Market.
