Kroger sees big dip in earnings

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Published: June 17,2010

Tags: grocer, investing, retail, stocks and bonds

CINCINNATTI — Supermarket operator Kroger said today that its first-quarter net income fell 14 percent as its costs rose faster than its revenue and it faced tough competitors such as Wal-Mart Stores Inc.

But the results beat analysts’ expectations, and the nation’s largest grocer affirmed its full-year forecast.

Its shares rose nearly 7 percent in electronic trading before the market opened.

The Cincinnati-based company’s net income fell 14 percent to $373.7 million for the quarter that ended May 22, or 58 cents per share. That beat the average forecast for earnings of 54 cents per share from analysts surveyed by Thomson Reuters.

Net income was $435.1 million, or 67 cents per share, a year earlier.

Revenue rose 9 percent to $24.76 billion from $22.79 billion, led by gasoline sales. Excluding gasoline, revenue rose 3 percent.

The sales improvement was offset by higher health care and pension costs and credit card fees.

Analysts also have been anticipating added pressure on Kroger as Wal-Mart Stores Inc. has recently become more aggressive about cutting its prices on food to pull customers from Kroger and other traditional grocers.

Kroger has implemented price-cutting and promotions in response to rising competition.

Revenue in its stores that have been open at least five full quarters, a key measure of a retailer’s financial strength, rose 2.4 percent excluding gas sales.

Kroger maintained its forecast for full-year profit of $1.60 to $1.80 per share. Analysts expect $1.72 per share for fiscal 2010.

It expects revenue in supermarkets open at least five quarters to rise 2 percent to 3 percent for fiscal 2010.

The Kroger Co. operates 2,470 stores, including the Ralphs, King Soopers, QFC, Fred Meyer and Kroger chains.

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