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VOL. 124 | NO. 122 | Wednesday, June 24, 2009

Kroger Q1 Profit Jumps 12.7 Percent

By DAN SEWELL | AP Business Writer

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SOMEBODY’S BOON: Kroger brand sauerkraut is stocked on a shelf at a Kroger store in Cincinnati, where the grocery chain’s corporate headquarters is. The company has reported a 12.7 percent profit spike as recession-hit shoppers look for food bargains. -- AP FILE PHOTO/AL BEHRMAN

CINCINNATI (AP) – Grocery operator Kroger Co.’s first-quarter profit shot up 12.7 percent as recession-hit households continue to eat at home more and seek food bargains including buying more store brands.

The nation’s largest traditional grocery store chain reported Tuesday that profit jumped to $435.1 million, or 66 cents per share, compared to $386 million, or 58 cents last year. Sales were $22.8 billion, down slightly from $23.1 billion last year. Kroger blamed the drop on lower gas prices at its service stations, with retail prices down 41 percent on an average gallon sold from the previous year.

Kroger has nine stores in Memphis, according to company information.

Analysts surveyed by Thomson Reuters expected 62 cents a share, on sales of $23.28 billion.

Same-supermarket sales, a key retailer gauge that compares sales at stores open at least 60 weeks, rose 3.1 percent, excluding fuel.

The Cincinnati-based company affirmed its full-year earnings guidance of $2 to $2.05 per share, with same-store sales growth of 3 to 4 percent without fuel. Analysts are expecting earnings of $2.04 per share.

Kroger officials also credited cost-control efforts in operations for helping profit margins.

David B. Dillon, Kroger’s chairman and CEO, told analysts in a conference call that the chain is seeing shoppers buying less per visit, but coming to the grocery store more often.

“What we believe is happening is customers are buying what they need when they need it, closer to when they need it, to make sure that their dollars stretch further to the end of the month or the end of the pay period,” Dillon said.

With many consumers cutting down on eating out at restaurants, Kroger has seen more customers buying deli and store-prepared meals to take home.

Kroger officials also said sales of its own store brands, which are usually priced lower than national brands, are growing at double-digit rates and account for 35 percent of grocery items sold in its stores.

The chain has expanded coupon offers, which it can tailor to customers through data-mining of their buying habits from store loyalty cards, and promotions of deals such as 10 items for $10.

While pleased with their results in the current economy, Kroger officials said shoppers remain cautious. Executives expect that mood of uncertainty to continue through the year. They also said rising fuel prices could affect customer spending and the company’s own transportation costs.

Kroger shares fell 24 cents to $21.54 on Tuesday. They have traded in a 52-week range of $19.39 to $30.99.

Dillon said the company’s same-store sales growth came despite falling prices for products such as milk. Sales also fell for general merchandise – Kroger sells home furnishings, office supplies and jewelry in some stores.

Kroger operates 2,475 supermarkets and multi-department stores in 31 states, under two dozen local banners including Ralphs, Fred Meyer, Food 4 Less, Fry’s, King Soopers, Smith’s, Dillons, QFC and City Market.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 56 137 4,903
MORTGAGES 88 226 6,452
FORECLOSURE NOTICES 6 25 1,504
BUILDING PERMITS 170 318 11,577
BANKRUPTCIES 65 119 5,078
BUSINESS LICENSES 27 46 1,982
UTILITY CONNECTIONS 84 227 6,693
MARRIAGE LICENSES 15 44 1,385

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