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Kroger's Quarterly Profit Soars
March 13, 2007 · Reuters
Kroger Co. the largest U.S. grocery chain, got an unexpected tax benefit and posted a 36.4 percent jump in quarterly profit on Tuesday as it attracted shoppers with remodeled stores featuring a better selection of products.
Kroger also said that this year's earnings should top Wall Street's average expectations, sending its shares up more than 1.75 percent in early trading.
Profit was $384.8 million, or 54 cents per share in the fiscal fourth quarter that ended Feb. 3, compared with $282.1 million, or 39 cents per share, a year earlier. Kroger said the latest quarter got a boost of 3 cents per share from the adjustments of certain deferred tax balances that were not contemplated in its forecast.
Analysts, on average, expected Cincinnati-based Kroger to earn 45 cents per share, according to Reuters Estimates.
Traditional U.S. grocery stores have come under increased pressure from a variety of foes: supercenters such as Wal-Mart Stores Inc. dollar stores, drugstores, natural chains such as Whole Foods Market Inc. and restaurants.
But Kroger and other chains have been remodeling their stores, improving customer service and promoting items such as fresher produce to entice shoppers to return.
Such changes appear to be working at Kroger. Sales in the fourth quarter rose 14.5 percent to $16.9 billion, and were up 5.7 percent after adjusting for an extra week. The sales topped analysts' average revenue forecast of $16.84 billion.
The company, which runs stores under such names as Kroger, Fred Meyer and Ralphs, as well as jewelry stores Littman and Barclay, said sales at identical supermarkets -- a measure that tracks stores open for at least five quarters -- rose 5.6 percent including gasoline sales, and 5.3 percent excluding sales of gasoline.
Kroger said that it expects to earn $1.60 to $1.65 per share in the current fiscal year, which equates to 9 percent to 12 percent growth over adjusted earnings per share in the year that ended in February.
Analysts, on average, expected the company to earn $1.57 per share this year.
Kroger stock was 47 cents higher at $26.23 in early New York Stock Exchange trading.
Kroger's shares trade at about 16.4 times next year's expected earnings, compared with 14.1 times expected earnings for Supervalu Inc. the company's next-largest competitor, according to Reuters data.