Kroger Co. claims victory in grocery store battles

first_img AD Quality Auto 360p 720p 1080p Top articles1/5READ MORECasino Insider: Here’s a look at San Manuel’s new high limit rooms, Asian restaurant160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! CINCINNATI (AP) Kroger Co. claimed success on Tuesday in the multifront grocery wars, reporting a fourth-quarter profit and announcing plans to pay a dividend for the first time since 1988. The nation’s largest traditional grocery chain, which topped analysts’ estimates while reversing a loss in the year-ago period, also reported a 10th consecutive quarter of identical-store sales growth, despite strong competition from discounters and specialty chains. For the quarter ended Jan. 28, Kroger reported a profit of $282.1 million, or 39 cents per share, compared with a loss a year ago of $652.1 million, or 89 cents per share. The year-ago results included charges for writing down the value of the Ralphs and Food 4 Less operations in Southern California, which reduced profit by $860.8 million, or $1.17 per share. Revenue rose to $14.72 billion from $13.7 billion a year ago. Wall Street had forecast a profit of 36 cents per share, the average estimate of 14 analysts surveyed by Thomson Financial, on projected sales of $14.63 billion. Sales in supermarkets for five full quarters a key performance gauge called identical supermarket sales rose 6.2 percent with fuel, and 4.7 percent excluding fuel. David B. Dillon, Kroger’s chairman and chief executive, said Kroger’s stores are doing well across the board in a highly competitive business, including in most markets where they face Wal-Mart Stores Inc. Traditional grocers have faced increasing rivalry from Wal-Mart and other discounters and from specialty chains such as Whole Foods Inc. and Wild Oats Inc. “We believe that our multiformat approach and our ability to segment our customer base uniquely positions Kroger to serve the very diverse needs of today’s grocery shoppers,” Dillon told analysts in a conference call. Kroger in recent years has expanded formats such as some two dozen Marketplace stores, nearly double the size of its typical stores, while offering nongrocery items including furniture, kitchenware and office supplies. The company, which has two Marketplace stores in Columbus, Ohio, plans to introduce two Marketplace stores this year in its home Cincinnati area. Kroger also competes with specialty food stores with its Fresh Fare markets, mainly in California, offering natural and gourmet food; and also with the Food 4 Less low-price warehouse stores in some markets. “There’s plenty of room for further growth,” Dillon said. Wendy Liebmann, president of WSL Strategic Retail, a New YorkZZNY marketing and retail consulting firm, said Kroger has adapted to “supersize or specialize” competition. She said Kroger has improved convenience, selection and what she calls “what’s for dinner tonight?” local grocery shopping. “They can’t compete exclusively on price with the supercenters; they have to offer an enhanced food experience,” she said. “They’ve smartly learned that new formats, new concepts, pushing the edges of the store a little bit is what’s defining them today.” For its full fiscal year, Kroger reported profits of $958 million or $1.31 per diluted share, and sales of $60.6 billion. For fiscal 2004, Kroger reported a net loss of $104.2 million, or 14 cents per share, on sales of $56.4 billion Kroger projected earnings per share growth of 6 percent to 8 percent per year in 2006 and 2007. The forecast includes stock option expense of roughly 5 cents to 6 cents per share. The company said it plans to spend between $1.7 billion and $1.9 billion to remodel stores and on other capital projects, excluding acquisitions, in fiscal 2006. Starting June 1, Kroger said it would pay its first quarterly dividend of 6.5 cents per share to shareholders of record as of May 15. The company said it plans to use one-third of its free cash flow to pay down debt, and use the remaining two-thirds for share buybacks and dividends. Kroger shares rose 27 cents, or 1.4 percent, to close at $20.15 on The New YorkZZNY Stock Exchange Tuesday. Kroger stock hit its 52-week high of $20.88 in September, while trading as low as $15.15 in the past year. At quarter’s end, Kroger operated, either directly or through its subsidiaries, 2,507 supermarkets and multi-department stores in 31 states under two dozen local banners including Kroger, Ralphs, Fred Meyer, Food 4 Less, King Soopers, Smith’s and Smith’s Marketplace, Fry’s and Fry’s Marketplace, Dillons, QFC and City Market. Kroger also operated 791 convenience stores, 428 fine jewelry stores, 579 supermarket fuel centers and 42 food processing plants.last_img

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