UPDATE 1-Kroger shares fall on cautious year-end view

Thu Dec 5, 2013 11:16am EST

Dec 5 (Reuters) - Kroger Co, the biggest U.S. supermarket operator, on Thursday reported slightly lower-than-expected overall quarterly sales and joined other retailers in taking a cautious stance on the remainder of 2013, sending its shares down 4 percent.

One of every seven Americans took a hit on Nov. 1 when a $5 billion cut in food stamps, the first across-the-board reduction in the history of the decades-old federal anti-hunger program, began. Affected shoppers have gotten some relief from lower gasoline prices and are believed to be cutting back on purchases of discretionary items, such as clothing, experts say.

A shorter holiday selling season and slow economic recovery also make it "a little more difficult" to forecast results for the current quarter, Chief Financial Officer Mike Schlotman said on a conference call with analysts.

Kroger, the top-performing mainstream U.S. grocer, maintained its forecast for full-year identical supermarket sales growth, excluding fuel, in the range of 3 percent to 3.5 percent and annual profit of $2.73 to $2.80 per share.

The Cincinnati-based company, which owns the Ralphs, Smith's and Food 4 Less chains, said net income was $299 million, or 57 cents per share, in the third quarter ended Nov. 9, down from $317 million, or 60 cents, a year earlier.

Excluding items ranging from taxes to settlement payments and merger-related costs, earnings per share rose to 53 cents from 46 cents, Kroger said.

On that basis, the results met the analysts' average estimate, according to Thomson Reuters I/B/E/S.

Sales including fuel were $22.5 billion, below analysts' estimates of $22.75 billion. Kroger executives noted that the retail price of gasoline was down about 8 percent during the quarter and that total gallons sold showed solid growth.

Identical-store sales, which include results from stores open without expansion or relocation for five full quarters, were up 3.5 percent for the latest quarter, excluding the sale of gasoline.

Kroger executives earlier this year vowed to deliver higher profits amid intense competition from retailers ranging from supermarket operator Safeway Inc and discounter Wal-Mart Stores Inc to dollar stores and convenience marts.

Shares in Kroger were down 4 percent at $39.87 in morning training, while Safeway fell 3.1 percent, and Wal-Mart declined 1.4 percent.

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