(Adds company comments, byline; updates stock activity)
By Brad Dorfman
CHICAGO, June 24 Kroger Co (KR.N), the largest
U.S. grocery chain, posted better-than-expected quarterly
profit on Tuesday, helped by an emphasis on lower prices,
gasoline discounts and other efforts to appeal to cash-strapped
The company also raised its sales forecast and the lower
end of its earnings forecast for the full year, and its shares
rose as much as 9.6 percent.
The company, which has also rolled out a
$4-per-prescription generic drugs program and offered shoppers
a bonus for cashing tax rebate checks at its stores, said its
latest research shows its customers are most concerned about
soaring food and gasoline costs.
Sales of Kroger's store brands also increased in the
quarter, a sign that consumers are looking for lower-priced
"We did see solid growth in Kroger corporate brand share in
the first quarter," said David Dillon, chief executive officer,
during a conference call with analysts.
Kroger posted a fiscal first-quarter profit of $386.0
million, or 58 cents per share, up from $336.6 million, or 47
cents per share, a year earlier.
Identical-store sales -- stores open for at least five full
quarters and which have not been moved or expanded -- were up
5.8 percent, excluding gasoline sales.
"Kroger has now put up 10 consecutive quarters of
(identical-store sales increases) between 5 percent and 6
percent, amazing consistency," said Goldman Sachs analyst John
Heinbockel in a research note. He also pointed out that the
increases came without Kroger significantly increasing its
store base. "Simply put, the company is chewing up meaningful
Total sales for the company, which operates Kroger, Fred
Meyer and Ralphs grocery stores as well as the Littman and
Barclay jewelry chains, rose 11.5 percent to $23.11 billion.
Analysts' average forecast was for earnings of 55 cents per
share on revenue of $22.27 billion, according to Reuters
During the quarter, Kroger allowed customers to exchange
their tax refund or tax rebate checks for a Kroger gift card
with an extra $30, $60 or $120 added to it. Under the program,
a customer could exchange a $600 rebate check for a $660 Kroger
Kroger said it did not see a material impact on sales and
earnings during the quarter from the rebate program.
On the cost side, Kroger said it saw a 3.5 percent increase
in product costs, excluding fuel. Kroger called this increase
"moderate" and said it is generally able to pass those costs on
Kroger on Tuesday raised its forecast for identical-store
sales for the full year. It now expects a rise of 4 percent to
5.5 percent excluding gasoline, compared with a prior forecast
of 3 percent to 5 percent.
It raised the lower end of its full-year earnings forecast
to $1.85 per share from $1.83. The top of the range remains
$1.90 a share. Analysts' average forecast is $1.89.
Kroger shares were up $1.80 at $27.79 in midday trading on
the New York Stock Exchange after trading as high as $28.50
earlier in the day.
(Additional reporting by Lisa Baertlein; Editing by Brian Moss
and Maureen Bavdek)