* 2nd-qtr profit 51 cents/share vs Street view 49 cents
* Weak U.S. job creation number stokes sales fears
* Shares down more than 2 percent
By Lisa Baertlein and Jessica Wohl
Sept 7 Kroger Co, the biggest U.S.
supermarket operator, reported quarterly profit that beat
expectations and slightly raised its full-year earnings
forecast, but a weak U.S. jobs report sparked concern that sales
Shares in Kroger, which owns grocery chains such as Ralphs,
Fred Meyer, Smith's and Food 4 Less, fell 2.6 percent to $22.49
in afternoon trading on the New York Stock Exchange.
The Labor Department said Friday that the United States
created 96,000 jobs in August, fewer than were expected.
That jobs data is tightly correlated with sales
at traditional grocery stores and shares in rival Safeway Inc
also were down 1.4 percent.
U.S. economic "growth is slow and likely to remain slow,"
said Manning & Napier senior research analyst Walter Stackow,
who thinks Kroger will continue to outperform its peers.
Nevertheless, Stackow said his firm sold its Kroger stake
over the summer because the weak economy threatens to put
increased pressure on its sales and profit margins.
Kroger said it earned 51 cents per share in the fiscal
second quarter ended Aug. 11, beating analysts' average estimate
by 2 cents, according to Thomson Reuters I/B/E/S.
Excluding fuel, same-store sales topped the forecasts of
some analysts, but overall sales missed Wall Street
Profit fell slightly from a year earlier, when the company
benefited from a lower tax rate. Net profit was $279.1 million,
down from $280.8 million.
Kroger executives said that so far, they do not expect the
worst U.S. drought in more than half a century to have a "huge"
impact on grocery prices this year.
"If it does, it would be very late in the year," Rodney
McMullen, Kroger's president and chief operating officer, said
on a conference call with analysts.
Next year, the drought-related spike in costs for animal
feed and other commodities likely will translate into higher
prices for meat, milk and other foods, McMullen said.
Kroger has a sophisticated customer-loyalty program and is
known for holding down prices even as food costs rise. That has
helped the company steal market share from operators like
Safeway and Supervalu Inc.
Customer service improvements, which recently have included
significantly reducing wait times in check-out lines, also have
helped Kroger hold its own against Wal-Mart Stores Inc,
which sells more groceries than any other U.S. retailer.
Kroger's second-quarter sales, including fuel, rose 3.9
percent to $21.73 billion, missing analysts' average estimate of
Excluding fuel, identical-supermarket sales rose 3.6
percent. Some analysts had expected a gain of around 3 percent.
Identical-supermarket sales are sales at stores that have
remained open without expansion or relocation for five full
Kroger said it now expects to earn $2.35 to $2.42 per share
this fiscal year, slightly higher than its previous forecast of
$2.33 to $2.40. Analysts, on average, expect $2.37.