CHICAGO – Kroger Co. (KR), the largest U.S. grocery chain, on Tuesday said quarterly profit rose 38 percent, matching forecasts, helped by the strongest sales growth in six years and recovery from a California labor action.
The retailer, whose shares edged up 2 percent in New York Stock Exchange (search) trading, kept its profit forecast for the full year and said it expects continued improvement at its southern California stores. Kroger and several of its competitors were hit hard by the five-month grocery strike that ended in February 2004.
Kroger said profit rose to $196.5 million, or 27 cents per share, in the fiscal second quarter that ended August 13, from $142.4 million, or 19 cents per share, a year earlier.
Analysts, on average, expected 27 cents per share, according to Reuters Estimates.
Kroger faces intense competition from discounter Wal-Mart Stores Inc. (WMT), which each year opens hundreds of new supercenters that carry a full line of groceries along with general merchandise. Kroger has responded by cutting prices on many items, but profits have held up so far this year as the retailer kept a lid on its own costs.
Last week, rival Albertsons Inc. (ABS) reported a slim 3 percent gain in quarterly profit, missing Wall Street forecasts, as price cuts hurt sales. The retailer recently hired advisers to consider strategic options, including a possible sale of the company.
Kroger said its quarterly revenue rose 6.8 percent to $13.9 billion.
Identical supermarket sales rose 5.1 percent, including sales of fuel. Excluding fuel, identical-store sales were up 3.4 percent. The retailer said by either measure, this was its strongest growth since the 1999 merger with Fred Meyer Inc.
Kroger said it still expects full-year profit to exceed $1.24 per share, although it was too soon to judge any impact from Hurricane Katrina.
The hurricane forced retailers to close hundreds of stores, but analysts have said the bigger threat could be oil prices, which surged following the storm. That can curb sales as people spend more money to fill up their gas tanks or heat and cool their homes instead of shopping. It also raises transportation costs for retailers.
Analysts, on average, expected a full-year profit of $1.29 per share, according to Reuters Estimates.
Shares of Kroger were up 40 cents at $20.62 in NYSE trading.