Kroger says storm hits earnings

Shares in the nation's largest traditional grocery store chain fell more than 7 percent after Kroger lifted its earnings guidance for the full year, but offered fourth-quarter projections below analysts' expectations.

The company did manage to boost sales during the recession, as people cut restaurant spending and buy more store brands and store-prepared meals to take home. Third-quarter revenue rose 9 percent to $17.6 billion.

Identical-supermarket sales rose 5.6 percent in the quarter without fuel sales and 7.8 percent with them. Those sales, for stores open at least five quarters, are considered a key gauge of retail strength.

Kroger said it earned $237.7 million, or 36 cents per share, in the quarter, down from $253.8 million, or 37 cents per share, a year earlier.

The company said results were hurt by an after-tax charge of $15.9 million, or 3 cents per share, related to its $25 million insurance deductible for Ike. The storm damaged stores, forced some to shut down temporarily and caused outage-spoiled food in September, particularly in Texas and inland states as far away as Ohio that suffered severe wind storms.

Otherwise, Kroger said earnings would have been $253.6 million, or 39 cents per share.

Analysts polled by Thomson Reuters had predicted earnings of 38 cents per share on revenue of $17.4 billion.

"We know our customers are increasingly feeling pressured in today's environment," David B. Dillon, chairman and CEO for the Cincinnati-based company, said in a statement. "Kroger's focus on low prices, quality products and providing a convenient, one-stop solution for their daily needs is resonating with our customers."

The company said it expects full-year earnings of $1.88 to $1.91 per share, excluding the 3-cent share charge from Ike. The previous guidance was for $1.85 to $1.90, excluding Ike effects. Earnings for 2007 were $1.69 per share. Analysts are projecting earnings of $1.91 a share.

But Kroger now says it expects fourth-quarter earnings of 49 to 52 cents per share, saying that range "considers the cautious mind-set of many consumers this holiday season." Analysts were projecting 53 cents for the quarter.

Kroger shares fell $2.05 to $25.25, in morning trading. They have traded in a range of $22.30 to $30.99 in the past year.

For the first nine months of its fiscal year, Kroger said it earned $900.2 million, or $1.36 per share, up from $857.6 million, or $1.22 per share, a year earlier. Total sales increased 10.9 percent to $58.7 billion.

Kroger operates 2,477 supermarkets and multi-department stores in 31 states, under two dozen local banners that include Ralphs, Fred Meyer, Food 4 Less, Fry's, King Soopers, Smith's, Dillons, QFC and City Market.