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Kroger profits rise 8%

March 11, 2009|Associated Press

CINCINNATI — Kroger Co., operator of Ralphs grocery stores, said Tuesday that its profit rose 8% in its latest quarter as shoppers increasingly bypassed restaurants, going to the supermarket more often and loading their carts with store brands at record rates. Its stock rose 10%.

Although Kroger executives voiced caution about the near-term economy, the nation's largest traditional grocery store chain is benefiting from households looking to cut spending as jobless rates rise and consumer confidence falls. Chief Executive David B. Dillon said people were focusing on buying what they need, not what they want.

"They are going to eat, and they are finding feeding a family of four at Kroger is less expensive than many of their other alternatives, especially going out to restaurants," Dillon said. "So we think we are in a good position."

The company reported gaining share in most areas, even those where it competes with giant discounter Wal-Mart Stores Inc., whose own grocery sales have been strong in the economic downturn.

Sales jumped for the no-frills Value brand and also for its highest-tier Private Selection line, which Kroger says compares well to national brands in quality for items such as coffee and pizza. A record 35% of all grocery unit sales -- each item sold is a unit -- came from Kroger brands.

"Kroger is a good barometer at the grocery level," said Christopher Shanahan, a food industry analyst with Frost & Sullivan. "Seeing their performance in private label is probably the big confirmation of the activity that's occurring across the food industry. More now than ever, consumers are trading down."

Net income for Kroger's fiscal fourth quarter ended Jan. 31 rose to $349.2 million, or 53 cents a share, from $322.9 million, or 48 cents, a year earlier.

Total sales revenue barely gained, to $17.26 billion from $17.23 billion last year, with gasoline revenue dropping with prices at store service stations. Excluding fuel sales, sales increased 4.4%, Kroger said.

Analysts polled by Thomson Reuters expected earnings of 51 cents a share on revenue of $18.3 billion. Kroger said sales grew 3.8% at stores open at least five quarters.

Kroger shares rose $1.98 to $21.44.

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