Kroger profit weighed down by inflation
Grocery store operator says larger-than-expected inventory charge helped lower income.
NEW YORK (CNNMoney.com) -- Kroger Co., the No. 1 U.S. grocery store operator, said Tuesday that inflation helped reduce fiscal fourth-quarter profit, but the results surpassed analysts' estimates.
Cincinnati-based Kroger posted income of $322.9 million, or 48 cents per share, in the quarter ended Feb. 2, a decline of 16% from $384.8 million, or 54 cents per share, a year earlier.
The company said earnings included a higher-than-expected 5 cents-per-share inventory charge due to product cost inflation.
"Like many food retailers, we continue to see product cost inflation across many core grocery and perishable categories at levels not seen in several years," said Kroger Vice Chairman Rodney McMullen in a conference call.
"We estimate that our product cost inflation during the fourth quarter vs last year was 3.8%, excluding fuel," he added.
"Even thought the inflation we described at 3.8% is higher than what we've seen for many years, it is still what I would characterize as still moderate in long traditional terms," said Kroger CEO David Dillon.
Total revenue grew 2.2% to $17.2 billion.
A consensus of analysts polled by Thomson Financial expected the company to have earned 47 cents per share on revenue of $16.8 billion.
Sales at stores open for at least a year - a measure known as same-store sales - grew 5.3%, excluding sales of fuel, from a year earlier.
"During the quarter, we continued to invest in lower prices for our customers, providing meaningful savings for them in this uncertain economic environment," said Dillon in a statement.
In the current year, Kroger expects to see earnings between $1.83 and $1.90 per share on stronger same-store sales, better operating margins and fewer outstanding shares due to repurchasing programs in 2007.
The forecast is below the $1.91-a-share consensus estimate of analysts surveyed by Thomson.
Kroger also said it expects same-store sales growth between 3% and 5%, excluding fuel sales.
Shares of Kroger (KR, Fortune 500) closed at $26, up 2.7%, on Tuesday.