[Made in the USA]

Kroger fourth-quarter profit drops

CINCINNATI - Kroger Co., the nation's largest traditional grocery chain, said today that its fourth-quarter profit tumbled 16 percent, weighed down by a large inventory charge as overall sales rose a slim 2 percent.

The results still beat Wall Street estimates, but the company offered a forecast for this year that was below current forecasts.

The Cincinnati-based company -- the parent of Dillons -- said it earned $322.9 million, or 48 cents per share, for the quarter ended Feb. 2 compared with a profit of $384.8 million, or 54 cents per share, a year earlier. Kroger said revenue in the quarter rose to $17.23 billion from $16.86 billion.

Kroger said a higher-than-expected inventory charge of 5 cents per share weighed on results. The previous year's quarterly earnings also were boosted by a tax benefit, the company said.

Analysts surveyed by Thomson Financial forecast fourth-quarter earnings of 47 cents per share on sales of $16.81 billion. The earnings forecasts typically exclude one-time items.

In a weakening U.S. economy, grocers are facing rising costs for dairy, wheat and other staples, as well as soaring fuel prices that increase their costs for production, packaging and transportation.

Kroger said the key retail indicator of same-store sales, showed an increase of 8.2 percent with gas sales at its stations and 5.3 percent without fuel sales, based on the same 12-week period in both years.

"We continue to drive solid identical sales growth by improving service, value, product quality and selection for our customers," David Dillon, Kroger's chairman and chief executive, said in a statement. "During the quarter, we continued to invest in lower prices for our customers, providing meaningful savings for them in this uncertain economic environment."

Profits for the year were $1.18 billion, or $1.69 per share, up from $1.11 billion or $1.54 per share, last year.

Sales increased 6.2 percent, to $70.2 billion from $66.1 billion. Kroger said sales rose 8.2 percent when adjusted for an extra week in 2006.

Kroger forecast a profit of $1.83 to $1.90 per share for this fiscal year, below analysts' projections of $1.91. The company expects same-store sales growth of 3 percent to 5 percent, excluding fuel sales.

Kroger has 2,486 supermarkets and multi-department stores in 31 states, operating under two dozen banners that include Ralphs, Fred Meyer, Food 4 Less, Fry's, King Soopers, Smith's, Dillons, QFC and City Market.

Associated Press