CINCINNATI (AP) — The Kroger Co.'s profit fell 27 percent in the fourth quarter, even as sales rose with a boost from the grocer's gasoline incentives for regular customers.
The nation's largest traditional grocery chain Tuesday reported profit of $255.4 million, or 39 cents per share, down from $349.2 million or 53 cents, a year ago.
Sales rose 7 percent to $18.6 billion. Excluding fuel, sales were up 2 percent.
Analysts expected 34 cents per share on $17.73 billion of revenue.
In the heated competition for recession-strapped households, Kroger has expanded discounts at its gas stations for regular customers, who can get at least 10 cents off a gallon for every $100 in grocery store purchases.
Kroger had seen earnings growth early in the recession, as people cut back on restaurants and bought more store-prepared food and groceries to eat at home. But competition has intensified, driving down prices and drawing bargain-hunting shoppers to warehouse club chains such as Costco Wholesale Corp. Kroger has stepped up promotions and incentives.
The company's CEO said Kroger is increasing its number of loyal shoppers, but said it's difficult to do that in the current economy without maintaining discounts and other promotions.
"Once started, customers begin to see it as who you are and your personality and why they shop with you," David B. Dillon, chairman and CEO, told investors in a conference call. "And to pull that away would be problematic."
The company said sales at stores open at least 15 months, a key retail gauge, rose only 1.2 percent without fuel sales in the fourth quarter.
The Cincinnati-based company offered a cautious forecast for 2010, citing an uncertain economy and tough competitive environment. It expects earnings in a range of $1.60 to $1.80 per share with same-store sales growth of 2-3 percent without fuel.
Analysts surveyed by Thomson Reuters are expecting an average $1.80 per share for the year, on sales of $78.6 billion.
Kroger shares were down 15 cents to $22.75 in late-morning trading.
Hapoalim Securities analyst Ajay Jain said Kroger's forecast shows that its business is still facing price-cutting competition.
"Pricing discipline has not been restored in the sector," he said in a note to clients.
Kroger sells fuel at about a third of its grocery stories and is trying out a link of its customer loyalty discounts with Shell Oil stations in five markets in California, Ohio and Tennessee to expand its fuel reach.
Kroger has nearly 2,500 grocery stores in 31 states that include local banners such as Ralphs, Fred Meyer, Food 4 Less, Fry's, King Soopers, Smith's, Dillons, QFC and City Market.
For the year, total sales increased nearly 1 percent, $76.7 billion, with same-store sales up 2.1 percent for the year.
Profits for the year were $70 million, or 11 cents a share, hurt by a $1.05 billion charge to write down in the third quarter on the value of its Ralphs division because of the battered economy in California. Kroger said otherwise, earnings for the year would have been $1.12 billion, or $1.71 per share.
That's still below 2008, when Kroger had profit of $1.25 billion, or $1.89 per share.
