Kroger Sales, Earnings Up

CINCINNATI-Efforts by Kroger Co. to build customer loyalty are apparently paying off. The nation’s largest supermarket chain said a 9.2% jump in sales during the second quarter helped boost profits by 6% to $209 million, or 29 cents per share, from $196.5 million, or 27 cents per share, in the year-ago period.

Total sales were up to $15.1 billion, above analysts’ estimates of $14.7 billion for the quarter. Kroger executives said efforts to build customer loyalty along with price discounts, cost-cutting measures and higher fuel prices that have cut into consumer restaurant trips helped fuel store profits.

David B. Dillon, chairman and chief executive officer of the Cincinnati, OH-based chain, said in a conference call that while Kroger stores offer convenience for gas conscious customers, loyalty cards that give shoppers deep discounts on gas and groceries along with cost cutting measures such as energy-efficient lighting, has helped the bottom line.

As a result of those efforts, sales at stores open more than a year grew 6.2% in the quarter ended Aug. 12, while same-store sales including gasoline increased 8.2%. The comparative store increases represent the twelfth consecutive quarter of positive same store sales for one of the the nation’s largest traditional supermarket chain.

Dillon also said Kroger was on track to meet its 2006 earnings guidance of 6% per share to 8% per share with earnings expected to range between $1.39 and $1.41 per share for the year. Those figures were below analysts’ expectations of $1.43 per share, however executives also said that any future acquisitions Dillon said sales are expected to be 4% for the balance of the year and 4.9% excluding fuel.

Kroger, which operates 2,477 supermarkets and multi-department stores in 31 states under the Ralphs, Fred Meyers, Food 4 Less, King Soopers, Smiths, Frys and Dillons banners, also said that any future acquisitions would have to add growth opportunity and fit into the chain’s culture since protecting the firm’s investment grade credit rating is a priority with company executives.