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12/9/2004

Kroger profit up in third quarter

By John Nolan
The Associated Press

CINCINNATI — The supermarket giant Kroger Co. reported its third-quarter earnings increased more than 29 percent, but still fell short of Wall Street expectations. Its shares rose more than 1 percent.

Kroger said it earned $142.7 million, or 19 cents a share, for the three months ended Nov. 6, versus $110.2 million, or 15 cents a share, a year ago. Analysts surveyed by Thomson First Call expected a profit of 23 cents per share.

Sales for the latest quarter increased 6 percent to $12.9 billion, up from $12.1 billion a year ago.

Kroger’s grocery sales are topped in the United States only by those at Wal-Mart Stores Inc.

Kroger’s Ralphs and Food 4 Less stores in Southern California accounted for 0.1 percent of the sales increase. Kroger officials have said they were boosting spending in Southern California to try to win back shoppers after a 41/2-month strike and lockout there that ended early this year.

“We see southern California as a great market,” David Dillon, Kroger’s chairman and chief executive officer, told analysts during a conference call Tuesday. “Generally speaking, we are clearly seeing improvements made.”

Dillon declined to offer predictions about the pace of Kroger’s business recovery in southern California. He also declined to answer analysts’ questions about the savings Kroger is achieving as the result of labor agreements that resolved the strike and lockout.

Kroger also has had to increase spending to compete with Wal-Mart and other nonunion or mass-merchandising retailers.

On the New York Stock Exchange, Kroger shares rose 32 cents to close Wednesday at $16.55. The stock price has ranged between $14.65 and $19.67 during the past year.

For the first nine months of the year, Kroger earned $548 million, or 73 cents per share, versus $652 million, or 86 cents a share, a year ago. Sales increased by 5 percent to $42.7 billion from $40.8 billion a year ago.

Management has set a priority for the company to restrain its labor costs to remain competitive. Kroger said Tuesday that labor contracts covering about 20,000 employees in Seattle and Cincinnati, and at Food 4 Less in Southern California have been ratified without a work stoppage.

Kroger said it expects to spend up to $1.8 billion this year on capital investments, excluding acquisitions. That would be a decline of up to $300 million from the upper end of Kroger’s original estimate for this year.

Total debt at the end of the third quarter was $7.8 billion, down $607 million from a year ago.

The Cincinnati-based company operates 2,531 supermarkets and multi-department stores in 32 states, including Colorado, under the names Kroger, Ralphs, Fred Meyer, Food 4 Less, King Soopers, Smiths, Frys, Frys Marketplace, Dillons, QFC and City Market. Kroger also operates 792 convenience stores, 439 jewelry stores, 520 supermarket fuel centers and 42 food-processing plants.