Profit up 23%, Kroger beats forecast

Shares of Kroger Co., the biggest U.S. grocery-store chain, climbed the most in more than four years after surging same-store sales lifted fourth-quarter profit well above analysts' estimates.

Net income rose 23 percent to $518 million, or $1.04 a share, from $422 million, or 81 cents, a year earlier, the Cincinnati-based company said Thursday in a statement. Analysts had projected 90 cents on average, according to data compiled by Bloomberg. Kroger also gave a full-year earnings forecast that topped analysts' predictions.

Kroger is winning market share from rivals and benefiting from a resurgence in retail spending by Americans. Chief Executive Officer Rodney McMullen, who took the reins last year, also has been integrating the Harris Teeter acquisition and adding workers to meet demand. The company said it created almost 25,000 jobs last year.

"We have a great strong core business that we expect to carry us into 2015," Chief Financial Officer Mike Schlotman told Bloomberg Television's Betty Liu on Thursday. "Our undying focus on the customer we believe is what's going to continue to deliver for us in the future."

Kroger shares rose $4.66, or 6.7 percent, to close Thursday at $74.31 on the New York Stock Exchange, the biggest gain since June 2010. The stock had added 8.5 percent this year through Wednesday's close.

Same-store sales, excluding fuel, jumped 6 percent in the fourth quarter. Analysts had estimated 4.8 percent. Total revenue rose 8.5 percent to $25.2 billion in the quarter, which ended Jan. 31. That matched projections.

Excluding some items, earnings will be $3.80 to $3.90 a share this year, the company said. Analysts had estimated $3.73. Identical-store sales will climb 3 percent to 4 percent, not counting fuel.

Wal-Mart Stores Inc. announced last month that it would raise wages for about 500,000 workers, boosting pay to at least $9 this year and $10 by next February. The move fueled speculation that other large employers will be forced to follow suit.

Kroger's Schlotman didn't commit to a wage increase on Thursday. The average pay in Kroger stores is about $14 an hour, with less than 4 percent of its workers making the federal minimum wage, he said. The company will continue hiring in 2015, Schlotman said.

"We feel very good about what they're paid and what their total benefit package is," he said.

Kroger runs more than 2,600 supermarkets in 34 states, including the Fred Meyer, Ralphs and Fry's chains. The company, which has almost 400,000 employees, also operates convenience stores and food-processing plants.

The decline in gasoline prices last year was a mixed bag for Kroger. It meant lower prices for the gas it sells, though it may have helped increase broader consumer spending.

The company also is taking market share from competitors, said Joe Feldman, an analyst at Telsey Advisory Group in New York.

"They're priced right," he said. "They're doing a really good job."

Information for this article was contributed by Craig Giammona of Bloomberg News.

Business on 03/06/2015

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