By Randy Tucker
The Cincinnati Enquirer

Kroger Co., the nation's largest supermarket chain, Tuesday posted quarterly earnings in line with Wall Street expectations despite a slow holiday sales season.

Kroger said fourth-quarter profits rose to $381 million, or 50 cents a share, from $368.5 million, or 45 cents a share, a year earlier.

Excluding one-time charges, earnings were 49 cents a share, meeting the consensus estimate of analysts polled by research firm Thomson First Call. Kroger stock closed up 53 cents to $12.66 Tuesday.

Sales at food stores open at least a year, including fuel, declined 1 percent. Sales, excluding fuel, at food stores open at least a year - known as same-store sales and considered the best indicator of a retailer's health - declined 1.8 percent, the company said.

"While we were not satisfied with our sales, we recognize that it was a difficult holiday season for Kroger and most retailers," chairman and chief executive Joseph Pichler said. "Consumers are still concerned about the weak economy, high unemployment and the possibility of war.''

Still, same-store sales at food stores through the first five weeks of fiscal 2003 are trending higher than during the fourth quarter of 2002, Pichler said.

Total sales for the fourth quarter increased 2.8 percent to $12.5 billion, while total food store sales rose 2.4 percent.

For fiscal 2002, sales increased 3.3 percent to $51.8 billion. Net earnings for 2002 were $1.52 a share, compared with $1.37 in 2001.

Kroger estimates that net earnings will be $1.63 a share in fiscal 2003, which is consistent with the company's previous guidance of $1.65, minus a 2 cent charge for expenses.

But that's below the $1.68 a share average at Thomson First Call.

"Sales are tough for everybody now,'' said Jack Russo, who follows Kroger for A.G. Edwards & Sons in St. Louis. "We knew it was going to be a tough year going in, and nothing has changed.''

Kroger said it would continue to lower prices and spend more on promotions to battle its competitors, including discounter Wal-Mart Stores. Kroger competes against 603 Wal-Mart supercenters in 26 major markets.

Wal-Mart supercenters have achieved at least a No. 3 share in 18 of the 26 markets, while Kroger's market share increased in 12 of those markets and declined in six, the company said.

"Kroger is narrowing the price gap with discount operators and extending our price advantage over traditional competitors in most markets," Pichler said. But "pricing is only one element of our strategic growth plan. We will continue to differentiate our stores through exciting departments that offer natural food, high-quality perishables, expanded general merchandise and outstanding private-label products in convenient locations."

Andrew Wolf, an analyst at BB&T Capital Markets in Richmond, Va., agrees with Kroger's strategy but doesn't expect significant short-term gains as a result.

"They (Kroger) are trying to turn around sales in a sluggish economy ... and it will take awhile,'' he said.

Kroger officials declined to give quarterly guidance on sales or earnings for fiscal 2003. They also declined comment on recent reports that Kroger might buy Chicago-based Dominick's grocery chain.

E-mail rtucker@enquirer.com