By Randy Tucker
The Cincinnati Enquirer
Kroger Co. reported first-quarter earnings Tuesday that beat analysts' estimates by a penny, but it also indicated that profits could fall short of expectations for the full year.
The Cincinnati-based grocery giant reported first-quarter earnings of $351.5 million, or 46 cents a share, compared with $305.2 million, or 38 cents a share, a year ago. The average estimate of analysts polled by research firm Thomson First Call was 45 cents a share.
But Kroger said it now expects earnings for fiscal 2003 to range from $1.55 to $1.63 a share, which means profits could fall below Kroger's previous forecast at the high end of that range. Analysts had been expecting $1.62 a share for the full year.
"Our earnings guidance for 2003 had included a projected gross profit margin increase of 20 to 30 basis points. ... Competitive conditions, thus far, have prevented us from increasing gross profit margin as anticipated,'' CEO Joseph A. Pichler said during a conference call with analysts.
Sales at stores open at least a year - or same-store sales - fell 0.1 percent at food stores that also sell gasoline, while same-store sales at food stores that do not sell fuel fell 1.1 percent.
Comparable food-store sales - which include relocations and expansions - increased 0.7 percent for the quarter, Kroger said. Comparable food-store sales, excluding fuel, declined 0.5 percent.
Kroger said it expects same-store sales - considered the best barometer of a retailer's health because they exclude the disproportionate contribution of newly opened or remodeled stores - to be positive for the full year at food stores that sell gasoline.
But the company warned that second-quarter same-store sales comparisons will be challenging.
Total sales for the first quarter of fiscal 2003 rose 3.8 percent, to $16.3 billion, while total sales at food stores alone rose 3.5 percent.
Also in the first quarter, Kroger repurchased 9.6 million shares of common stock at an average price of $13.98 a share, boosting profits by $134.3 million.
Since January 2000, Kroger has invested $2.2 billion to repurchase 111.3 million shares.
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