Kroger Q4 profit falls 27%

Cincinnati The Kroger Co. reported that its profit fell 27% in the fourth quarter, even as sales rose with a boost from the grocer's gasoline incentives for regular customers.

The chain Tuesday reported profit of $255.4 million down from $349.2 million a year ago. Sales rose 7% to $18.6 billion. Excluding fuel, sales were up 2%.

Kroger had seen earnings growth early in the recession, as consumers cut back on restaurants and bought more store-prepared food and groceries to eat at home. Kroger also has seen good growth for its store-brand items, usually priced below national brands.

But competition has intensified, driving down prices and drawing bargain-hunting shoppers to warehouse club chains such as Costco Wholesale Corp. Kroger has stepped up promotions and incentives.

The company said sales at stores open at least 15 months rose only 1.2% without fuel sales in the fourth quarter.

"We are strengthening Kroger's overall competitive position by increasing the number of households that are loyal to Kroger and earning a greater share of their business," said David B. Dillon, Kroger's chairman and CEO.

Kroger sells fuel at about a third of its grocery stories and is trying out a link of its customer loyalty discounts with Shell Oil stations in five markets in California, Ohio and Tennessee to expand its fuel reach.

Kroger has nearly 2,500 grocery stores in 31 states that include local banners such as Ralphs, Fred Meyer, Food 4 Less, Fry's, King Soopers, Smith's, Dillons, QFC and City Market.

For the year, total sales increased nearly 1%, $76.7 billion, with same-store sales up 2.1% for the year.

Profits for the year were $70 million, hurt by a $1.05 billion charge to write down in the third quarter on the value of its Ralphs division because of the battered economy in California. Kroger said otherwise, earnings for the year would have been $1.12 billion.