Kroger Earnings Take Hit From Hurricane Ike While Sales Soar

ELLIOT ZWIEBACH

CINCINNATI — Shares in Kroger were trading down more than 6% yesterday after the retailer here acknowledged sluggish sales of nonfood items in the current quarter and a decline in earnings in the third quarter due to expenses related to Hurricane Ike.

Net income for the third quarter ending Nov. 8 fell 6.3% to $237.7 million, including an after-tax charge of $15.9 million, or 3 cents a share, related to the chain's $25 million deductible for disruption and damaged caused by Hurricane Ike in September. Excluding the charge, net income for the quarter was virtually flat. Sales for the quarter jumped 9% to $17.8 billion, and identical supermarket sales, excluding fuel, rose 5.6%.

For the year to date, net income increased 5% to $900.2 million, while sales climbed 10.9% to $58.7 billion and ID sales, excluding fuel, were up 5.4%. Kroger raised its earnings guidance for the year to the range of $1.88 to $1.91 per share, excluding the charge for Hurricane Ike. The company also confirmed ID sales guidance for the year of 4.5% to 5.5%, excluding fuel.

David Dillon, chairman and chief executive officer, said the expected sales range was wide “because times are such that it's a little less predictable than you might want.” He said during the first four weeks of the fourth quarter Kroger's ID sales are running “just a tick below 5% without fuel,” acknowledging some slowness in sales of discretionary general merchandise and jewelry, “and that slowness continues to get worse.” Those discretionary items account for roughly 10% of sales, he noted, “though it would be a bigger part of the business for Fred Meyer,” he added.

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