Kroger Q4 Adj. Profit Beats View, Sees 2014 Earnings In Line

(RTTNews) - Grocery chain operator Kroger Co. (KR) on Thursday reported a 9 percent decline in profit for the fourth quarter from last year on lower sales and a LIFO charge. However, adjusted earnings per share for the quarter beat analysts' estimates and the company's identical supermarket sales rose from last year. Looking ahead, the company forecast earnings for fiscal 2014 in line with Street estimates.

The Cincinnati, Ohio-based company's net earnings for the fourth quarter were $422 million or $0.81 per share, down from $462 million or $0.88 per share in the prior-year quarter that included an additional week of sales.

The latest quarter's results include the benefits of certain tax items partially offset by expenses related to the company's $2.5 billion acquisition of Harris Teeter Supermarkets. The transaction closed on January 28, 2014.

The quarter's results also include a LIFO charge of $9.7 million, compared to LIFO credit of $41.2 million in the year-ago period.

Excluding items, adjusted earnings for the latest quarter were $0.78 per share, compared to $0.88 per share in the year-ago period. On average, eighteen analysts polled by Thomson Reuters expected the company to report earnings of $0.72 per share for the quarter. Analysts' estimates typically exclude special items.

Total sales for the quarter declined 4 percent to $23.22 billion from $24.12 billion in the same quarter last year. Analysts' revenue consensus was $23.14 billion for the quarter.

After adjusting for an extra week in the year-ago period and excluding fuel, sales for the quarter increased 4.4 percent. The company noted that results were enhanced by its response to adverse weather.

Kroger, which also operates the Ralphs, Fred Meyer, Food 4 Less, Fry's, King Soopers, Smith's, and Dillons brands, said identical supermarket sales, including fuel centers, grew 4.0 percent. Excluding fuel centers, identical supermarket sales advanced 4.3 percent.

Kroger defines a supermarket as identical when it has been open without expansion or relocation for five full quarters.

Operating margin for the quarter declined 30 basis points from last year to 3.1 percent.

Looking ahead to fiscal 2014, Kroger forecasts net earnings of $3.14 to $3.25 per share. The guidance includes Harris Teeter.

The company noted that growing fiscal 2013 adjusted earnings per share of $2.85 by the company's long term growth rate of 8 to 11 percent equates to a range of $3.08 to $3.16 per share.

Street expects the company to report earnings of $3.13 per share for the year.

Adding net accretion to earnings from the Harris Teeter merger of $0.06 to $0.09 per share, excluding transition and transaction expenses, will result in a 10 to 14 percent growth rate for fiscal 2014. Thereafter, Kroger expects to return to its long-term growth rate of 8 to 11 percent.

Kroger anticipates identical supermarket sales growth, excluding fuel, of about 2.5 percent to 3.5 percent for fiscal 2014, including Harris Teeter. This range takes into account the expectation of low inflation during the year.

The company added that shareholder returns will be further enhanced by a dividend expected to increase over time.

In Thursday's regular trading session, KR is trading at $44.73, up $1.05 or 2.40 percent on a volume of 146,341 shares.