Grocery chain operator Kroger Co. (KR) reported Thursday a profit for the fourth quarter compared to a loss last year, reflecting lower expenses, double-digit sales, and as the year-ago quarter was weighed down by a hefty pension plan charge.
Both adjusted earnings per share and quarterly revenues topped analysts' expectations. The company also provided earnings forecast for the full-year 2013, above Street view.
"Kroger's unique value offering of better service, great products and an enjoyable shopping experience with low prices continues to resonate with a full range of customers," Chairman and CEO David Dillon said in a statement.
The Cincinnati, Ohio-based traditional grocery retailer reported net earnings of $461.5 million or $0.88 per share for the fourth quarter, compared to a net loss of $306.9 million or $0.54 per share in the prior-year quarter.
The results for the latest quarter include an $0.11 per share benefit of a 53rd extra week, while the year-ago quarter included a pension plan consolidation charge of $1.04 per share, and a $0.13 per share charge related to LIFO adjustment.
Excluding the items, adjusted net earnings for the quarter was $403.1 million or $0.77 per share, compared to $357.1 million or $0.50 per share in the year-ago quarter.
On average, 19 analysts polled by Thomson Reuters expected the company to report earnings of $0.70 per share for the fourth quarter. Analysts' estimates typically exclude special items.
Total sales for the quarter increased 12.8 percent to $24.15 billion from $21.41 billion in the same quarter last year, and topped fifteen Wall Street analysts' consensus estimate of $24.00 billion. After adjusting for the extra week, total sales rose 3.7 percent.
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 3.5 percent and excluding fuel centers, it advanced 3.0 percent. This also marks 37 consecutive quarters of identical supermarket sales growth.
Kroger defines a supermarket as identical when it has been open without expansion or relocation for five full quarters.
Operating, general and administrative expenses as a percentage of total sales contracted 500 basis points to 15.27 from last year. Excluding retail fuel operations and the extra week, it declined 70 basis points.
"We achieved strong sales and pharmacy results, plus controlled expenses well throughout the year. We delivered value to shareholders by increasing our dividend 30 percent and exceeding our own earnings per share guidance through the combination of solid operating results and share buybacks in 2012," Dillon added.
For fiscal 2012, the company reported net earnings of $1.50 billion or $2.77 per share, sharply higher than $602.1 million or $1.01 per share in the prior year. Excluding the items, adjusted net earnings for the year was $1.36 billion or $2.52 per share, compared to $1.30 billion or $2.17 per share in the year-ago quarter. Total sales for the full year grew 7.1 percent to $96.75 billion from $90.37 billion in the previous year. Adjusting for the extra week, total sales increased 4.9 percent.
Analysts expected the company to report full-year 2012 earnings of $2.46 per share on annual revenues of $96.37 billion.
Looking ahead to fiscal 2013, Kroger continued to expect earnings in a range of $2.71 to $2.79 per share, on projected identical supermarket sales growth, excluding fuel, of about 2.5 to 3.5 percent. Street is currently looking for full-year 2013 earnings of $2.64 per share.
During fiscal 2013, Kroger also said it plans to use cash flow from operations to fund capital investments, pay dividends to shareholders, maintain its current debt rating and repurchase shares.
In Thursday's regular trading session, KR is currently trading at $30.35, up $0.99 or 3.39% on a volume of 2.21 million shares. In the past 52-week period, the stock has been trading in a range of $20.98 to $29.76.
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