Kroger Rings Up More Profit Despite Slashing Prices

By Imani Moise Features Dow Jones Newswires

Kroger Co. posted results that beat analysts' expectations for the third quarter as lower food costs offset price cuts at its stores.

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Shares jumped 7.5% to $26.28 during premarket trading Thursday as the earnings might help quell concerns that Kroger has lost market share to rivals.

The largest supermarket chain in the U.S. has been investing heavily to position itself to better compete against Amazon.com Inc. and Wal-Mart Stores Inc. as the retail giants battle for market share in the grocery business.

The company has also been ramping up its e-commerce efforts in the wake of Amazon's recent acquisition of Whole Foods Market. Kroger said digital revenue more than doubled in the latest quarter.

Earlier this month, Wal-Mart posted strong gains in its grocery business where it is the No. 1 or No. 2 competitor in 94% of Kroger's major markets, BMO Capital Markets wrote in a research note.

Gross margin grew 0.30 percentage point as the lower prices needed to compete were balanced out by reduced food costs.

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Leading up to the holidays, Kroger said it expects growth to continue, projecting comparable sales to increase 1.1% in the current quarter.

"The holidays are always Kroger's time to shine," said Chief Executive Rodney McMullen in prepared remarks.

Sales at established stores excluding fuel grew 1.1%, which topped expectations. Including fuel, comparable sales grew 2.4% as gasoline prices reached a two-year high during the most recent quarter.

Kroger reported a net profit of $397 million, or 44 cents a share, compared with $391 million, or 41 cents a share, a year ago. Overall sales rose 4.5% to $27.75 billion.

Analysts polled by Thomson Reuters had forecast per-share earnings of 40 cents on $27.46 billion in sales.

Write to Imani Moise at imani.moise@wsj.com

(END) Dow Jones Newswires

November 30, 2017 09:05 ET (14:05 GMT)