Kroger Co. reports $875 million 3Q loss, California economy batters Ralph’s divisiion

Kroger reports $875M 3Q loss on writedown

CINCINNATI — The Kroger Co. reported Tuesday an $875 million loss in its third quarter, blaming tough price competition and the struggling California economy’s hit on its grocery business.

The nation’s largest traditional grocery chain also cut its profit and sales forecast for the full year, with Wal-Mart Stores Inc. and club stores such as Costco Wholesale Corp sharpening industry price-cutting efforts to lure recession-pinched grocery shoppers.

Kroger shares plummeted 12 percent in early trading, down $2.85 to $20.

Kroger took a $1.05 billion writedown on the Ralphs division it acquired a decade ago, saying the 263-store group in California has been battered by the state’s rising double-digit unemployment and housing slump.

Kroger reported a loss of $1.35 a share, compared with profit of $237.7 million, or 36 cents a share, a year ago. Sales rose less than 1 percent to $17.7 billion.

Without the Ralphs writedown, profit would have been $176.7 million, or 27 cents. Analysts expected 36 cents a share on $17.7 billion.

The company said sales at stores open at least 15 months, a key retail gauge, rose only 1.3 percent, excluding fuel sales. Kroger cuts its full-year sales forecast for the measure to 2-2.5 percent, without fuel, from 3-4 percent for stores open at least five quarters.

For the second straight quarter, Kroger also cut its full-year earnings forecast, from $1.90 to $2 down to $1.60 to $1.70 per share.

Analysts were expecting $1.94 per share.

“The operating environment we saw during the third quarter was more challenging than we anticipated,” David B. Dillon, Kroger’s chairman and CEO, said in a statement. “In the near term, our financial results are being pressured by factors including persistent deflation, unusually intense competition, and the cautious mindset of customers.”

Kroger has said shoppers are focused on promotions and price to stretch their food budgets. With an unprecedented number of Americans using food stamps in the recession, big-box stores have begun competing with grocers for their business, too.

Kroger has some 2,470 grocery stores in 31 states under two dozen local banners that include City Market, Dillons, Food 4 Less, Fred Meyer, Ralphs and King Soopers.

Kroger shares traded as high as $27.65 last December before falling to $19.39 in March.

Kroger sales so far were $58.2 billion, down from $58.9 billion for the first three quarters of last year. It has a net loss $185.4 million for the first three quarters, or 28 cents. Excluding the Ralphs writedown, profit would have been $866.2 million, or $1.33 per share.

Earnings for the first three quarters last year were $900.2 million, or $1.36 per diluted share.

On the Net:

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