KROGER OPERATING NET CLIMBS IN 4TH QUARTER

CINCINNATI -- Kroger Co. here said operating earnings increased 25.7% in the fourth quarter, which exceeded Wall Street's expectations and helped boost Kroger's stock above $24 per share for the first time in a year.Operating earnings, or earnings before an extraordinary item of $3.8 million related to debt retirement, totaled $86.5 million in the 12-week quarter. This compared with operating earnings

CINCINNATI -- Kroger Co. here said operating earnings increased 25.7% in the fourth quarter, which exceeded Wall Street's expectations and helped boost Kroger's stock above $24 per share for the first time in a year.

Operating earnings, or earnings before an extraordinary item of $3.8 million related to debt retirement, totaled $86.5 million in the 12-week quarter. This compared with operating earnings of $68.8 million in last year's 13-week fourth quarter.

Sales totaled $5.4 billion in the quarter, a decline of 5.2%. After adjusting for the extra week and the divestiture of the San Antonio division in mid-1993, Kroger said sales increased 3.8% in the quarter.

For the first five weeks of 1994, Kroger said favorable weather factors have contributed to a 3% same-store sales gain.

Joseph A. Pichler, chairman and chief executive officer, said Kroger was "a better, smarter organization" in 1993. More efficient operating procedures "helped reduce product costs and enabled the company to be the value-oriented merchant that is so much in demand," he said.

Chuck Cerankosky, a securities analyst at Hancock Institutional Equity Services, Cleveland, said Kroger exceeded his earnings estimate of 65 cents per share, which was at the top of Wall Street's expectations.

"Kroger came in even better at 71 cents fully diluted," he said. "I think it was indeed a positive surprise."

Kroger executives also told analysts the "business tone was positive" throughout its market areas. This included an easing of competitive levels in Dallas following Food Lion's move to close a number of stores and improvements in Detroit, which was hurt by the 1993 strike, Cerankosky said.

Kenneth Goldberg, a securities analyst at Merrill Lynch, New York, said Kroger's cash flow continues to improve while interest expense declines. "So Kroger, at this point, is generating free cash flow in excess of cash interest and capital expenditures, which will be used to either reduce debt or make further capital expenditures."

YEAR-END RESULTS

Qtr. Ended 1/1/94 1/2/93

Sales $5.4 billion $5.7 billion

Change -5.2%

Same-store +1.1%

Net Income $82.7 million $53.1 million

Change +55.6%

Inc/Share 68 cents 56 cents

Year 1993 1992

Sales $22.4 billion $22.1 billion

Change +1.1%

Same-store +1.2%

Net Income ($12.2 million) ($5.9 million)