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Kroger Drives Sales Gains in Q4

Kroger Drives Sales Gains in Q4

CINCINNATI — Shoppers continue to face economic uncertainty, Kroger Co. here said in a conference call with investors last week discussing fourth-quarter results.

“Consumer confidence was fragile throughout the year and it hit its lower point this January as customers voiced heightened concern over taxes,” said David Dillon, chairman and chief executive officer. “We believe four factors will continue to affect consumer confidence: the overall state of the economy; fluctuating gas prices; payroll taxes; and government policy uncertainty. These factors are causing sales comparisons between days and weeks to be highly variable, but overall we continue to have strong [identical-store] sales trends. We remain confident in our ability to deliver growth despite the economic uncertainty.”

David Dillon
David Dillon

The company posted its 37th consecutive quarter of same-store sales growth in the fourth period, at 3% excluding fuel.

Net income for the fourth quarter, which ended Feb. 2, totaled $461.5 million, vs. a loss of $305.4 million in the year-ago period related to one-time charges. Sales for the quarter, which included an extra week, increased 12.8%, to $24.2 billion. Adjusting for the extra week, sales increased 3.7% over year-ago results.

For the year, net income more than doubled, to almost $1.5 billion, vs. $602.1 million in the preceding year. Sales increased 7.1% to $96.8 billion, and were up 4.9% adjusting for the extra week.

Dillon said Kroger was able to control expenses in a broad way across the organization, and the company was able to reduce operating, general and administrative costs 70 basis points as a percent of sales in the fourth quarter.

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Kroger also reported that its market share increased during the year. Citing Nielsen Homescan data, Rodney McMullen, president and chief operating officer, said Kroger’s overall dollar share of products grew about 20 basis points during the year.

“The pace of our market share growth accelerated in the back half of the year,” he said in the conference call. “This mirrors our tonnage growth during the year.”

He said the data also reveal that Kroger’s market share increased in 10 of the 19 marketing areas outlined by the Nielsen report.

He also cited success with the private brands — particularly its new Simple Truth and Simple Truth Organic, which had 2012 sales that exceeded the company’s goal by 33%.

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