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Kroger Q2 Comps Up 3.3%

CINCINNATI — Kroger Co. on Thursday posted identical-store sales growth of 3.3%, excluding fuel, for the second quarter, and raised its ID-store sales target for the year.

“Kroger's strong second quarter results have us on target to deliver the earnings per share growth we promised for the year,” said David B. Dillon, chairman and chief executive officer. “Kroger's second quarter operating performance and financial results show that the common thread in our story is consistency.

“Every supermarket division and every department had positive ID sales. We controlled costs throughout the business.”


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Rodney McMullen, Kroger’s president and chief operating officer, said the company sees consumer confidence improving “at a slow but steady pace.”

Overall, we would characterize the economy as continuing to improve but fragile,” he said.

McMullen said that Kroger grew both the number of loyal households that shop at its stores and the number of total households during the second quarter.

“Overall, customers continued to visit our stores more frequently, purchase fewer items per trip and buy more on a monthly basis,” he said, noting that total units sold were up compared with last year. 

Dillon added, “There's lots of categories and items and areas that you would say are more discretionary items that people are buying more of today than they were before.”

Net income for the quarter was up 13.6%, to $317 million, and sales rose 4.6%, to $22.7 billion.

Kroger estimated the rate of product cost inflation at 1.6%, excluding fuel and pharmacy.

Based on the second quarter results, the company maintained its net earnings guidance for the year to a range of $2.73 to $2.80 per diluted share. Kroger raised its guidance for ID sales growth, excluding fuel, to approximately 3% to 3.5% for fiscal 2013, vs. previous guidance of 2.5% to 3.5%.

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Asked by an analyst about the potential for expanding its e-commerce grocery offering, Dillon said the company will take a closer look at how Harris Teeter is handling online ordering with store pick-up once Kroger completes its previously announced acquisition of that chain, expected later this year.

“We continue to experiment with it, in Denver, Colo., and we have for the last several years,” Dillon said. “We have a few customers that are very loyal to it, but it's modestly growing and it's modestly grown for a long period of time. We think, over time, it'll just be one part of the way a customer shops, along with physical assets, too.”

He said the company wants to examine Harris Teeter’s model more closely “to make sure we understand that, and what pieces of that make sense to use in other places.”

In response to another question, McMullen said the company’s Fred Meyer supercenter division, based in Portland, Ore., has been “having a tremendous amount of success working deeper with all our divisions across the company” it terms of selecting items to add to Kroger stores.

 “We’re starting to redo some of our marketplace stores with categories different than what we initially did, and we’re very pleased with the success there,” he said.

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