Kroger says storm hurt third quarter; outlook cautious

CINCINNATI — Hurricane Ike battered Kroger Co.'s third-quarter profits, and the grocery chain offered a cautious forecast Tuesday amid the churning U.S. economic storm.

The nation's largest traditional grocer said profits fell 6 percent in the quarter, mainly because of far-reaching damage from Hurricane Ike, even as its sales rose 9 percent. But Kroger expects lower holiday spending to hurt fourth-quarter results, and projects slower same-store sales growth for next year.

Kroger shares (NYSE: KR) dropped $1.84 (6.74%) to close at $25.47.

"Clearly, as an economy, things have gotten a little worse across the country, and I think you can see that in some elements of our business, too," chairman and chief executive David B. Dillon said. "Bottom line for us is that when the economy is bad, people are still going to eat, and somebody is going to do well, and we're really committed to it being us."

Third-quarter revenue rose 9 percent to $17.6 billion, and identical-supermarket sales rose 5.6 percent in the quarter without fuel sales and 7.8 percent with them. Those sales, for stores open at least five quarters, are considered a key gauge of retail strength.

Kroger said sales were strong for its deli, bakery and other store-prepared foods as Americans cut down on restaurant meals, and that its corporate brand sales continue to rise, accounting for more than a fourth of grocery sales.

The Cincinnati-based company said it earned $237.7 million, or 36 cents per share, in the quarter, down from $253.8 million, or 37 cents per share, a year earlier.