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Kroger Posts Fourth-quarter Loss on Labor Disputes

CINCINNATI - The Kroger Co. today reported a net loss of $337.4 million, or $(0.45) per diluted share, for the fourth quarter ended Jan. 31, 2004.

The company estimates the recently resolved labor dispute affecting stores in southern California, as well as a work stoppage in West Virginia that ended in mid-December, reduced earnings by $156.4 million after tax during the quarter. Kroger also incurred a goodwill impairment charge of $444.2 million after tax related to its Smith's division, and a charge of $75.0 million after tax for an asset writedown related to 74 under-performing stores. In addition, Kroger had income of $12.5 million after tax related to the adjustment of a property tax allowance.

Net earnings in the year-ago period were $381.0 million, or $0.50 per diluted share.

Total sales for the 12-week fourth quarter increased 4.5 percent to $13.0 billion, including stores affected by the labor disputes. On this basis, identical food-store sales, including fuel, increased 1.8 percent and, excluding fuel, increased 1.2 percent. Excluding stores affected by labor disputes, identical food-store sales, including fuel, increased 2.0 percent. On this basis, identical food-store sales, excluding fuel, increased 1.3 percent. Kroger estimates that product cost inflation, including fuel, was 2.3 percent and, excluding fuel, was 2.1 percent.

"We are pleased with Kroger's fourth-quarter sales. This represents continued sequential improvement in both total and identical food-store sales," said c.e.o. David B. Dillon. "In addition, we are happy to have a new contract in place in southern California and to have Ralphs team members back at work serving our customers. Ralphs has a comprehensive plan in place to build its business and will receive our full support."

Looking ahead, the company said it expects identical food-store sales for 2004, excluding fuel, to be stronger than the fourth quarter of 2003. However, Kroger expects earnings in 2004 to be lower than in 2003, excluding the effect of the labor disputes and unusual items.

Dillon said that in 2004, the company will seek additional opportunities to reduce its costs in areas such as administration, labor, shrink, warehousing and transportation.
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