Kroger Posts Strong Q2; Same Store Sales Up 5.8 Pct.

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Kroger Posts Strong Q2; Same Store Sales Up 5.8 Pct.

CINCINNATI, Ohio - The Kroger Co.'s shares jumped 7 percent Tuesday after the chain here posted stronger-than-expected second-quarter earnings and lifted its full-year profit outlook.

Total sales increased 6.6 percent to $16.1 billion for Kroger's second quarter ended August 18, 2007, while same store supermarket sales rose 5.8 percent with fuel and 5.1 percent without fuel. This is the ninth consecutive quarter Kroger has reported same store supermarket sales in excess of 3 percent.

The retailer earned $267.3 million, or 38 cents per share, for the three-month period, up from $209 million, or 29 cents per share, a year ago. Revenue rose 7 percent to $16.14 billion in the quarter from $15.14 billion last year.

Commenting on the strong quarterly progress, David B. Dillon, Kroger's chairman and chief executive, credited the company's associates, who he said "understand the importance of placing our customers first in their daily decisions. These results show we are connecting with our diverse customer base in a variety of ways, including service, price and products."

During the past year, the company said, it has focused heavily on improving customer service with faster checkouts, expanded offerings in such areas as organic foods, and adding store formats such as its Marketplace that's double the size of the typical Kroger store and that also sell furniture, office supplies and other nonfoods.

For the first half of the year, Kroger earned $603.8 million, or 85 cents per share, up from $515.4 million, or 71 cents, the previous year. Sales rose to $36.86 billion, up nearly 7 percent from $34.55 billion in the first six months of last year.

"Kroger's earnings per share growth in fiscal 2007 will be driven by strong identical sales growth, a slightly improved operating margin, and fewer shares outstanding," said Dillon. "The performance of Kroger's business through the first half of 2007 exceeded our expectations, and our momentum heading into the second half of the year causes us to raise our identical sales and earnings guidance for fiscal 2007."

Looking beyond 2007, Kroger expects its same store supermarket sales to grow in the 3 percent to 5 percent range with a slightly improving operating margin, excluding fuel sales.

Kroger operates 2,491 supermarkets and multi-department stores in 31 states under two dozen local banners. It also operates 780 convenience stores, 406 fine jewelry stores, 664 supermarket fuel centers, and 42 food processing plants.