Kroger posts 4Q loss on pension costs

NEW YORK (AP) - The Kroger Co. on Thursday reported a fourth-quarter net loss due to pension costs even though its focus on offering shoppers low prices and personalized deals led to higher sales.

The nation's biggest supermarket chain, which operates Kroger, Ralphs, Food 4 Less and other grocery stores, said the loss was the result of costs associated with consolidating its pension plans for union workers

But revenue from stores open at least a year - a performance measure for a food company - rose 4.9 percent during its fourth quarter. Kroger said total sales in the quarter increased 7.7 percent to $21.4 billion from a year ago. Excluding results from its fuel stations, which are subject to volatility and not considered part of the company's core business, sales increased 5 percent over the same period last year.

Kroger benefited in part from its loyalty programs that offer shoppers targeted discounts and weekly coupon mailings based on their purchase histories. Without providing specifics, the company said the total number of households shopping with Kroger increased during the quarter, as did its core group of "loyal customers," which the company defines based on shopping patterns.

Kroger, like many supermarkets and big-box retailers, has struggled to keep prices low for customers in recent years because they're paying more to stock shelves as a result of rising fuel commodity prices. Kroger says it has managed the balancing act in part by controlling its operating and administrative costs. The company has also focused on pushing its store brands to control expenses.

During the quarter, the company said that store brands represented about 27 percent of all its grocery department sales. Kroger has expanded the category over the years and now offers three varieties of store brands; a "value" line, a line that bears the company's name and a line that's marketed as a more premium product.

Still, the Cincinnati-based company said it lost $306.9 million, or 54 cents per share, for the three months ended Jan. 28. That's compared with a profit of $278.8 million, or 44 cents per share, a year ago.

Not including one-time charges, the company said it earned 50 cents per share, which topped the 49-cents-per-share profit that analysts were expecting, according to FactSet Research.

The per-share results in the latest period were boosted by the company's stock buyback during the quarter, which reduced the number of outstanding shares. Kroger's stock rose 65 cents, or 2.7 percent, to close at $24.44 Thursday.

The pension-related costs for the quarter had been announced in December, when the company said that four of the union pension funds to which it contributes were merging into a new fund as of the start of this year. Kroger contributed $650 million to the new fund in January as part of the agreement, but the company said the move is expected to reduce costs over the long term.

Kroger also recorded a $73.4 million "LIFO" charge during the quarter, compared with $18.8 million a year ago. LIFO, or last-in, first-out, is an accounting practice that assumes that a company sells its newest products first. If a product is sold for less than it was bought for, the difference is taken as a loss.

For the full year, Kroger's adjusted net income excluding one-time items was $1.2 billion, or $2 per share, which beat Wall Street expectations of $1.77 per share.

Looking ahead to 2012, Kroger said it expect net earnings of $2.28 to $2.38 per share, taking into account the benefit of an extra week in the year, lower-than-expected accounting charges and aggressive stock buybacks during 2011.

"All of the data we are seeing suggests the overall economy and customer sentiment are improving," CEO Dave Dillon said in a conference call with analysts. "Both give us reason to be optimistic."

But he added that consumer sentiment is fragile and subject to change from a variety of factors.

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