Profits at US grocer Kroger tumbled during 2009 due to impairment charges, soft sales and increased promotional activity.
Net earnings for fiscal 2009 totalled US$70m, down from $1.25bn a year ago.
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The company said earnings were hit by asset impairment charges in southern California, booked during the third quarter. Excluding these items, profits would have fallen to $1.12bn.
Total sales rose 0.8% to $76.7bn. Excluding fuel, sales were up 2.9%, while identical sales gained 2.1%.
“Throughout 2009, Kroger successfully achieved identical sales growth, one of the key objectives of our business model,” chairman and CEO David Dillon said.
“Through the efforts of all of our associates, we continue to widen the gap between Kroger’s identical sales growth trends and those of most of our competitors,” he insisted.
However, Kroger shares fell 2.45% in early trade this morning, declining to $22.34 at 9.40 am ET, on concerns over profits and the weakness of Kroger’s fourth quarter.
During the final three months of 2009, Kroger saw net earnings fall to $255.4m from $349.2m last year. The company said that increased promotional activity and food deflation meant margins declined 214 basis points as US retailers increased competition around price.
Looking to the coming year, Kroger said it anticipated the structural issues that weighed on the business during the back half of 2009 would continue to have a negative impact.
“Inflation or deflation in product and operating costs, the competitive environment, fluctuating fuel margins, and the pace of the economic recovery are uncertain and cause Kroger to be cautious about its fiscal year 2010 forecast,” the company said.
Kroger predicted identical sales growth, excluding fuel, of 2-3% and net earnings are expected to range from $1.60 to $1.80 per share.
For the full earnings release click here and click here for Kroger’s 2010 outlook.
