Kroger Shares Rise as Profit Tops Forecasts

Kroger, the largest U.S. grocery chain, Tuesday posted a better-than-expected quarterly profit, helped by an emphasis on lower prices, gasoline discounts and other efforts to appeal to cash-strapped consumers.

Its shares rose more than 5 percent in premarket trading.

Kroger had a fiscal first-quarter profit of $386.0 million, or 58 cents per share, compared with a profit of $336.6 million, or 47 cents per share, in the year-earlier quarter.

Identical store sales, which includes stores that have been open five full quarters and have not been moved or expanded, were up 5.8 percent, excluding fuel.

Total sales for the company, which operates Kroger, Fred Meyer and Ralphs grocery stores, as well as the Littman and Barclay jewelry chains, rose 11.5 percent to $23.11 billion.

Analysts, on average, were looking for earnings of 55 cents per share on revenue of $22.27 billion, according to Reuters Estimates.

During the quarter, Kroger allowed customers to exchange their tax refund or economic stimulus checks for a Kroger gift card with an extra $30, $60 or $120 added to it. Under its program, a customer who loaded a $600 rebate check onto a Kroger gift card, got a credit of $660 — an extra 10 percent.

The grocery chain also rolled out a $4 generic drug promotion similar to that of Wal-Mart Stores . While the program is designed to lure more customers into stores, analysts worry that it could cause gross margins to contract in the near term.

Kroger shares were at $27.45 in premarket trading, up from Monday's New York Stock Exchange close of $26.