Kroger Company (KR)

The biggest U.S. grocery chain was off to a strong start in fiscal 2008, posting Q1 profit that beat analysts’ expectations. Net income climbed 23.4% from a year ago to $386 million, or $0.58 per share – $0.03 more than consensus. Same-store sales also rose by 9.2% with fuel and 5.8% without fuel.

Kroger’s lower price strategy - working :

The startegy including generic and gas discount programs, has helped increase traffic. In addition, shoppers were given bonus gift cards if they spent their tax rebates in Kroger stores.

Based on the strength of its Q1 results, the company raised its full-year guidance and is now expecting same-store sales growth of 4-5% versus a previous forecast of 3-5%.

Forecast :

Kroger now anticipates EPS of $1.85-1.90, up from original guidance of $1.83-1.90.

The company is a dominant operator of traditional grocery stores in the United States and is able to offer lower prices, as well as a broader selection of higher margin private label foods, than its other traditional grocery store competitors.

Kroger has effectively used technology to boost its sales per square foot and it is likely that the company will continue to do so because of its stake in dunnhumby USA.