Kroger Earnings Surpass Estimates; Shares Advance

June 17 (Bloomberg) -- Kroger Co., the largest U.S. grocery-store chain, reported first-quarter profit that exceeded analysts’ projections as it attempts to fight off competition from Wal-Mart.

Net income declined 14 percent to $373.7 million, or 58 cents a share, the Cincinnati-based company said today in a statement. That compared with the 54-cent average of estimates compiled by Bloomberg. Merchandise costs climbed 11 percent.

Kroger struck a better balance in offering discounts to increase traffic, according to Scott Mushkin, an analyst at New York-based Jefferies & Co. Kroger has faced escalating price cuts from Wal-Mart Stores Inc., which has slashed prices on grocery items like meats and dairy.

“The environment with Wal-Mart and other stores has gotten very competitive,” Mushkin said in an interview. “Kroger curtailed some of their self-inflicted wounds by pulling back couponing, but not all of it.”

Revenue advanced 8.7 percent to $24.8 billion in the period ended May 22, helped by fuel sales. Profit was $435.1 million, or 66 cents, in the year-earlier quarter.

Kroger rose 67 cents, or 3.3 percent, to $20.75 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have climbed 1.1 percent this year.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net