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    Kroger Posts Strong Q3

    CINCINNATI -- The Kroger Co. here posted a strong earnings increase in the third quarter, as same-store sales rose 6.6 percent.

    CINCINNATI -- The Kroger Co. here posted a strong earnings increase in the third quarter, as same-store sales rose 6.6 percent.

    Earning were $185.4 million, or 25 cents a share, for the three months ended Nov. 5 --up 30 percent from the $142.7 million, or 19 cents a share in the year-ago period. Kroger's total sales for the quarter jumped 9.1 percent to $14 billion. Excluding fuel, same-store sales were up 3.7 percent, representing Kroger's ninth consecutive quarter of positive identical supermarket sales.

    The company also benefited from a previous class-action credit card settlement and the reversal of a tax contingency -- but those were offset by hurricane-related expenses, an increase in legal reserves and an asset writedown.

    "Kroger's performance in the third quarter is a clear sign that our associates' focus on providing improved service, selection and value is being well-received by our customers," said David B. Dillon, Kroger chairman and c.e.o. "Thanks to this emphasis on placing the 'customer first,' Kroger posted its highest identical supermarket sales since the merger with Fred Meyer in 1999."

    Noting that its financial performance in the third quarter reflects, "the consistent approach we have taken to managing our business," Dillon said Kroger continues to balance investments in gross margin and improved customer service with operating cost reductions to provide a better shopping experience.

    Sales and operating profit at Ralphs and Food 4 Less in Southern California improved during the third quarter as compared to last year. In Southern California, identical supermarket sales without fuel at both divisions, on a combined basis, increased 2.9 percent over the prior-year period.

    "The pace of our recovery in southern California is slower than we would like. Clearly there are opportunities for growth, and our teams are focused on seizing those," Dillon said.

    Over the first three quarters of fiscal 2005, sales increased 7.2 percent to $46 billion. Net earnings for the first three quarters of fiscal 2005 were $676 million, or $0.92 per diluted share. For the first three quarters of fiscal 2004, net earnings were $548 million, or $0.73 per diluted share.

    "Thanks to the hard work and outstanding contributions of the entire organization, Kroger has made tremendous progress in several key areas this year. Our associates are offering improved shopping experiences for our customers in a variety of ways, and Kroger has been able to fund these by improving productivity and taking costs out of our business. Holiday sales are off to a strong start. We are focused on becoming more competitive in every aspect of our business so that we can take advantage of growth opportunities and generate value for our shareholders," said Dillon.

    At the end of the third quarter of fiscal 2005, Kroger operated (either directly or through its subsidiaries) 2,510 supermarkets and multi-department stores in 32 states under two dozen local banners including Kroger, Ralphs, Fred Meyer, Food 4 Less, King Soopers, Smith's and Smith's Marketplace, Fry's and Fry's Marketplace, Dillons, QFC and City Market. Kroger also operated (either directly or through subsidiaries, franchise agreements, or operating agreements) 792 convenience stores, 431 fine jewelry stores, 567 supermarket fuel centers and 42 food processing plants.

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