This March 1, 2011 photo shows a customer walking down the bread and pastry aisle at a Kroger Co. supermarket. The Kroger Co. reported a second-quarter profit that beat Wall Street expectations, Friday, Sept. 7, 2012, as the supermarket operator said its loyalty program helped lift a key sales figure. The nation's largest traditional grocery store chain also raised its outlook for the year. (AP Photo/Al Behrman)
This March 1, 2011 photo shows a customer walking down the bread and pastry aisle at a Kroger Co. supermarket. The Kroger Co. reported a second-quarter profit that beat Wall Street expectations, Friday, Sept. 7, 2012, as the supermarket operator said its loyalty program helped lift a key sales figure. The nation's largest traditional grocery store chain also raised its outlook for the year. (AP Photo/Al Behrman)
NEW YORK (AP) ? The Kroger Co. said Friday that its profit dipped slightly in the second quarter, as the nation's largest traditional grocer faced higher expenses and an increased tax rate.
The Cincinnati-based company said a key sales figure rose during the period as its loyalty program helped attract shoppers. But merchandise costs ? which includes advertising, warehouse and transportation expenses ? also rose 4.3 percent.
Like other supermarkets, Kroger has been paying more to stock its shelves as a result of rising commodity costs. The company has tried to offset the impact by introducing more store-brand items, which helps it control costs.
Kroger, which also operates Ralphs, Food 4 Less and other chains, said sales at supermarkets open at least a year rose 3.6 percent, when excluding fuel. The metric is a key gauge of health because it excludes the impact of newly opened and closed locations.
Its stock slipped 41 cents, or 1.8 percent, to $22.69 in morning trading. Its stock has still risen 8 percent since hitting a 52-week low of $20.98 in late July. Kroger traded as high as $24.83 in January.
As traditional grocery stores face growing competition from big-box retailers and drug stores, Kroger is trying to hang onto shoppers by offering tailored discounts based on past purchases. The strategy seems to be paying off, with Kroger noting that customer loyalty increased in the quarter.
For the three months ended Aug. 11, the company reported net income of $279.1 million, or 51 cents per share. That's down from $280.8 million, or 46 cents per share, a year ago when there were more outstanding shares.
The results were impacted by a higher tax rate, which rose to 34.5 percent, from 27.6 percent a year ago.
Revenue, including fuel, climbed 3.9 percent to $21.73 billion.
Analysts expected earnings of 49 cents per share on revenue of $21.89 billion.
Kroger now anticipates fiscal 2012 earnings of $2.35 to $2.42 per share, up from $2.33 to $2.40 per share.
Analysts predict $2.38 per share.
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