UPDATE 1-Credit Suisse downgrades Kroger

lunes 15 de diciembre de 2008 17:23 CET

 (Recasts; adds details, share movement)
 Dec 15 (Reuters) - Credit Suisse downgraded Kroger Co
(KR.N: Cotización) to "neutral" from "outperform" as it expects the no. 1
U.S. grocery store chain's identical-store sales growth to
decelerate in 2009 amid moderating food price inflation and
falling gas prices.
 Kroger's non-fuel identical store sales growth will fall to
2.5 percent to 3.0 percent by 2009 end from 5.6 percent in the
third quarter of 2008 as food price inflation moderates and the
customer traffic benefit from its fuel promotion diminishes
with the drop in gas prices, the brokerage said.
 Kroger has been providing a 10 cent per gallon discount at
its fuel centers to customers who purchase $100 of groceries.
 The brokerage said it sees food price inflation moderating
to flat-to-up 2 percent from 6 percent currently as more
realistic, even as the company expects it to decline to 2
percent to 3 percent in 2009.
 Credit Suisse, which expects Cincinnati-based Kroger's fuel
earnings to drop by as much as 35 percent in 2009, cut its
price target on the grocer's shares to $26 from $32, saying the
risks were not fully priced into the stock.
 The brokerage also raised concerns about the grocer's
rising selling, general and administrative costs, and said its
recent expense management was "disappointing."
 "While we see this issue as quickly fixable, it is a
concern heading into 2009 given that expense control may be
critical if identical stores actually slow," Credit Suisse's
Edward Kelly said.
 Kroger's shares fell to a low of $24.90, before recouping
some losses to trade down 27 cents at $25.29 Monday morning on
the New York Stock Exchange.
 (Reporting by Dhanya Skariachan in Bangalore; Editing by
Deepak Kannan)