California Wilts Grocery Results

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The much-awaited financial numbers out of national grocers Kroger (NYSE: KR) and Albertson's (NYSE: ABS) were released today. Both were expected to be significantly affected by the recently ended California grocery strike, and indeed both companies saw net income fall considerably in their fiscal fourth quarters ended January.

Kroger said total Q4 sales rose 4.5% to $13 billion. Gross margins fell, even at divisions without labor problems, indicating competitive pressure. In all, the company turned in a net loss of $337 million, reversing last year's net profit of $381 million. In better news, the business generated free cash flow of about $215 million and managed to finish the fiscal year with lower debt levels than it had a year before.

At Albertson's, Q4 sales fell to $8.6 billion from $9.1 billion as same-store sales fell 6.5%. (Excluding the strike, it should be noted that "comps" actually rose 1.2%.) Net income for the quarter finished down $75 million to $130 million. Gross and operating margins fell. The generation of some $450 million in free cash flow and lower debt, however, softened the blow.

Still, the strike had a significant impact on results at both companies. Albertson's pointed to $700 million in lost sales and $90 million in missing net income during the quarter, while Kroger said the strike (as well as a separate West Virginia work stoppage) was responsible for $156 million in missing bottom-line profit. It should be noted that all this is not to mention any effects on collective bargaining partner Safeway (NYSE: SWY) and the rest of the food and retail business.

And progress in that business marches on: The timing of Wal-Mart's (NYSE: WMT) latest California announcement was almost eerie coming as it did just days after the strike ended. Last Wednesday, the massive retailer opened its first Supercenter in the Palm Springs area. The product mix at Supercenters includes both groceries and the company's traditional discounted goods. (Not all California communities welcome them, however.)

In the long term, reports say that Wal-Mart plans 40 Supercenters in California, and that information must have colored the grocery labor talks. (Reread our recent Struggling Supermarkets feature for more.)

Fool contributor Dave Marino-Nachison doesn't own any companies in this story. He can be reached via email.