US grocer Kroger has warned that earnings for the year would be flat - compared to the 10% to 12% rise it had anticipated - due to extra promotional costs incurred to attract shoppers.

For the third quarter ended November 9, Kroger said like-for-like sales fell 1.3% excluding fuel while total sales rose 2.8% to $11.7bn.

CEO Joseph Pichler said: “The combination of a weak economy, rising unemployment, product cost deflation and continued aggressive competition has created a difficult operating environment. It is not clear when consumer confidence will improve.

“In addition, we anticipate that health care and pension costs will increase substantially in 2003.”