 |  |  |  |  |  |  |  |  |
|
Kroger Reports Third Quarter ResultsIdentical Supermarket Sales Rose 7.7% with Fuel and 5.7% without Fuel
CINCINNATI, Dec. 11 /PRNewswire-FirstCall/ -- The Kroger Co. (NYSE: KR) today reported total sales increased 9.8% to $16.1 billion for the third quarter that ended November 10, 2007. Identical supermarket sales increased 7.7% with fuel and 5.7% without fuel. This is the tenth consecutive quarter Kroger has reported identical supermarket sales increases, excluding fuel, in excess of 3%. Net earnings in the third quarter totaled $253.8 million, or $0.37 per diluted share. These results include a benefit from the resolution of certain tax issues. Most of this benefit was offset by lower margins from retail fuel operations and the Company's decision to accelerate certain initiatives that are part of Kroger's Customer 1st strategy. Net earnings in the same period last year were $214.7 million, or $0.30 per diluted share. "Our earnings performance this quarter was solid. Our strategy continues to deliver earnings growth in a variety of economic and competitive conditions, which underscores the core strength of Kroger's business model," said David B. Dillon, Kroger chairman and chief executive officer. "Kroger's strong sales performance in the third quarter is the direct result of our associates' efforts to focus on our customers. Our business model positions us well to serve the diverse needs of our customers." Highlights of the third quarter included:
-- FIFO gross margin decreased 110 basis points to 23.38% of sales
(Table 1). Excluding the effect of retail fuel operations (Table 4),
FIFO gross margin declined 34 basis points.
-- Operating, general and administrative (OG&A) costs as a percentage of
sales declined 78 basis points to 17.49%. Excluding the effect of
retail fuel operations, OG&A declined 49 basis points (Table 4).
-- Capital investment totaled $555.3 million, excluding acquisitions,
compared to $415.0 million a year ago.
-- Kroger repurchased 16.5 million shares of stock at an average price of
$26.77 for a total investment of $442.1 million. At the end of the
third quarter, $201.6 million remained under the $1 billion stock
repurchase program announced in June 2007.
-- On a rolling four-quarters basis, Kroger's net total debt (Table 5) to
EBITDA ratio was 1.97, compared with 2.03 during the same period last
year.
Fiscal 2007 Year-to-Date Results During the first three quarters of fiscal 2007, total sales increased 7.6% to $53.0 billion. For the same period, identical supermarket sales, excluding fuel, increased 5.3%. The Company's operating margin for the first three quarters of fiscal 2007 increased 3 basis points. Excluding fuel and first quarter charges for labor unrest in 2007 and certain legal expenses in 2006, Kroger's operating margin for the first three quarters of fiscal 2007 increased 7 basis points. Net earnings for the first three quarters of fiscal 2007 were $857.6 million, or $1.22 per diluted share. Net earnings for the same period in fiscal 2006 were $730.1 million, or $1.01 per diluted share. Guidance Based on year-to-date financial results and current trends, Kroger now expects identical supermarket sales growth of approximately 5% for the full year, excluding fuel sales. The Company expects earnings per diluted share to slightly exceed the range previously given of $1.64-$1.67. This earnings guidance includes the lower tax rate due to the resolution of certain tax issues this quarter, and a higher estimated LIFO charge of $130 million, which is $80 million more than the Company originally anticipated for fiscal 2007. In addition, Kroger's dividend currently adds slightly over 1% to shareholder return. "Our year-to-date performance positions us to deliver slightly expanding operating margin, low double-digit earnings per share growth and strong identical sales growth in fiscal 2007," Mr. Dillon said. "Kroger continues to deliver financial results in the near-term while maintaining our focus on investing for the future. Our associates' focus on building customer loyalty through service, product, and value initiatives remains key to Kroger's future earnings growth." Looking beyond fiscal 2007, the Company confirmed that it expects identical supermarket sales growth in the 3-5% range with a slightly improving operating margin, excluding the effect of retail fuel operations. Kroger is one of the nation's largest retail grocery chains. The Company's more than 300,000 associates serve customers in 2,487 supermarkets and multi-department stores in 31 states under two dozen local banners including Kroger, Ralphs, Fred Meyer, Food 4 Less, Fry's, King Soopers, Smith's, Dillons, QFC and City Market. Kroger associates also serve customers in 782 convenience stores, 405 fine jewelry stores and 678 supermarket fuel centers the Company operates. The Company also operates 42 food processing plants in the U.S. Headquartered in Cincinnati, Ohio, Kroger focuses its charitable efforts on supporting hunger relief, health and wellness initiatives, and local schools and grassroots organizations in the communities it serves. For more information about the Company, please visit our web site at http://www.kroger.com. This press release contains certain forward-looking statements about the future performance of the Company. These statements are based on management's assumptions and beliefs in light of the information currently available to it. Such statements are indicated by the word "expects." Increased competition, weather and economic conditions, interest rates, goodwill impairment, the success of programs designed to increase our identical supermarket sales without fuel, the impact our other stores located in proximity to existing stores (the "sister store" impact) have on sales at those existing stores, and labor disputes, particularly as the Company seeks to manage increases in health care and pension costs, could materially affect our identical supermarket sales growth and earnings per share. Earnings per share also will be affected by the number of shares outstanding and our success in reducing the number of shares outstanding. Our estimate of LIFO charge could be different than anticipated if the mix of our products sold or product cost inflation changes. Our ability to increase our operating margins is dependent primarily on our ability to increase identical sales, pass along product cost increases, and our ability to reduce shrink, distribution costs, and advertising expenses as a rate of sales. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially. We assume no obligation to update the information contained herein. Please refer to Kroger's reports and filings with the Securities and Exchange Commission for a further discussion of these risks and uncertainties. Note: Kroger's quarterly conference call with investors will be broadcast live via the Internet at 10 a.m. (ET) on December 11, 2007 at http://www.kroger.com and http://www.streetevents.com. An on-demand replay of the webcast will be available from approximately 1 p.m. (ET) today through December 21, 2007.
Table 1.
THE KROGER CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)
THIRD QUARTER
2007 2006
SALES $16,135.6 100.00% $14,698.8 100.00%
MERCHANDISE COSTS, INCLUDING
ADVERTISING, WAREHOUSING AND
TRANSPORTATION (a), AND LIFO
CHARGE (b) 12,402.5 76.86 11,130.7 75.73
OPERATING, GENERAL AND
ADMINISTRATIVE (a) 2,822.9 17.49 2,685.1 18.27
RENT 149.2 0.92 139.4 0.95
DEPRECIATION 315.5 1.96 294.9 2.01
OPERATING PROFIT 445.5 2.76 448.7 3.05
INTEREST 109.9 0.68 106.8 0.73
EARNINGS BEFORE TAX EXPENSE 335.6 2.08 341.9 2.33
TAX EXPENSE 81.8 0.51 127.2 0.87
NET EARNINGS $253.8 1.57% $214.7 1.46%
NET EARNINGS PER BASIC COMMON
SHARE $0.37 $0.30
SHARES USED IN BASIC
CALCULATION 677.6 712.1
NET EARNINGS PER DILUTED
COMMON SHARE $0.37 $0.30
SHARES USED IN DILUTED
CALCULATION 685.4 720.0
Table 1.
THE KROGER CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)
YEAR-TO-DATE
2007 2006
SALES $53,000.2 100.00% $49,252.4 100.00%
MERCHANDISE COSTS, INCLUDING
ADVERTISING, WAREHOUSING AND
TRANSPORTATION (a), AND LIFO
CHARGE (b) 40,551.1 76.51 37,387.0 75.91
OPERATING, GENERAL AND
ADMINISTRATIVE (a) 9,258.7 17.47 8,862.6 17.99
RENT 487.5 0.92 488.5 0.99
DEPRECIATION 1,030.1 1.94 972.6 1.97
OPERATING PROFIT 1,672.8 3.16 1,541.7 3.13
INTEREST 360.6 0.68 371.8 0.75
EARNINGS BEFORE TAX EXPENSE 1,312.2 2.48 1,169.9 2.38
TAX EXPENSE 454.6 0.86 439.8 0.89
NET EARNINGS $857.6 1.62% $730.1 1.48%
NET EARNINGS PER BASIC COMMON
SHARE $1.23 $1.02
SHARES USED IN BASIC
CALCULATION 696.2 718.2
NET EARNINGS PER DILUTED
COMMON SHARE $1.22 $1.01
SHARES USED IN DILUTED
CALCULATION 704.3 725.3
Note: Certain prior-year amounts have been reclassified to conform to
current-year presentation. Certain per share amounts and percentages may
not sum due to rounding.
Note: The Company defines FIFO gross margin as sales minus merchandise
costs plus the Last-In First-Out (LIFO) charge.
(a) Merchandise costs and operating, general and administrative expenses
exclude depreciation expense and rent expense which are included in
separate expense lines.
(b) LIFO charges of $40.0 and $30.1 were recorded in the third quarter of
2007 and 2006, respectively. For the year-to-date period, LIFO charges
of $100.0 and $52.7 were recorded for 2007 and 2006, respectively.
Table 2.
THE KROGER CO.
CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)
November 10, November 4,
2007 2006
ASSETS
Current Assets
Cash $139.6 $141.0
Cash - Temporary investments 26.7 0.3
Store deposits in-transit 579.7 596.3
Receivables 735.1 718.4
Inventories 5,185.6 4,967.7
Prepaid and other current assets 236.1 249.1
Total current assets 6,902.8 6,672.8
Property, plant and equipment, net 12,331.2 11,552.7
Goodwill, net 2,143.7 2,192.3
Other assets 525.0 503.2
Total Assets $21,902.7 $20,921.0
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities
Current portion of long-term debt,
at face value, including
capital leases and lease-
financing obligations $1,714.8 $813.8
Accounts payable 4,230.7 3,846.7
Accrued salaries and wages 774.1 695.3
Deferred income taxes 221.0 217.3
Other current liabilities 1,997.5 2,016.3
Total current liabilities 8,938.1 7,589.4
Long-term debt including capital
leases and lease-financing obligations
Long-term debt, at face value,
including capital leases and
lease-financing obligations 5,747.0 6,127.3
Adjustment to reflect fair value
interest rate hedges 27.6 20.2
Long-term debt including capital
leases and lease-financing obligations 5,774.6 6,147.5
Deferred income taxes 317.4 778.1
Other long-term liabilities 2,101.4 1,795.2
Total Liabilities 17,131.5 16,310.2
Shareowners' equity 4,771.2 4,610.8
Total Liabilities and
Shareowners' Equity $21,902.7 $20,921.0
Total common shares outstanding at
end of period 672.7 707.0
Total diluted shares year-to-date 704.3 725.3
Note: Certain prior-year amounts have been reclassified to conform to
current-year presentation.
Table 3.
THE KROGER CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
YEAR-TO-DATE
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $857.6 $730.1
Adjustment to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 1,030.1 972.7
LIFO charge 100.0 52.7
Stock option expense 68.0 54.7
Expense for Company-sponsored
pension plans 47.3 122.5
Gain on sale of property (7.2) (35.5)
Deferred income taxes (102.1) (91.2)
Other 40.5 35.0
Changes in operating assets and
liabilities, net of effects
of acquisitions:
Store deposits in-transit 34.3 (107.6)
Receivables 34.4 (38.3)
Inventories (659.1) (534.7)
Prepaid expenses 321.8 276.9
Accounts payable 348.5 331.8
Accrued expenses 88.1 50.8
Income tax payables and
receivables 121.0 188.3
Contribution to Company-
sponsored pension plan (51.5) (150.0)
Other long-term liabilities 4.8 (27.5)
Net cash provided by operating
activities 2,276.5 1,830.7
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for capital expenditures (1,627.7) (1,177.8)
Payments for acquisitions (85.5) -
Proceeds from sale of assets 46.4 126.0
Other (46.3) (40.2)
Net cash used by investing
activities (1,713.1) (1,092.0)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from lease-financing
transactions 7.6 15.0
Proceeds from issuance of long-term
debt 624.9 -
Payments for long-term debt (545.3) (542.9)
Borrowings on bank revolver 341.0 264.9
Dividends paid (151.1) (93.7)
Proceeds from issuance of common
stock 214.9 89.0
Treasury stock purchases (1,152.3) (527.2)
Increase (decrease) in book
overdrafts 78.5 (35.5)
Other (4.6) 23.0
Net cash used by financing
activities (586.4) (807.4)
NET DECREASE IN CASH (23.0) (68.7)
CASH AT BEGINNING OF YEAR 189.3 210.0
CASH AT END OF QUARTER $166.3 $141.3
Reconciliation of capital expenditures
Payments for capital expenditures $(1,627.7) $(1,177.8)
Changes in construction-in-progress
payables 35.7 (48.2)
Total capital expenditures $(1,592.0) $(1,226.0)
Supplemental disclosure of cash flow
information:
Cash paid during the year for
interest $386.5 $412.3
Cash paid during the year for
income taxes $326.8 $291.7
Note: Certain prior-year amounts have been reclassified to conform to
current-year presentation.
Table 4. Supplemental Sales Information
(in millions, except percentages)
(unaudited)
Items identified below should not be considered as alternatives to sales
or any other GAAP measure of performance. Identical and comparable
supermarket sales are industry-specific measures and it is important to
review them in conjunction with Kroger's financial results reported in
accordance with GAAP. Other companies in our industry may calculate
identical or comparable sales differently than Kroger does, limiting the
comparability of these measures.
IDENTICAL SUPERMARKET SALES (a)
THIRD QUARTER
2007 2006
INCLUDING FUEL CENTERS $14,283.6 $13,261.9
EXCLUDING FUEL CENTERS $13,012.9 $12,312.1
INCLUDING FUEL CENTERS 7.7% 4.9%
EXCLUDING FUEL CENTERS 5.7% 5.3%
COMPARABLE SUPERMARKET SALES (b)
THIRD QUARTER
2007 2006
INCLUDING FUEL CENTERS $14,768.2 $13,676.9
EXCLUDING FUEL CENTERS $13,439.7 $12,694.6
INCLUDING FUEL CENTERS 8.0% 5.2%
EXCLUDING FUEL CENTERS 5.9% 5.5%
(a)Kroger defines a supermarket as identical when it has been open without
expansion or relocation for five full quarters and is not scheduled to
be closed.
(b)Kroger defines a supermarket as comparable when it has been open for
five full quarters, including expansions and relocations, and is not
scheduled to be closed.
OTHER INFORMATION
Note: Fuel sales have a very low FIFO gross margin rate, OG&A rate, and
operating margin rate, as compared to corresponding rates on non-fuel
sales. As a result, the Company discloses such rates excluding the
effect of retail fuel operations.
Table 5. Reconciliation of Total Debt to Net Total Debt
(in millions)
(unaudited)
Net total debt should not be considered an alternative to any GAAP measure
of performance or liquidity. Management believes net total debt is an
important measure of liquidity, and a primary component of measuring
compliance with the financial covenants under the Company's credit
facility. Net total debt should be reviewed in conjunction with Kroger's
financial results reported in accordance with GAAP.
The following table provides a reconciliation of total debt to net total
debt and compares the balance in the third quarter of 2007 to the balances
in the third quarter of 2006 and the fourth quarter of 1999.
November 10, November 4, January 29,
2007 2006 Change 2000 Change
Current portion of
long-term debt, at
face value,
including capital
leases and
lease-financing
obligations $1,714.8 $813.8 $901.0 $591.5 $1,123.3
Long-term debt, at
face value,
including capital
leases and
lease-financing
obligations 5,747.0 6,127.3 (380.3) 8,422.5 (2,675.5)
Adjustment to
reflect fair value
interest rate
hedges 27.6 20.2 7.4 - 27.6
Total debt $7,489.4 $6,961.3 $528.1 $9,014.0 $(1,524.6)
Temporary cash
investments (26.7) (0.3) (26.4) - (26.7)
Investments in debt
securities - - - (68.8) 68.8
Prepaid employee
benefits - - - (200.0) 200.0
Net total debt $7,462.7 $6,961.0 $501.7 $8,745.2 $(1,282.5)
Website: http://www.kroger.com/Website: http://www.streetevents.com/ |
Issuers of news releases and not PR Newswire are solely responsible for the accuracy of the content.
Terms and conditions, including restrictions on
redistribution, apply.
Copyright © 1996-2007 PR Newswire Association LLC.
All Rights Reserved.
A United Business Media company.
