| « Go back
KROGER REPORTS SECOND QUARTER RESULTS
Identical Supermarket Sales Rose 5.8% with Fuel and 5.1% without Fuel
Company Raises Fiscal 2007 Identical Sales and Earnings Guidance
CINCINNATI, Ohio, September 18, 2007 – The Kroger Co. (NYSE: KR) today reported total sales increased 6.6% to $16.1 billion for the second quarter ended August 18, 2007. Identical supermarket sales increased 5.8% with fuel and 5.1% without fuel. This is the ninth consecutive quarter Kroger has reported identical supermarket sales, excluding fuel, in excess of 3%.
Net earnings in the second quarter totaled $267.3 million, or $0.38 per diluted share. Net earnings in the same period last year were $209.0 million, or $0.29 per diluted share. .
“We are very pleased with our second quarter results,” said David B. Dillon, Kroger chairman and chief executive officer. “Our associates understand the importance of placing our customers first in their daily decisions. These results show we are connecting with our diverse customer base in a variety of ways, including service, price and products.”.
Highlights of the second quarter included:
- FIFO gross margin increased 47 basis points to 23.94% of sales (Table 1). Excluding the effect of retail fuel operations (Table 4), FIFO gross margin increased 51 basis points. During the quarter, the Company passed along higher product costs. Gross margin also benefited from lower shrink, distribution costs and advertising expense as a rate of sales.
- Operating, general and administrative (OG&A) costs as a percentage of sales increased 2 basis points to 17.52%. Excluding the effect of retail fuel operations, OG&A increased 16 basis points. Excluding adjustments to closed store liabilities and costs associated with the Scott's and Farmer Jack acquisitions, Kroger's second quarter OG&A rate declined compared to the same period last year.
- Capital investment totaled $480.9 million, excluding acquisitions, compared to $361.2 million a year ago (Table 3).
- Net total debt was $6.7 billion, an increase of $362 million from a year ago. Total debt was $6.7 billion, a reduction of $274 million from a year ago. Kroger’s net total debt to EBITDA ratio was 1.77, compared with 1.87 during the same period last year. (Table 5)
- Under its stock repurchase programs, Kroger repurchased 21.2 million shares of stock at an average price of $27.21 for a total investment of $578.1 million. At the end of the second quarter, $612.0 million remained under the $1 billion stock repurchase program announced in June 2007. Kroger's long-term financial strategy is to use free cash flow to repurchase shares and pay dividends while maintaining a solid investment grade rating.
Fiscal 2007 Year-to-Date Results
During the first two quarters of fiscal 2007, total sales increased 6.7% to $36.9 billion. For the same period, identical supermarket sales, excluding fuel, increased 5.1%.
The Company’s operating margin for the first two quarters of fiscal 2007 increased 17 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 two quarters of fiscal 2007 increased 5 basis points.
Net earnings for the first two quarters of fiscal 2007 were $603.8 million, or $0.85 per diluted share.
Net earnings for the same period in fiscal 2006 were $515.4 million, or $0.71 per diluted share.
"Kroger's earnings per share growth in fiscal 2007 will be driven by strong identical sales growth, a slightly improved operating margin, and fewer shares outstanding," Mr. Dillon said. "The performance of Kroger's business through the first half of 2007 exceeded our expectations, and our momentum heading into the second half of the year causes us to raise our identical sales and earnings guidance for fiscal 2007."
Guidance
Kroger now anticipates identical supermarket sales growth of 4 – 5% for the full year, excluding fuel sales. The Company expects to earn $1.64 – $1.67 per diluted share in fiscal 2007, up from the previous range of $1.60 – $1.65 per diluted share. The updated guidance equates to 12 – 14% growth from adjusted fiscal 2006 earnings of $1.47 per diluted share (Table 6). It incorporates a higher estimated LIFO charge of $110 million, which is $60 million more than the Company originally anticipated for fiscal 2007. In addition, Kroger’s dividend currently adds slightly over 1% to shareholder return.
“Kroger’s results reflect the hard work of our associates. We appreciate their focus on improving our customers’ shopping experience, which is the foundation for delivering value to our shareholders,” Mr. Dillon said.
Looking beyond 2007, the Company confirmed that it expects identical supermarket sales growth in the 3 – 5% range with a slightly improving operating margin, excluding fuel sales.
Headquartered in Cincinnati, Ohio, Kroger is one of the nation’s largest retail grocery chains. In 2006, the Company donated $150 million to help hunger relief efforts across the country, raise awareness of breast cancer, and support local schools and organizations in the communities it serves. At the end of the second quarter of fiscal 2007, the Company operated (either directly or through its subsidiaries) 2,491 supermarkets and multi-department stores in 31 states under two dozen local banners including Kroger and Kroger Marketplace, Ralphs, Fred Meyer, Food 4 Less, King Soopers, Smith’s and Smith’s Marketplace, Fry’s and Fry’s Marketplace, Dillons and Dillons Marketplace, QFC and City Market. Kroger also operated (either directly or through subsidiaries, franchise agreements, or operating agreements) 780 convenience stores, 406 fine jewelry stores, 664 supermarket fuel centers and 42 food processing plants. For more information about Kroger, please visit our web site at www.kroger.com.
# # #
View Second Quarter 2007 Reports - PDF Format:
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF CASH FLOWS
SUPPLEMENTAL SALES INFORMATION
RECONCILIATION OF TOTAL DEBT TO NET TOTAL DEBT
ADJUSTED EARNINGS PER DILUTED SHARE
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 words “anticipates,” “expects,” and “estimated.” 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, earnings per share, and earnings per share growth. Earnings per share and earnings per share growth 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. 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 September 18, 2007 at www.kroger.com and www.streetevents.com. An on-demand replay of the webcast will be available from approximately 1 p.m. (ET) today through September 28, 2007.
# # #
Media Contact :
Investor Contact:
|
Meghan Glynn (513) 762-1304
Carin Fike (513) 762-4969
|
« Go back |
