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KROGER REPORTS STRONG THIRD QUARTER RESULTS AND RAISES 2006 EXPECTATIONS
Identical Supermarket Sales Increased 5.3% without Fuel
CINCINNATI, OH, December 5, 2006
-- The Kroger Co. (NYSE: KR) today reported total sales increased 4.8% to $14.7 billion for the third quarter ended November 4, 2006. Identical supermarket sales increased 4.9% with fuel and 5.3% without fuel.
Net earnings in the third quarter totaled $214.7 million, or $0.30 per diluted share. Net earnings in the same period last year were $185.4 million, or $0.25 per diluted share. Results for the third quarter of fiscal 2006 include $0.01 per diluted share for stock option expense to reflect the Company's adoption of SFAS No. 123(R).
"Our associates continue to put customers first as Kroger's third quarter performance indicates," said David B. Dillon, Kroger chairman and chief executive officer. "These results once again demonstrate Kroger's ability to consistently deliver strong, sustainable growth over time."
Other highlights of the third quarter included: FIFO gross margin as a percentage of sales was 24.48%, unchanged from the same period last year. Excluding the effect of retail fuel operations, FIFO gross margin declined 12 basis points. Kroger continued to invest in lower prices for our customers
Operating, general and administrative (OG&A) costs as a percentage of sales increased 4 basis points to 18.27%. Excluding the effect of retail fuel operations and stock option expense, OG&A declined 17 basis points
Total capital expenditures were $415.0 million, compared to $336.9 million a year ago
(Table 3)
Kroger repurchased 10.2 million shares of stock at an average price of $22.79 for a total investment of $232.0 million. At the end of the third quarter, $322.8 million remained under the $500 million stock buyback announced in May 2006
Total debt was $7.0 billion, a reduction of $299.1 million from a year ago (Table 5)
Since January 2000, Kroger has invested $5.3 billion to repurchase shares and to reduce net total debt. Of this total, $3.5 billion was used to repurchase 180.2 million shares at an average price of $19.46 per share. Net total debt was reduced by $1.8 billion
Fiscal 2006 Year-to-Date Results
During the first three quarters of fiscal 2006, total sales increased 7.5% to $49.3 billion. Identical supermarket sales year-to-date increased 6.7% with fuel and 5.6% without fuel.
Net earnings for the first three quarters of fiscal 2006 were $730.1 million, or $1.01 per diluted share.
During the same period last year, net earnings were $676.0 million, or $0.92 per diluted share. The fiscal 2006 year-to-date results include $0.04 per diluted share for stock option expense to reflect the Company's adoption of SFAS No. 123(R), and include $0.03 of expense per diluted share for legal reserves recorded in the first quarter.
Guidance
Based on its year-to-date financial performance and sustained sales momentum leading into the holiday season, the Company now anticipates identical supermarket sales growth will exceed 5.0% for the fourth quarter, excluding fuel. Kroger also raised its guidance for earnings per share growth in fiscal 2006 to 8 - 10% from 6 - 8%. Based on current results, the Company is striving for the upper end of that range.
Kroger confirmed its guidance for earnings per share growth in fiscal 2007 of 6 - 8%, after adjusting for the benefit of the 53rd week in 2006 and the increase in the legal reserve also recorded in 2006. Based on Kroger's current business trends, the Company is targeting the high end of this range.
Earlier this year, Kroger's board initiated a dividend policy. In addition to earnings per share growth in fiscal 2006 and 2007, shareholder value will be enhanced by the yield associated with Kroger's quarterly dividend.
"Kroger's performance shows consistent improvement as our associates execute our business strategy. This allows us to be competitive in every aspect of our business and generate value for shareholders," Mr. Dillon said.
"Our associates continue to place a priority on serving customers. These results clearly show what we can achieve by focusing on improving the service, product selection, quality and pricing we offer customers throughout the year."
Headquartered in Cincinnati, Ohio, Kroger is one of the nation's largest retail grocery chains. At the end of the third quarter of fiscal 2006, the Company operated (either directly or through its subsidiaries) 2,473 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, QFC and City Market. Kroger also operated (either directly or through subsidiaries, franchise agreements, or operating agreements) 774 convenience stores, 418 fine jewelry stores, 619 supermarket fuel centers and 42 food processing plants. For more information about Kroger, please visit our web site at 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 words "anticipates," "consistent," "guidance," "striving," and "targeting." Increased competition, weather and economic conditions, interest rates, goodwill impairment, the success of programs designed to increase our identical supermarket sales without fuel, and future labor disputes, particularly as the Company seeks to manage increases in health care and pension costs, could materially affect our expected identical supermarket sales growth and earnings per share growth. 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 5, 2006 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 December 15, 2006
View 3rd Quarter 2006 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
| Kroger Contacts:
Media: Meghan Glynn
(513) 762-1304
Investor: Carin Fike
(513) 762-4969
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