Kroger Reports Fourth Quarter and Full Year 2011 Results
CINCINNATI, Ohio, March 1, 2012 - The Kroger Co. (NYSE: KR) today reported total
sales, including fuel, increased 7.7% to $21.4 billion in the fourth quarter of
fiscal 2011 compared with $19.9 billion for the same period last year. In the fourth
quarter, which ended on January 28, 2012, total sales, excluding fuel, increased
5.0% over the same period last year.
Adjusted Earnings of $0.50 Per Diluted Share for the Fourth Quarter and $2.00 for the Full Year 2011 ID Sales Up 4.9% Without Fuel
Identical supermarket sales, without fuel, increased 4.9% in the fourth quarter
over the same period last year.
Excluding the effect of the UFCW pension plan consolidation announced in December,
adjusted earnings for the quarter were $283.8 million, or $0.50 per diluted share.
Including the effect of the UFCW pension plan consolidation, Kroger reported a net
loss for the fourth quarter that totaled $(306.9) million, or $(0.54) per diluted
share. Net earnings in the same period last year were $278.8 million, or $0.44 per
“We are very pleased with Kroger's outstanding performance in fiscal year
2011 and strong fourth quarter financial results," said David B. Dillon, Kroger's
chairman and chief executive officer. "Our Customer 1st strategy is delivering value
for our customers, who are rewarding Kroger with their loyalty. Customer loyalty,
in turn, is driving sales and shareholder returns.”
Details of Fourth Quarter 2011 Results
FIFO gross margin, as reported, was 21.13% of sales for the fourth quarter of fiscal
2011. Excluding retail fuel operations, FIFO gross margin decreased 47 basis points
from the same period last year.
Kroger recorded a $73.4 million LIFO charge during the quarter compared to $18.8
million in the same quarter last year. Excluding retail fuel sales, the LIFO charge
increased 30 basis points as a percentage of sales.
Excluding retail fuel operations and the UFCW pension plan consolidation charge,
operating, general and administrative (OG&A) costs, rent and depreciation declined
a total of 21 basis points from the same quarter last year. OG&A declined 8 basis
points, rent declined 3 basis points and depreciation declined 10 basis points.
Positive identical sales growth, good cost control and productivity improvements
offset an increase in incentive plan expense compared to the fourth quarter last
year and the continued challenge of rising health care and pension costs and rising
debit and credit card fees.
Fiscal Year 2011 Results
For fiscal year 2011, total sales increased 10.2% to $90.4 billion compared with
$82.0 billion for fiscal year 2010. Excluding fuel sales, total sales increased
5.0% over the same period last year. Identical supermarket sales, without fuel,
increased 4.9% in fiscal year 2011 compared with the prior fiscal year
Excluding the effect of the UFCW pension plan consolidation, earnings for fiscal
year 2011 were $1.2 billion, or $2.00 per diluted share. Including the effect of
the UFCW pension plan consolidation, fiscal year 2011 earnings were $602.1 million
or $1.01 per diluted share. Net earnings for fiscal year 2010 were $1.1 billion,
or $1.74 per diluted share.
Inflation continued at a rate higher than expected during the 4th quarter, resulting
in a final full year LIFO charge of approximately $216 million. At the end of the
3rd quarter of fiscal 2011, Kroger projected the full year LIFO charge to be $185
FIFO operating margin, excluding fuel and the UFCW pension plan consolidation charge,
increased by 5 basis points for fiscal year 2011.
“Kroger increased identical sales, grew market share and invested wisely to
continue to win customer loyalty,” Mr. Dillon said. “That we were able
to raise earnings per share and identical sales guidance through the year and achieve
those higher results demonstrates the strength of our business strategy and momentum
for a strong 2012.”
Kroger's strong free cash flow allowed the company to return more than $1.8 billion
to shareholders through share buybacks and dividends in 2011. During the fourth
quarter, Kroger repurchased 11.7 million shares of stock for a total investment
of $272.4 million.
Capital investment, excluding acquisitions and purchases of leased facilities, totaled
$1,898.5 million for the year compared with $1,859.3 million in 2010.
Net total debt was $8.2 billion, an increase of $902.9 million from a year ago.
On a rolling four quarters basis, Kroger's net total debt to adjusted EBITDA ratio
was 2.00 compared with 1.89 during the same period last year.
Fiscal 2012 Annual Guidance
For fiscal year 2012, Kroger anticipates identical supermarket sales growth, excluding
fuel, of approximately 3.0% to 3.5%. This includes the expected negative effect
on sales from prescription drugs coming off patent.
Kroger's business model is structured to produce annual earnings per share growth
averaging 6% to 8%, plus a dividend of 1.5% to 2%, for a total shareholder return
of approximately 8% to 10%. We expect this total shareholder return to compare favorably
to the S&P 500 over a rolling three-to-five year time horizon.
Full-year net earnings for fiscal 2012 are expected to range from $2.28 to $2.38
per diluted share. This growth rate is higher than our business model due to a combination
of the benefit of a 53rd week, an expected lower LIFO charge, the benefit of aggressive
stock buybacks during 2011, and benefits from the UFCW pension plan consolidation.
During fiscal 2012, Kroger plans to use cash flow from operations to fund capital
expenditures, repurchase shares, pay dividends to shareholders and maintain its
current debt rating. We expect capital expenditures to be in the $1.9 to $2.2 billion
range for the year.
“When we put our customers first, shareholders win,” said Mr. Dillon.
“Kroger will continue to reward shareholders in 2012 through increased earnings,
plus the benefit of quarterly dividends and share repurchases.”
Kroger, the nation's largest traditional grocery retailer, employs more than 339,000
associates who serve customers in 2,435 supermarkets and multi-department stores
in 31 states under two dozen local banner names including Kroger, City Market, Dillons,
Jay C, Food 4 Less, Fred Meyer, Fry's, King Soopers, QFC, Ralphs and Smith's. The
company also operates 791 convenience stores, 348 fine jewelry stores, 1,090 supermarket
fuel centers and 39 food processing plants in the U.S. Recognized by Forbes as the
most generous company in America, Kroger supports hunger relief, breast cancer awareness,
the military and their families, and more than 30,000 schools and grassroots organizations
in the communities it serves. Kroger contributes food and funds equal to 125 million
meals a year through more than 80 Feeding America food bank partners. For more information
please visit 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. These statements
are indicated by words such as "anticipates," "expect," "expected," "plans," and
"will." Aggressive competition, economic conditions, interest rates, goodwill impairment,
the success of programs designed to increase our identical supermarket sales without
fuel, the impact of increasing fuel costs on consumer spending, and 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,
net earnings, and earnings per share. Earnings per share also will be affected by
the number of shares outstanding and volatility in the company's fuel margins. Earnings
and sales also may be affected by adverse weather conditions, particularly to the
extent that hurricanes, tornadoes, floods, and other conditions disrupt our operations
or those of our suppliers; create shortages in the availability or increases in
the cost of products that we sell in our stores or materials and ingredients we
use in our manufacturing facilities; or raise the cost of supplying energy to our
various operations, including the cost of transportation; and the benefits that
we receive from the consolidation of the UFCW pension plans. Our results also will
be affected by rising commodity costs, the inconsistency of the economic recovery,
consumer confidence, changes in government-funded benefit programs, and changes
in inflation or deflation in product and operating costs. Total shareholder return,
and the extent to which it compares favorably to the S&P 500 over a rolling three-to-five
year time horizon, and our ability to continue to reward shareholders in 2012 through
increased earnings, quarterly dividends, and share repurchases, will be affected
by all of the factors identified above, as well as the ability for the company to
pay dividends from free cash flow as contemplated. Our plans to use cash flow from
operations to fund capital expenditures, repurchase shares, pay dividends to shareholders,
and maintain our current debt rating, will depend on our ability to generate free
cash flow, which will be affected by all of the factors identified above, as well
as the extent to which funds can be used for those reasons while maintaining our
debt rating. Our LIFO charge will be affected by changes in product costs during
the year if our estimates of product cost changes or the timing of those changes
prove incorrect. Our capital expenditures could vary from our expectations if we
are unsuccessful in acquiring suitable sites for new stores; development costs vary
from those budgeted; our logistics and technology or store projects are not completed
on budget or within the time frame projected; or if current operating conditions
worsen. 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 online
at 10 a.m. (ET) on March 1, 2012 at www.kroger.com. An on-demand replay of the webcast
will be available from approximately 1 p.m. (ET) today through Thursday, March 15,
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View 4th Quarter 2011 Reports - PDF Format:
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF CASH
SUPPLEMENTAL SALES INFORMATION
RECONCILIATION OF TOTAL DEBT TO
NET TOTAL DEBT
NET EARNINGS PER DILUTED SHARE
EXCLUDING IMPAIRMENT CHARGE
Media: Keith Dailey (513) 762-1304
Investors: Cindy Holmes (513) 762-4969