Kroger Reports First Quarter 2012 Results
Identical Supermarket Sales Up 4.2% Excluding Fuel
Company Raises Fiscal 2012 EPS Guidance to $2.33 to $2.40
CINCINNATI, Ohio, June 14, 2012 – The Kroger Co. (NYSE: KR) today reported
total sales, including fuel, increased 5.8% to $29.1 billion in the first quarter
of fiscal 2012 compared with $27.5 billion for the same period last year. In the
first quarter, which ended May 19, 2012, total sales, excluding fuel, increased
4.3% over the same period last year.
Identical supermarket sales, without fuel, increased 4.2% in the first quarter over
the same period last year. This marks 34 consecutive quarters of positive identical
supermarket sales for Kroger.
Net earnings for the first quarter totaled $439.4 million, or $0.78 per diluted
share. Net earnings in the same period last year were $432.3 million, or $0.70 per
Separately, the company today announced that the Board of Directors authorized a
new $1 billion share repurchase program that replaces the prior authorization, which
was exhausted on June 12, 2012.
“Kroger’s solid first quarter performance demonstrates that our Customer
1st strategy continues to resonate with customers,” said David B. Dillon,
Kroger’s chairman and chief executive officer. “Our core business is
growing, and we are rewarding shareholders through earnings growth, increasing dividends
over time and share buybacks.”
Details of First Quarter 2012 Results
FIFO gross margin was 20.70% of sales for the first quarter of fiscal 2012. Excluding
retail fuel operations, FIFO gross margin decreased 53 basis points from the same
period last year.
Kroger recorded a $46.0 million LIFO charge in the first quarters of both 2012 and
Operating, general and administrative (OG&A) costs were 15.36% of sales. Excluding
retail fuel operations, OG&A decreased 27 basis points from the same period
last year. Including rent and depreciation, it was a 40 basis point reduction. The
benefits of sales leverage, strong cost control and execution more than offset rising
health care costs and credit card fees.
Excluding fuel, on a rolling four quarters basis the company’s FIFO operating
margin decreased 11 basis points. Kroger continues to expect slightly increasing
FIFO operating margin, excluding fuel, for the full 2012 fiscal year.
Kroger’s strong free cash flow allowed the company to return more than $1.6
billion to shareholders through share buybacks and dividends over the last four
quarters. During the first quarter, Kroger repurchased 14.6 million common shares
for a total investment of $345.3 million.
Capital investment, excluding acquisitions and purchases of leased facilities, totaled
$539.1 million for the first quarter, compared with $573.1 million for the same
period last year.
Net total debt was $7.8 billion, an increase of $662.1 million from a year ago.
The increase is primarily the result of the issuance of debt to fund the UFCW pension
plan consolidation. On a rolling four quarters basis, Kroger’s net total debt
to adjusted EBITDA ratio was 1.91 compared with 1.79 during the same period last
Fiscal 2012 Guidance
Based on the strong results in the first quarter, the company increased its earnings
per share guidance to $2.33 to $2.40 per diluted share for fiscal 2012. The original
guidance was $2.28 to $2.38 per diluted share.
Kroger continues to expect identical supermarket sales growth, excluding fuel, of
3.0% to 3.5%. In accordance with original guidance, this includes the expected negative
effect on sales from prescription drugs coming off patent.
“We were very pleased with the results of the first quarter. We exceeded our
expectations, and as a result raised our earnings per share guidance for the year.”
Mr. Dillon said. “Through our focus on the customer, we will continue to stand
out among food retailers, and drive loyalty, cash flow and earnings growth in 2012
Kroger, one of the world’s largest retailers, employs more than 339,000 associates
who serve customers in 2,425 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 789 convenience stores, 337 fine jewelry stores, 1,109 supermarket
fuel centers and 38 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 160 million
meals a year through more than 80 Feeding America food bank partners. For more information
please visit Kroger.com.
Note: Fuel sales have historically had a low FIFO gross margin rate and OG&A
rate as compared to corresponding rates on non-fuel sales. As a result, in addition
to disclosing such rates including the effect of retail fuel operations, Kroger
also discusses the changes in these rates excluding the effect of retail fuel operations.
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 "expect" and "guidance." 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 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 identical supermarket
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. Our FIFO operating margin
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, and if competitive
or other factors cause our margins on product sold to fail to meet our objectives.
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 June 14, 2012 at
www.thekrogerco.com. An on-demand replay of the webcast will be available
from approximately 1 p.m. (ET) Thursday, June 14 through Thursday, June 28, 2012.
# # #
View 1st Quarter 2012 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
Media: Keith Dailey (513) 762-1304
Investors: Cindy Holmes (513) 762-4969