Kroger Reports Record Second Quarter Earnings Per Share
Net Earnings of $0.51 Per Diluted Share; ID Sales Up 3.6% Without Fuel
Company Raises Fiscal 2012 EPS Guidance to $2.35 to $2.42
CINCINNATI, Ohio, September 07, 2012 - The Kroger Co. (NYSE: KR) today reported
net earnings of $0.51 per diluted share and identical supermarket sales growth,
without fuel, of 3.6% in the second quarter. Other highlights of the quarter include:
• Increased second quarter earnings per diluted share by 10.9% compared
to last year
• Raised earnings per diluted share guidance for the fiscal year to a range
of $2.35 to $2.42
• Increased FIFO operating profit $47 million for the second quarter
• Achieved 35th consecutive quarter of positive identical supermarket sales,
driven by higher tonnage and loyal and total household growth
• Put strong free cash flow to work for shareholders to buy back 23.7 million
“We are pleased with Kroger’s strong performance in the second quarter,”
said David B. Dillon, Kroger’s chairman and chief executive officer. “Kroger
shareholders once again benefited from our Customer 1st strategy. Increased customer
loyalty and solid cost controls allowed us to grow sales, profitability, and shareholder
Kroger reported total sales, including fuel, increased 3.9% to $21.7 billion in
the second quarter of fiscal 2012 compared with $20.9 billion for the same period
last year. In the second quarter, which ended August 11, 2012, total sales, excluding
fuel, increased 3.8% over the same period last year.
Net earnings for the second quarter totaled $279.1 million, or $0.51 per diluted
share. Net earnings in the same period last year were $280.8 million, or $0.46 per
diluted share. Prior year net earnings benefited from a 27.6 percent tax rate, compared
to a tax rate of 34.5 percent in the second quarter this year.
Details of Second Quarter 2012 Results
FIFO gross margin was 20.63% of sales for the second quarter of fiscal 2012. Excluding
retail fuel operations, FIFO gross margin decreased 43 basis points from the same
period last year.
Kroger recorded a $34.7 million LIFO charge in the second quarters of both 2012
Operating, general and administrative (OG&A) costs plus rent and depreciation
were 18.01% of sales. Excluding retail fuel operations, OG&A plus rent and depreciation
declined 59 basis points as a percent of sales compared with the prior year.
As a result of operating leverage, second quarter FIFO operating profit increased
approximately $47 million over the prior year, both with and without fuel. Excluding
fuel, on a rolling four quarters basis, the company's FIFO operating margin was
3 basis points lower compared to last year. This is an improvement in the trend
from the first quarter. Kroger expects to have a slightly higher FIFO operating
margin rate, excluding fuel, for the full 2012 fiscal year.
Kroger’s strong free cash flow allowed the company to return more than $1.9
billion to shareholders through share buybacks and dividends over the last four
quarters. During the second quarter, Kroger repurchased 23.7 million common shares
for a total investment of $525 million.
Capital investment, excluding acquisitions and purchases of leased facilities, totaled
$444.7 million for the second quarter, compared with $428.5 million for the same
period last year.
Net total debt was $8.1 billion for the second quarter, an increase of $1.2 billion
from a year ago. On a rolling four quarters basis, Kroger's net total debt to adjusted
EBITDA ratio was 1.96 compared with 1.71 during the same period last year.
Fiscal 2012 Guidance
As a result of strong first half performance and higher than anticipated share repurchase
activity, Kroger is increasing its fiscal 2012 earnings guidance to a range of $2.35
to $2.42 per diluted share. The company continues to expect identical supermarket
sales growth for the full year, excluding fuel, of 3.0% to 3.5%. Kroger expects
to achieve in the upper end of the range for both earnings per share and sales growth.
The previous earnings per share guidance was a range of $2.33 to $2.40.
“Every day, our associates are delivering a better shopping experience for
our customers,” Mr. Dillon said. “Kroger's increased earnings per share
guidance for the year reflects our confidence that our Customer 1st strategy will
continue to create value for our customers and shareholders alike.”
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 788 convenience stores, 342 fine jewelry stores, 1,124 supermarket
fuel centers and 37 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 "expects," "continues," "guidance," and "will." Aggressive
competition, economic conditions, interest rates, goodwill impairment, the success
of programs designed to increase our identical supermarket sales without fuel and
increase customer loyalty, 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, earnings per share, and our ability to continue to create value for
shareholders. 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
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, and our ability to implement cost controls. Our FIFO operating margin, excluding
fuel, 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
Note: Kroger's quarterly conference call with investors will be broadcast live online
at 10 a.m. (ET) on September 7, 2012 at www.kroger.com. An on-demand replay of the
webcast will be available from approximately 1 p.m. (ET) Friday, September 7 through
Friday, September 21, 2012.
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View 2nd 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