Kroger Q1 Sales Up 11%

The Kroger Co. reported total sales, including fuel, increased 11.0 percent to $27.5 billion in the first quarter of fiscal 2011, compared to $24.7 billion for the same period last year.

In the first quarter, which ended May 21, total sales excluding fuel increased 4.8 percent over the same period last year, the Cincinnati-based grocer reported.

Identical supermarket sales, without fuel, increased 4.6 percent in Q1 over last year, marking 30 consecutive quarters of same-store sales increases for Kroger. Net earnings for the first quarter totaled $432.3 million, or 70 cents per diluted share, up from 58 cents a year ago.

“Our ‘Customer 1st’ strategy is clearly connecting with customers,” said David B. Dillon, Kroger’s chairman and CEO. “We have shown that our focus on people, products, prices and the shopping experience is meaningful to customers through both good and challenging times. As a result, we achieved strong performance across the company.”

Operating, general and administrative costs were 15.76 percent of sales. Excluding retail fuel operations, OG&A decreased 36 basis points from the same period last year. The benefits of leverage from strong sales, productivity improvements and outstanding cost control more than offset rising credit card fees, health care and pension costs, Kroger reported.

Q1 operating margin was 2.95 percent of sales; excluding fuel, on a rolling four quarters basis the company’s operating margin increased by 12 basis points.

Capital investment, excluding acquisitions and purchases of leased facilities, totaled $573.1 million for the first quarter, compared with $532.2 million for the same period last year. Net total debt was $7.1 billion, an increase of $47.3 million from a year ago. Strong cash flow enabled Kroger to invest $544.3 million to repurchase 23.1 million shares of stock at an average price of $23.55 per share during the first quarter. At the end of the first quarter, approximately $602.7 million remained under the $1 billion stock repurchase program announced in March.

Kroger expects same-store sales growth, excluding fuel, of 3.5 percent to 4.5 percent for the year. For the full year, Kroger increased its earnings guidance to $1.85 to $1.95 per diluted share.

“Our guidance for the year reflects the balance we strive to achieve across our business, including strong identical sales growth and outstanding cost control, as well as increased earnings and earnings per share,” Dillon said. “Our ‘Customer 1st’ strategy will drive increased sales, cash flow and earnings growth well into the future.”

Kroger operates 2,449 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.

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