Kroger Reports 19% Increase in Earnings Per Share for Second Quarter

The Kroger Co. on Wednesday reported earnings of $0.32 per diluted share excluding costs related to a merger and one-time expenses, for the second quarter ended August 18, 2001. These results represent an increase of 19% over the second quarter of 2000, on the same basis.

Total sales for the second quarter of fiscal 2001 increased 4.2% to $11.5 billion. Total food store sales rose 4.5%. Comparable food store sales, which include relocations and expansions, rose 1.6% for the quarter, while identical food store sales rose 0.8%.

EBITDA (earnings before interest, taxes, depreciation, amortization,
LIFO and one-time items) for the second quarter of 2001 totaled $837 million, an increase of 9.6% from a year ago.

"We are pleased with our earnings performance in the second quarter, despite some softness in sales," said Joseph A. Pichler, Kroger chairman and CEO. "Kroger's earnings growth was driven by our corporate brands, which turned in one of their strongest quarters, and additional synergy savings from our merger with Fred Meyer Inc. in 1999. Thanks to the strategic planning and outstanding execution by our associates, Kroger has achieved and exceeded our $380 million synergy goal well ahead of schedule."

Pichler said Kroger remains comfortable with achieving annual earnings per share growth of 16-18% through fiscal 2002 (which ends February 1, 2003) from $1.31 per share in 2000, after adjustment for the 53rd week. However, he cautioned that Kroger cannot foresee the effects of last week's tragedy upon the company's business. Looking beyond fiscal 2002, Kroger expects to achieve earnings per share growth of 15% annually, excluding major acquisitions, he said.

During the second quarter of 2001, Kroger opened, expanded, relocated or acquired 38 food stores. Overall food store square footage increased 4.0% over the prior year. Including acquisitions, capital expenditures for the quarter totaled $540 million.

Net working capital totaled $430 million, an increase of $235 million from the second quarter of fiscal 2000. This increase represents a $29 million improvement in working capital when compared to the increase in the first quarter of 2001 over the first quarter of 2000. The Company attributed the increase in the second quarter primarily to higher inventories, including duplicate inventory resulting from the opening of new warehouses and the reallocation of divisions among distribution facilities.

"We are committed to achieving our goal of reducing working capital by $500 million from the benchmark we set in the third quarter of 1999," Pichler said.
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