Kroger's Q4 Profit at $282M; Same Store Sales Up 6.2 Percent
CINCINNATI -- Kroger provided evidence yesterday that being a huge, publicly-owned conventional grocer can certainly still pay off, if management is making the right moves. The chain posted better-than-expected fourth-quarter profits, a decent sales boost, and healthy comps--and even resurrected a quarterly dividend again, signaling the end of an almost 20-year drought.
For the quarter ended Jan. 28, Kroger tabbed $282 million in profit, while sales increased 7.5 percent to $14.7 billion. In its tenth consecutive quarter of positive same store supermarket sales, Kroger's comparables were also up 6.2 percent with fuel, and 4.7 percent without fuel, also reflecting the company's highest identical supermarket sales growth since the merger with Fred Meyer in 1999.
"The continued focus of Kroger's associates on delivering improved service, product selection, and value to our customers has generated another quarter of impressive identical sales growth," said David B. Dillon, Kroger chairman and chief executive. "Sustainable identical sales growth is a key driver of Kroger's financial objective to increase earnings and generate value for our shareholders."
Net earnings totaled $282.1 million for the quarter, a far brighter outcome than Kroger's net loss of $652.1 million in the same period last year, which included a goodwill impairment charge of $903.8 million, pre-tax that affected net earnings by $860.8 million.
Full year results were also impressive. For the 2005 fiscal year, sales increased 7.3 percent to $60.6 billion, while same store sales increased 5.3 percent with fuel and 3.5 percent without fuel. Net earnings for fiscal 2005 were $958.0 million, vs. Kroger's fiscal 2004 results, which saw a net loss of $104.2 million.
"Thanks to the hard work and dedication of our associates, Kroger delivered a strong performance in 2005 that exceeded our original expectations, including both sales and earnings," said Dillon.
Looking ahead, Kroger discussed how it has been transitioning its business model over the past several years to meet the changing needs and expectations of its customers. As such, Kroger said it plans to grow identical sales through merchandising and operating initiatives that improve the shopping experience and build customer loyalty, to be funded by operating cost reductions and productivity improvements.
As a result of this strategy, Kroger said it expects to deliver earnings per share growth in 2006 and 2007 of 6-8 percent per year.
For fiscal 2006, Kroger also expects:
--To achieve identical supermarket sales growth in excess of 3.5 percent, excluding fuel sales.
--To recognize stock option expense of approximately $0.05 - $0.06 per diluted share. Stock option expense will affect each quarter of the fiscal year.
--To invest $1.7 - $1.9 billion in capital projects, excluding acquisitions. While continuing to focus on remodels, Kroger said it expects to grow its square footage by 1.5–2 percent (before acquisitions and operational closings) with an emphasis on large, fast-growing markets.
The chain also said it would begin paying 6.5 cents per share June 1 to shareholders of record as of May 15. It had stopped paying dividends in 1988 following a leveraged buyout that staved off a hostile takeover.
At the end of fiscal 2005, Kroger operated 2,507 supermarkets and multi-department stores in 31 states, under two dozen local banners including Kroger, Ralphs, Fred Meyer, Food 4 Less, King Soopers, Smith's and Smith's Marketplace, Fry's and Fry's Marketplace, Dillons, QFC and City Market.
For the quarter ended Jan. 28, Kroger tabbed $282 million in profit, while sales increased 7.5 percent to $14.7 billion. In its tenth consecutive quarter of positive same store supermarket sales, Kroger's comparables were also up 6.2 percent with fuel, and 4.7 percent without fuel, also reflecting the company's highest identical supermarket sales growth since the merger with Fred Meyer in 1999.
"The continued focus of Kroger's associates on delivering improved service, product selection, and value to our customers has generated another quarter of impressive identical sales growth," said David B. Dillon, Kroger chairman and chief executive. "Sustainable identical sales growth is a key driver of Kroger's financial objective to increase earnings and generate value for our shareholders."
Net earnings totaled $282.1 million for the quarter, a far brighter outcome than Kroger's net loss of $652.1 million in the same period last year, which included a goodwill impairment charge of $903.8 million, pre-tax that affected net earnings by $860.8 million.
Full year results were also impressive. For the 2005 fiscal year, sales increased 7.3 percent to $60.6 billion, while same store sales increased 5.3 percent with fuel and 3.5 percent without fuel. Net earnings for fiscal 2005 were $958.0 million, vs. Kroger's fiscal 2004 results, which saw a net loss of $104.2 million.
"Thanks to the hard work and dedication of our associates, Kroger delivered a strong performance in 2005 that exceeded our original expectations, including both sales and earnings," said Dillon.
Looking ahead, Kroger discussed how it has been transitioning its business model over the past several years to meet the changing needs and expectations of its customers. As such, Kroger said it plans to grow identical sales through merchandising and operating initiatives that improve the shopping experience and build customer loyalty, to be funded by operating cost reductions and productivity improvements.
As a result of this strategy, Kroger said it expects to deliver earnings per share growth in 2006 and 2007 of 6-8 percent per year.
For fiscal 2006, Kroger also expects:
--To achieve identical supermarket sales growth in excess of 3.5 percent, excluding fuel sales.
--To recognize stock option expense of approximately $0.05 - $0.06 per diluted share. Stock option expense will affect each quarter of the fiscal year.
--To invest $1.7 - $1.9 billion in capital projects, excluding acquisitions. While continuing to focus on remodels, Kroger said it expects to grow its square footage by 1.5–2 percent (before acquisitions and operational closings) with an emphasis on large, fast-growing markets.
The chain also said it would begin paying 6.5 cents per share June 1 to shareholders of record as of May 15. It had stopped paying dividends in 1988 following a leveraged buyout that staved off a hostile takeover.
At the end of fiscal 2005, Kroger operated 2,507 supermarkets and multi-department stores in 31 states, under two dozen local banners including Kroger, Ralphs, Fred Meyer, Food 4 Less, King Soopers, Smith's and Smith's Marketplace, Fry's and Fry's Marketplace, Dillons, QFC and City Market.