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The Kroger Co. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: June 26, 2012 10:10AM
The Kroger Co. (KR) filed Quarterly Report for the period ended 2012-05-19. The Kroger Co. has a market cap of $12.83 billion; its shares were traded at around $22.575 with a P/E ratio of 11.3 and P/S ratio of 0.1. The dividend yield of The Kroger Co. stocks is 2%. The Kroger Co. had an annual average earning growth of 3.1% over the past 10 years. GuruFocus rated The Kroger Co. the business predictability rank of 4.5-star.
Highlight of Business Operations:The increase in total sales and total supermarket sales for the first quarter of 2012, compared to the first quarter of 2011, was primarily the result of our identical supermarket sales increase, excluding fuel, of 4.2% and an increase in supermarket fuel sales of 13.4%. Total supermarket fuel sales increased over the same period in 2011 due to a 4.3% increase in average retail fuel prices and an 8.7% increase in fuel gallons sold. The increase in the average supermarket retail fuel price was caused by an increase in the product cost of fuel. Identical supermarket sales, excluding fuel, increased primarily due to product cost inflation, increased transaction count, an increase in the average sale per shopping trip, an increase in the number of households shopping with us and exceptional pharmacy results.
Rent expense was $191 million in the first quarter of 2012 compared to $192 million in the first quarter of 2011. Rent expense, as a percentage of sales, was 0.66% in the first quarter of 2012, compared to 0.70% in the first quarter of 2011. Rent expense, as a percentage of sales excluding fuel, decreased four basis points in the first quarter of 2012 compared to the first quarter of 2011. The decrease in rent expense, as a percentage of sales excluding fuel, reflects our continued emphasis on owning rather than leasing, whenever possible, and the benefit of increased supermarket sales.
Net interest expense was $141 million, or 0.48% of total sales, for the first quarter of 2012 compared to $138 million, or 0.50% of total sales, for the first quarter of 2011. The increase in net interest expense for the first quarter of 2012, compared to the first quarter of 2011, resulted primarily from a higher weighted average debt balance and a decrease in the benefit from interest rate swaps, offset partially by a lower weighted average interest rate.
We generated $1.3 billion of cash from operating activities during the first quarter of 2012, compared to $1.2 billion in the first quarter of 2011. The cash provided by operating activities came from net earnings including noncontrolling interests, adjusted for non-cash expenses, and changes in working capital. Changes in working capital provided cash from operating activities of $206 million in the first quarter of 2012 and $239 million in the first quarter of 2011. The decrease in cash provided by changes in working capital for the first quarter of 2012, compared to the first quarter of 2011, was primarily due to decreases in other liabilities and a decreased change in income taxes payable, offset partially by increases in accounts payable.
· Our business model is structured to produce annual earnings per diluted share growth averaging 6.0%-8.0%, plus a dividend of 1.5% to 2.0%, for a total shareholder return of approximately 8.0%-10.0%. We expect this total shareholder return to compare favorably to the S&P 500 over a rolling three-to-five year time horizon. Annual earnings per diluted share growth for fiscal 2012 will be higher than our long term model due to a combination of the benefit of a 53rd week, a lower expected LIFO charge compared to 2011, share repurchases, benefits from the UFCW pension plan consolidation and the benefit from Express Scripts prescription transfers.
Stocks Discussed: KR,