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The Kroger Co. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: December 11, 2012 03:06PM

The Kroger Co. (KR) filed Quarterly Report for the period ended 2012-11-03. Kroger Co has a market cap of $13.84 billion; its shares were traded at around $26.73 with a P/E ratio of 24.4 and P/S ratio of 0.2. The dividend yield of Kroger Co stocks is 1.9%. Kroger Co had an annual average earning growth of 3.1% over the past 10 years. GuruFocus rated Kroger Co the business predictability rank of 4.5-star.



Highlight of Business Operations:

For the third quarter of 2012, net earnings totaled $317 million, or $0.60 per diluted share, compared to $196 million, or $0.33 per diluted share for the same period of 2011. This includes a $0.14 per diluted share benefit from a settlement with Visa and MasterCard and from a reduction in our obligation to fund the UFCW consolidated pension fund created in January 2012 (“adjusted items”). Excluding these adjusted items, net earnings totaled $243 million, or $0.46 per diluted share, for the third quarter of 2012. The adjustments for these items resulted in a reduction of operating, general and administrative expense of $115 million ($74 million after-tax) in the third quarter of 2012. We believe the adjusted earnings per diluted share figure presents a more accurate year-over year comparison of our financial results because the adjusted items were not the result of our normal operations. The net earnings and adjusted earnings per diluted share for the third quarter of 2012 also includes a $0.02 benefit from a lower Last-In, First-Out (“LIFO”) charge due to the Company reducing its estimated LIFO charge to $125 million from $150 million for 2012. For the first three quarters of 2012, net earnings totaled $1.0 billion, or $1.89 per diluted share, compared to $909 million, or $1.50 per diluted share for the same period of 2011. Excluding the adjusted items, net earnings totaled $961 million, or $1.76 per diluted share, for the first three quarters of 2012. Please refer to the “Net Earnings” section for more information related to the increases in net earnings for both the third quarter and the first three quarters of 2012, compared to the third quarter and the first three quarters of 2011.

Rent expense was $141 million, or 0.64% of sales, for the third quarter of 2012, compared to $141 million, or 0.68% of sales, for the third quarter of 2011. For the first three quarters of 2012, rent expense was $471 million, or 0.65% of sales, compared to $475 million, or 0.69% of sales, in the first three quarters of 2011. Rent expense, as a percentage of sales excluding fuel, decreased 3 basis points in the third quarter of 2012 compared to the third quarter of 2011. Rent expense, as a percentage of sales excluding fuel, decreased 4 basis points in the first three quarters of 2012 compared to the first three quarters of 2011. These decreases in rent expense, as a percentage of sales both including and excluding fuel, primarily reflect our continued emphasis on owning rather than leasing, whenever possible, and the benefit of increased supermarket sales.

Operating profit was $596 million, or 2.73% of sales, for the third quarter of 2012, compared to $405 million, or 1.97% of sales, for the third quarter of 2011. Operating profit, excluding the adjusted items, was $481 million, or 2.21% of sales, for the third quarter of 2012. Operating profit was $1.9 billion, or 2.68% of sales, for the first three quarters of 2012, compared to $1.7 billion, or 2.47% of sales, for the first three quarters of 2011. Operating profit, excluding the adjusted items, was $1.8 billion, or 2.52% of sales, for the third quarter of 2012.

FIFO operating profit was $611 million, or 2.80% of sales, for the third quarter of 2012, compared to $467 million, or 2.27% of sales, for the third quarter of 2011. FIFO operating profit, excluding the adjusted items, was $496 million, or 2.27% of sales, for the third quarter of 2012. Retail fuel sales lower our FIFO operating profit rate due to the very low FIFO operating profit rate, as a percentage of sales, of retail fuel sales compared to non-fuel sales. FIFO operating profit, excluding fuel, was $547 million, or 3.16% of sales, for the third quarter of 2012, compared to $424 million, or 2.54% of sales, for the third quarter of 2011. FIFO operating profit, excluding fuel and the adjusted items, was $432 million, or 2.50% of sales, for the third quarter of 2012. FIFO operating profit, as a percentage of sales excluding fuel and the adjusted items, decreased four basis points in the third quarter of 2012, compared to the third quarter of 2011 primarily due to continued investments in lower prices for our customers and increased shrink and warehouse and transportation costs, offset slightly by improvements in operating, general and administrative expenses, rent and depreciation.

FIFO operating profit was $2.0 billion, or 2.81% of sales, for the first three quarters of 2012, compared to $1.8 billion, or 2.68% of sales, for the first three quarters of 2011. FIFO operating profit, excluding the adjusted items, was $1.9 billion, or 2.65% of sales, for the first three quarters of 2012. FIFO operating profit, excluding fuel, was $1.9 billion, or 3.21% of sales, for the first three quarters of 2012, compared to $1.7 billion, or 3.02% of sales, for the first three quarters of 2011. FIFO operating profit, excluding fuel and the adjusted items, was $1.7 billion, or 3.01% of sales, for the first three quarters of 2012. FIFO operating profit, as a percentage of sales excluding fuel and the adjusted items, decreased one basis point in the first three quarters of 2012, compared to the first three quarters of 2011, primarily due to continued investments in lower prices for our customers and increased shrink and warehouse costs, offset slightly by improvements in operating, general and administrative expenses, rent and depreciation.

Read the The complete Report



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