01—Abstract
Summary
Summary of the 10-K filed March 31, 2009. Cited figures are marked; the original filing is the authoritative source.
The Kroger Co. reported fiscal 2008 (52 weeks ended January 31, 2009) sales of $76.0 billiona, up from $70.2 billion in fiscal 2007, and net earnings of $1.249 billion, or $1.90 per diluted share, compared with $1.181 billion ($1.69 per diluted share) in fiscal 2007.
Excluding a $0.02b per diluted share charge for damage and disruption caused by Hurricane Ike, earnings per diluted share were $1.92, which the filing states represents a 13.6% growth rate over 2007. Supermarket identical sales excluding fuel rose 5.0%, and the company estimates its market share increased approximately 61 basis points across its 42 major markets. Operating profit was $2.451 billion, and net cash provided by operating activities was $2.896 billion.
Capital expenditures were $2.2 billionc, and the company repurchased $637 million of its stock during the year. The balance sheet shows total assets of $23.211 billion and total debt of approximately $8.1 billion, including capital leases and financing obligations. The company's Leverage Ratio was 2.02 to 1 as of January 31, 2009, and it was in compliance with its financial covenants.
Management's 2009 outlook calls for earnings per diluted share of $2.00 to $2.05d, identical supermarket sales growth excluding fuel of 3% to 4%, and capital investment of $1.9 to $2.1 billion. The filing also estimates Kroger's share of multi-employer pension plan underfunding at $3.0 billion pre-tax, or $1.9 billion after tax, and notes that multi-employer contributions could as much as double over the several years after 2009. Key risks highlighted include intense price competition, labor relations (approximately 309 collective bargaining agreements, with major contracts to be negotiated in 2009), rising pension and health care costs, and a pending Tax Court case in which an adverse decision would require a cash payment of up to approximately $436 million, including interest.
02—Key points
Key Highlights
- Fiscal 2008 sales rose 8.2% to $76.0 billion, and net earnings increased to $1.249 billion from $1.181 billion.
- Diluted EPS was $1.90, or $1.92 excluding a $0.02 Hurricane Ike charge, a stated 13.6% growth rate over 2007's $1.69.
- Supermarket identical sales excluding fuel increased 5.0%, and market share rose approximately 61 basis points in 2008 across 42 major markets.
- Operating cash flow was $2.896 billion, and capital expenditures were $2.2 billion; the company repurchased $637 million of stock during 2008.
- Total debt was approximately $8.1 billion at year-end 2008, with a Leverage Ratio of 2.02 to 1 and compliance with financial covenants.
- 2009 guidance calls for diluted EPS of $2.00 to $2.05 and identical supermarket sales growth excluding fuel of 3% to 4%.
- Kroger's estimated share of multi-employer pension underfunding is $3.0 billion pre-tax ($1.9 billion after tax), and the company says contributions could as much as double over several years after 2009.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Kroger kept $0.02.
- Revenue$76.15B100.0%
- Cost of revenue−$58.54B76.9%
- Gross profit$17.60B23.1%
- Operating costs−$15.15B19.9%
- Operating income$2.45B3.2%
- Interest, other & tax−$1.20B1.6%
- Net income$1.25B1.6%
Where FY2009 revenue went
$76.15B- Cost of revenue: $58.54B, 77% of revenue
- Operating costs: $15.15B, 20% of revenue
- Net income: $1.25B, 1.6% of revenue
- Interest, other & tax: $1.20B, 1.6% of revenue
Kept 1.6% as net incomeNet income $1.25B · 1.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed March 31, 2009Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $76.15B$70.34B | +8.3% |
| Cost of Revenue | $58.54B$53.71B | +9.0% |
| Gross Profit | $17.60B$16.63B | +5.9% |
| Operating Income | $2.45B$2.36B | +3.8% |
| Interest Expense | $485.00M$474.00M | +2.3% |
| Net Income | $1.25B$1.22B | +2.1% |
| EPS (Basic) | $1.91$1.75 | +9.1% |
| EPS (Diluted) | $1.89$1.73 | +9.2% |
| Shares Outstanding (Basic) | 652.00M690.00M | −5.5% |
| Shares Outstanding (Diluted) | 658.00M697.00M | −5.6% |
05—Questions
Frequently Asked Questions
How did Kroger perform financially in fiscal 2008?
Sales increased 8.2% to $76.0 billion and net earnings rose to $1.249 billion, or $1.90 per diluted share. Excluding a $0.02 per diluted share Hurricane Ike charge, earnings were $1.92 per diluted share, which the filing states represents 13.6% growth over 2007.
What is Kroger's outlook for 2009?
Kroger expects diluted EPS of $2.00 to $2.05, identical supermarket sales growth excluding fuel of 3% to 4%, capital investment of $1.9 to $2.1 billion, and an effective tax rate of approximately 37%.
How is Kroger's debt position?
Total debt, including capital leases and financing obligations, was approximately $8.1 billion at year-end 2008. The Leverage Ratio was 2.02 to 1, against a default threshold of 3.50 to 1, and the company stated it was in compliance with its financial covenants.
What are the main risks flagged in the filing?
The filing highlights intense price competition, labor relations risk with about 309 collective bargaining agreements and major contracts to be negotiated in 2009, rising health care and pension costs, and multi-employer pension underfunding. It also cites an adverse Tax Court outcome that would require a cash payment of up to approximately $436 million, including interest.
How much did Kroger return to shareholders?
Kroger repurchased $637 million of its stock in 2008 and paid dividends totaling $227 million. The Board declared a quarterly dividend of $0.09 per share payable June 1, 2009.
06—Continue