Wednesday, March 13, 2002

Kroger Co. buffeted by bad economy




By James McNair, jmcnair@enquirer.com
The Cincinnati Enquirer

        As the company forewarned, Kroger Co. ended its fiscal year in a state of financial flux.

        Tuesday, the Cincinnati-based supermarket chain reported a 3 percent increase in fourth-quarter sales — after adjusting the prior-year quarter that ran one week longer — and a 5 percent drop in net income.

        Spending on restructuring and upgrading computer systems accounted for the profit reversal. But the recession, terrorist attacks and the invasion of retail supercenters such as Wal-Mart kept Kroger rather hemmed in last year.

        “No question about it, it was the most challenging of my 22 years in the business,” said Joseph Pichler, Kroger's chairman and chief executive.

        The fourth-quarter results weren't unexpected. Kroger shares fell 57 cents Tuesday, closing at $21.98.

        Kroger's fiscal year, which ended Feb. 2, was capped by distribution and office consolidations — and about 1,500 layoffs — that the company expects to erase $500 million in operating costs in the next two years.

        Kroger also spent $18.4 million last quarter in its continuing conversion of computer systems in acquired stores. Because those outlays were less than expected last year, Kroger said it is considering a conversion of its 131 Fred Meyer Inc. stores that made Kroger the nation's biggest food retailer in 1999.

        Kroger's fourth-quarter report is a boon for full disclosure, yet requires a rigorous review of so-called “extraordinary” charges and weaving through a host of exceptions in comparing sales numbers to prior periods.

        For example, not only did Kroger report a 0.3 percent drop in “identical store” sales — at stores open at least one year — but also a 0.3 percent gain in sales at “comparable stores,” which includes those that have been remodeled or moved.

        Overall, Kroger posted $12.1 billion in sales last quarter. For the year, Kroger reported $50.1 billion, up 4.2 percent after adjusting for the extra week in the company's fiscal 2000.

       

       



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