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The Kroger Company

The Kroger Company faces some potential risks and considerations in its financial outlook. Weather-related concerns arise due to their ownership of Fred Meyer, whose West Coast presence is vulnerable to earthquakes and transportation costs influenced by fuel prices. Proposed changes in minimum wage and overtime pay by the Obama administration could impact their labor expenses. Growth challenges are evident compared to industry peers. Interest and health insurance costs are expected to rise, alongside increasing liabilities. While the 10-K report shows no alarming changes, close monitoring of financial metrics is necessary.

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The Kroger Company

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  1. The Kroger Company Module9

  2. Weather • -Originally would not have thought weather had much risk with Kroger • -They own Fred Meyer which has large presence on West Coast and Earthquakes pose a threat • -Transporting goods across the country give concern to fuel and other transportation costs

  3. Minimum Wage Considerations • -Nothing of note under legal ramifications facing the company other than a quick mention on wages • -Obama is proposing changing minimum wage and overtime pay • -This would seriously affect Kroger • -Not a measurable effect, but given industry this certainly would increase wages payable and is a concern moving forward

  4. Consider Changing Growth Rate • -Found a graph in the 10-k that compares Kroger to Peer Group and S&P • -Kroger has been outperformed by a different group then industry tables presented • -Should I change my growth rate based on this information?

  5. -Visa/Mastercard highly covered topic in news this summer and recently • -There was a big change in Kroger’s NEA from 2012-2011 • -It is shown why here because of LIFO charge

  6. -Shows that the grocery store is really the heart and sole of Kroger Brand -Fuel Sales is a concern and could be an area to hurt Kroger -I didn’t realize other sales was such a small portion of their revenue -Fuel and Supermarket sales growing similarly

  7. -Interesting to note that the biggest increase in 2012 for Interest Expense was because total debt increased -Think back to Harris Teeter Deal where Kroger financed the majority of it with debt -Expect to see a much larger interest expense in 2013 10-K being published very soon

  8. Insurance • -Similar to interest expense increasing so too could health insurance costs under Obama for Kroger • -They have calculated premiums off of historical but we are entering new period of health care • -Expect to see an increase in liabilities for Obama’s plan that came into effect in October

  9. Rise of Fresh Food? • Organic • Should this be rising?

  10. Taxes • -37% seems appropriate to keep

  11. CONCLUSION • -Nothing too alarming found in the 10-K • -If numbers look drastically off in the next 10-k however, I have a good base for why they might have changed • -Kroger is a solid company with not much going on besides grocery sales • -They have small investments so not worried about fluctuation in accounting for that

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