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The Kroger Company. Module9. 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.
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The Kroger Company Module9
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
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
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?
-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
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
Kroger Inventory • “Inventories are stated at the lower of cost (Principally on a LIFO basis) or market. Our method involves counting each item in inventory, assigning costs to each of these items based on the actual purchase costs and recording the cost of items sold”-pg. 25 • Balance Sheet February 2, 2013 • LIFO Reserve-$1098m • -> Fifo inventory 1098m higher • ->Tax payable 406m higher • -> NEA 692m higher
Income statement effect • LIFO Reserve 2012 1043m • LIFO Reserve 2013 1098 • Change in LIFO reserve 53 • Tax effect 20 • EPAT raised by 33m
Leases • As of February 2, 2013, the Company operated more than 3,600 owned or leased supermarkets, convenience stores, fine jewelry stores, distribution warehouses and manufacturing plants through divisions, subsidiaries or affiliates. These facilities are located throughout the United States. While the Company’s current strategy emphasizes ownership of store real estate, a majority of the properties used to conduct the Company’s business are leased. • The Company generally owns store equipment, fixtures and leasehold improvements, as well as processing and manufacturing equipment. The total cost of the Company’s owned assets and capitalized leases, at February 2, 2013, was $29.4 billion while the accumulated depreciation was $14.5 billion. • Leased premises generally have base terms ranging from ten-to-twenty years with renewal options for additional periods. Some options provide the right to purchase the property after the conclusion of the lease term. Store rentals are normally payable monthly at a stated amount or at a guaranteed minimum amount plus a percentage of sales over a stated dollar volume. Rentals for the distribution, manufacturing and miscellaneous facilities generally are payable monthly at stated amounts. For additional information on lease obligations, see Note 8 to the Consolidated Financial Statements.
