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The Kroger Company

This document explores The Kroger Company, a leading grocery retailer with over 343,000 employees headquartered in Cincinnati. It assesses Kroger's financial strategies, particularly the use of a 2% sales method and its implications on cash flow and operations. Detailed insights are shared regarding asset liabilities, enterprise value, and tax benefits. The analysis highlights potential discrepancies in financial reporting, the strength of Kroger’s operations, and the challenges faced in reconciling financial statements in light of standard accounting practices.

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The Kroger Company

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Presentation Transcript

  1. The Kroger Company Module2

  2. Kroger • 343,000 Employees • Headquarter in Cincinnati • Primary store is “combo store” • Multi-department, Marketplace, Price Impact Stores as well • Last Saturday in January

  3. Source: Mergent Online Will 2% make sense to use for Kroger going forward? For this portion I used the 2%, but got a very negative number in NFL as you will see in a few slides

  4. Problem with 2% sales method with Kroger • As you can see, they would be using much more cash for operations than they carry on their balance sheet • Trying different percentages, I found something as low as .1% would work better • Is this feasable? • I continued with 2% method for rest of exercise 2% numbers Using .1%

  5. Enterprise Assets and Liabilities • Notice lack of intangibles • Finished goods, and WIP also • PPE largest because cost of building and maintaining grocery/department stores

  6. Net Financial Liabilities • Total about 8.9 billion in debt! • Will have to change these numbers around March when new 10-k comes out • Notice anything missing here? 2013 2012 2011

  7. Common Stock • Tripped up on treasury stock at cost

  8. Putting it all together • Complications when checking with cash and deferred tax assets • Off by about 800,000 for a while

  9. Enterprise Value after Tax • -Interestingly Kroger didn’t discontinue any operations in the past few years • -Shows the strength of the company • -No interest income found as well • -Income taxes are adjusted for tax shield (462,000*.37%) is added

  10. Financing Expense after Tax -The income tax benefit is the tax shield talked about in the previous slide -No foreign translation or anything dealing with that since Kroger only operates in the states -These were all the financing expenses I could find in the 10-K

  11. Statement of Comprehensive income • -Source Kroger 10-K • -Very small compared to other operations and amounts

  12. Putting it All Together • -My numbers didn’t match • -Tried for hours but couldn’t find my error • -My guess is something with the tax shield (wrong rate?) • -Could have potentially missed Interest income or discontinued operations but I don’t think I did • -Going forward will have to look to correct this

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