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The Kroger Co. reported total sales, including fuel, of $20.6 billion in the third quarter of fiscal 2011 – an increase of 10.3 percent over the $18.7 billion in the same period last year; sales excluding fuel rose 5.1 percent.
Identical supermarket sales, without fuel, increased 5 percent in the third quarter, which ended Nov. 5, marking 32 consecutive quarters of identical supermarket sales increases for the Cincinnati-based grocer. Q3 net earnings totaled $195.9 million, or 33 cents per diluted share, up from 32 cents a year ago.
“Kroger had an outstanding third quarter. Our associates delivered on our ‘Customer 1st’ strategy and we had strong sales and earnings per share growth,” said David B. Dillon, Kroger chairman and CEO. “This is exactly the positive momentum we strive for as we enter the holiday season, our most exciting time of the year. Based on the consistency of our results, we have the confidence to raise our earnings guidance for the year.”
Operating, general and administrative costs were 16.09 percent of sales. Excluding retail fuel operations, OG&A decreased 29 basis points from the same period last year. The benefits of leverage from strong sales and outstanding cost control more than offset rising debit and credit card fees, incentive plan, health care and pension costs, the company reported. In addition, depreciation and rent expense were 19 basis points lower as a percentage of sales, excluding fuel, as compared to the prior year.
Kroger’s strong free cash flow has allowed the company to return more than $1.8 billion to shareholders through share buybacks and dividends over the last four quarters. During the third quarter, Kroger repurchased 21 million shares of stock for a total investment of $471.2 million.
Capital investment, excluding acquisitions and purchases of leased facilities, totaled $497 million for the third quarter, compared with $484.0 million for the same period last year. Net total debt was $7.7 billion, an increase of $476.6 million from a year ago.
Kroger increased its diluted earnings per share guidance to $1.95 to $2 for the full year; previously, the range was $1.85 to $1.95. The company also raised its same-store sales growth guidance, excluding fuel, to 4.5 to 5 percent for the year. Previously, same-store sales were expected to range from 4 to 5 percent.
“Kroger is winning in the marketplace and delivering value for our customers, associates and shareholders. We have a great strategy that has worked well in a variety of economic environments,” Dillon said. “We are confident that the balance we strive for, including strong sales growth and exceptional cost control, will continue to drive growth in loyal customers and earnings per share well into the future.”
Kroger operates 2,439 supermarkets and multidepartment stores in 31 states under two dozen local banner names including Kroger, City Market, Dillons, Jay C, Food 4 Less, Fred Meyer, Fry’s, King Soopers, QFC, Ralphs and Smith’s.