CINCINNATI -- High gasoline prices in 2005 boosted revenue at The Kroger Co. last year and should bring surging revenue in 2006, too, CEO David B. Dillon told shareholders at the company's annual meeting Thursday, according to the Cincinnati Enquirer.
The company, which operates about 600 fuel centers at grocery stores and another 600 fuel centers at company-owned convenience stores, plans to open some new ones in 2006 that could be as far as three blocks from existing stores, Dillon said.
Kroger projected in 2004 that sales at [image-nocss] supermarkets open at least a year, excluding fuel, would grow by 2% in 2005. Instead, sales grew by 3.5%.
Earnings were projected at $1.21 per diluted share at the beginning of the fiscal year but ended the year at $1.31 per diluted share.
If we own the real estate and we have the space, we are putting gas stations in as fast as we can, Dillon said. Our customers like the convenience.
The annual meeting marked the first meeting in 18 years where shareholders were offered a quarterly dividend, said the report6.5 cents a share, payable to shareholders of record as of August 15. The company announced in March it would resume its dividend.
Looking to fiscal 2006, Kroger said it expects to increase earnings per share by 6% to 8% and is planning for sales growth at supermarkets open at least a year to exceed 4%, perhaps hitting 4.5% for the full year, the report said. The company had earnings in 2005 of $958 million compared with a $104 million loss in 2004 and a loss of 14 cent per diluted share.
B. Craig Hutson, the Chicago-based senior bond analyst for Gimme Credit, an independent corporate bond research firm based in New York City, told the Enquirer that higher gasoline prices bring more shoppers to Kroger because most of its stores are closer to highly populated markets than competitors such as Wal-Mart. Consumers usually have to drive less distance to get to a Kroger store, he told the newspaper. People have to eat. When there are high gas prices, what goes away first is eating out. That means more people are eating in, and that is good for supermarkets.
According to BigResearch, a Columbus, Ohio-based consumer behavior and research firm, higher gasoline prices mean more Americas are paying attention to coupons and buying cheaper private-store brands, said the report. BigResearch found that 23% of households with incomes higher than $50,000 are using coupons more often, and 38% are shopping closer to home to save money on fuel. One in five buys private brands more often.
Companies like Kroger earn a higher profit margin on those private-label products, Dillon said. It creates a greater level of brand loyalty. If you like the Private Selection chocolate-chip cookies, well, you might like the Private Selection lunchmeat, and you can't buy either at the Wal-Marts of the world.
Meanwhile, Kroger said it has appointed Carver L. Johnson as its first Chief Diversity Officer. Johnson has been with Kroger since 1999, serving as group vice president of management information systems. He will remain an officer of the company.
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