Executive Summary Of Kroger

Revenue Driver Kroger earns revenue by selling product to their customers in the stores. They earn income through setting the price level of their product higher than the costs. These costs include procurement and distribution costs, facility occupancy and operational costs, and overhead expenses. The retail operations, which represent over 99% of Kroger’s consolidated sales and EBITDA, are the only reportable segment. On January 28, 2014, Kroger finished the merger with Harris Teeter Supermarkets, Inc. by purchasing 100% of the Harris Teeter outstanding common stock for approximately $2.4 billion. The merger allows Kroger to expand into the fast-growing southeastern and mid-Atlantic markets and into Washington, D.C...

Expense Driver Kroger keeps a relatively stable COGS ratio which is approximately 79.4% of revenue in last three years. And there are nearly 40% of Kroger’s

Gross Profit also increased by 1.7%, which reflect the good cost control of Kroger. The EBITDA and net income barely increased. The slow growth of this year is mainly due to the expense of buying Harris Teeter. The 2014 net earnings were $1.5 billion or $2.90 per diluted share, compared to $1.5 billion, or $2.77 per diluted share for the same period of 2013(appendix). In the last five years, Kroger achieved high growth in its net sales. The growth rate is separately 1%, 7.1%, 10.2%, 7.1%, and 1.8% in 2010, 2011, 2012, 2013, and 2014. Gross profit margin kept about 20.5% of the total revenue in last five years. Earing per share increased exponentially from 0.11 in 2010 to 2.99 at 2014, which is approximately 26 times. In my assumption, the growth rate for Kroger at 2015 and 2016 will be 10.4% and 4.3%. At 2017, 2018, and 2019, the growth rate will keep 4.3% growth rate. After that, it will keep stable growth rate of 2.0%. Table 3: Net Sales of Kroger’s Second