CINCINNATI -- Kroger Co. here is gearing for its upcoming merger with Fred Meyer Inc., Portland, Ore., through extensive planning in areas ranging from merchandising to human resources, top executives said at the annual meeting last week.
Joseph A. Pichler, chairman and chief executive officer, said the merger, which is expected to close "anytime," is expected to increase projected annual earnings growth about 1%.
"We remain committed to increasing earnings per share by 16% to 18% beginning in the year 2000," Pichler said, "and [we] will continue to do our best to build shareholder value at a rate above our industry."
Prior to the announcement of the pending merger, Kroger had targeted annual earnings-per-share growth of 15% to 17%.
Pichler said he could not be specific about when the merger with Fred Meyer will close, but emphasized, "We're confident it's going to close."
Bob Miller, chairman and CEO of Fred Meyer -- who would become chief operating officer and vice chairman of Kroger after the merger -- told shareholders that planning for the integration of the two companies "continues to move rapidly while we wait for the final approval from the Federal Trade Commission, which we expect soon."
He said 14 integration teams are preparing the company for the combination, working in such areas as merchandising, manufacturing, private label and human resources.
According to Miller, the combination "will generate substantial economies from volume-based purchasing of food, health and beauty aids, general merchandise, seasonal items, supplies, equipment and raw materials for our plants," noting that Kroger customers should be able to see the effect of the merger as early as Christmas, as local stores begin to reflect a broader selection of merchandise.
Talking to shareholders about strategic developments, Pichler said Kroger will continue working on improvements in technology applications, its logistics network, brand sales and marketing and consolidation of support activities.
"Kroger's fundamental strategy is to achieve the responsiveness of decentralized merchandising and operations combined with the economies of scale available from coordinating volume-based activities, such as purchasing, and from consolidating support systems, such as accounting and data processing."
In 1998 Kroger consolidated slow-turn grocery, health and beauty care and private-label products into four warehouses, Pichler said, closing 14 satellite warehouses in the process. He also said most divisional distribution functions have been sold to third-party logistics firms.
"Our goal is to reduce costs and benchmark the remaining company-operated distribution centers," Pichler said. "While still early in the process, we are encouraged by the results."
During the meeting shareholders voted to approve a shareholder proposal for annual election of directors, rather than electing them in three classes. More than 100 million shares voted in favor of the measure, which must still be considered by the directors for approval.