CINCINNATI -- Kroger Co. here said last week the strategic initiatives the company launched in mid-December will produce visible results in the first quarter.
In a conference call with industry analysts following the release of the company's results for the fourth quarter and year ended Feb. 2, Joseph A. Pichler, chairman and chief executive officer, said Kroger would have a "modest increase" in same-store sales in the first quarter compared with third-quarter 2001.
He added that in the first five weeks of first-quarter 2002, sales have been "trending up."
Pichler updated the progress of the strategic initiatives he outlined in December. He said the company had already eliminated two-thirds of the $500 million in operating, general and administrative costs that it was seeking to cut this year.
He added Kroger now estimated that the expense of these cutbacks -- mostly for severance and other costs, estimated at $85 million to $100 million -- has now been reduced to a $75 million to $90 million estimate.
He said the company, which in December said it would lay off approximately 1,500 management and clerical employees, continues to downsize. "Everybody doesn't leave on one day," he explained. "We are downsizing in a way that enables us to keep control of our business.
However, despite the downsizing, OG&A costs increased in the fourth quarter, largely because of an increase in health care benefit costs. Pichler said the company was conducting "a stem-to-stern review" of its health care benefits for management employees and "having a lot of discussions with organized labor" about the costs. He added that the unions were "most interested" in addressing this issue, because rising benefit costs represent "a key unit of disadvantage" between Kroger and nonunionized food retailers.
In the fourth quarter, same-store sales declined 0.3%, net sales increased 3% (adjusted for an extra week in the previous fourth quarter) to $12.1 billion, net income declined 4.8% to $350.4 million and earnings per share were 43 cents, compared with 44 cents in the previous fourth quarter.
