Kroger Eases Debt Service; Stock Buybacks to Rise

CINCINNATI — Kroger here said yesterday that it will no longer need to devote a third of its cash to servicing debt, and will instead step up a stock buyback program. The move met the approval of rating agency Standard & Poor’s, which also yesterday upgraded Kroger’s corporate credit outlook to “positive” — seen as the first step toward a rating upgrade — citing lower debt and improvements in sales and earnings. Kroger officials said the company has reduced total debt by $2.2 billion while improving EBITDA by $522 million since 2000, and reduced net-debt-to-EBITDA ratios from 2.8 to 1.8 over that period. In first-quarter financial results, also announced yesterday, Kroger reported net income of $336.6 million, or 47 cents per share, on sales of $20.7 billion for the period ending May 26. Sales improved by 6.7%, with identical-store sales improving by 5.2%, excluding fuel. Net earnings were up 9.9% from the same period a year ago. Gross margins as a percentage of sales decreased to 23.7% from the same period last year; officials said Kroger was slow to pass along product cost increases.

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