Kroger Re-Allocates Cap-Ex

NEW YORK — A change in how Kroger allocates its capital for new and expanded stores will drive better returns on those projects in the years to come, the company’s chief financial officer said Wednesday.

Mike Schlotman, speaking at the Bank of America Merrill Lynch Consumer & Retail Conference here, said the Cincinnati-based retailer today is putting its capital for new stores and expansions into a central fund it allocates to projects with the most potential for returns. Previously, that money was distributed among Kroger’s various operating divisions for use within their own geography, he explained.

“This will mean some divisions won’t build stores in a particular year if their stores [projections] don’t measure up to the other potential stores,” Schlotman said. “We stepped back and realized there were some opportunities in some markets that we want to take an advantage of, because they felt they didn’t have the capital to spend. We were building decent stores in other parts of the country. But we weren’t building truly outstanding stores when we had an opportunity to do that.”

Schlotman said operating divisions are still responsible for store remodels. The company plans to spend between $1.9 billion and $2.2 billion in capital expenditures this fiscal year It spent around $1.9 billion last year.