Fitch Affirms Kroger's IDR at 'BBB'; Outlook Stable.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch has affirmed The Kroger Co. (Kroger) ratings as follows: --Long Term Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) at 'BBB'; --$2.5 billion Bank Credit Facility at 'BBB'; --Senior Unsecured Notes at 'BBB'; --Short Term IDR at 'F2'; --Commercial Paper (CP) at 'F2'. The Rating Outlook is Stable. As of May 26, 2007, Kroger had $6.6 billion of debt outstanding, including capital leases. The ratings reflect Kroger's well executed operating strategy which has led to positive operating trends, its position as one of the largest U.S. supermarket companies with a diverse store base, and its strong cash flow generation. Also considered is the highly competitive operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. , which will continue to pressure operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: over time and the company's dedication to returning funds to shareholders. Kroger's Customer 1st operating strategy, which is primarily focused on improving the customers' shopping experience through competitive pricing, service, merchandise, and store experience, has allowed it to maintain strong market share positions and positive operating trends across its markets. Kroger has continued to generate mid-single digit non-fuel identical store sales, among the strongest in the industry, and strengthen its market shares, with the #1 or #2 market share in 38 of its 44 major markets in fiscal 2006. At the same time, Kroger has focused on reducing costs, maintaining stable operating profit margins Operating profit margin The ratio of operating profit to net sales. and competitive pricing despite higher energy and product costs. Since 2005, operating EBITDAR Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring Costs - EBITDAR An indicator of a company's financial performance calculated as: = Revenue - Expenses (excluding tax, interest, depreciation, amortization, and restructuring costs) margins have remained between 6.5% and 6.2%. As a result, cash flow generation has remained strong, allowing Kroger to reduce debt balances, which together with stronger operating trends has resulted in strengthened credit metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. . For the latest twelve months ended May 26, 2007, leverage, measured by total adjusted debt to operating EBITDAR, improved to 2.8 times (x) from 3.2x in fiscal 2005 and EBITDAR coverage of interest and rents was 3.7x up from 3.4x over the same period. Going forward, Fitch expects Kroger to return excess cash flow to shareholders through dividends and share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. . Nonetheless, Kroger is expected to maintain a prudent financial strategy and its strong credit profile over time. Competition in the food retail segment remains intense and the ability of industry participants to maintain operating profit margins will remain challenging. As one of the largest supermarket retailers in the U.S., generating over $67 billion in revenues and operating 2,458 food stores across an extensive geographic area and diverse store formats, Kroger benefits from its broad experience competing against both traditional and non-traditional food retailers. Over the longer term, as the supermarket industry continues to consolidate, Fitch anticipates that Kroger could participate in future merger and acquisition activity but that this activity would be balanced with its capital allocation strategy over time. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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