The Kroger Co. reported net earnings of $383 million, or $0.40 per diluted share, and identical supermarket sales growth, without fuel, of 1.7% in the second quarter of 2016, which ended on August 13.
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The company's net earnings per diluted share included charges related to the restructuring of certain multi-employer pension obligations to help stabilize associates' future benefits.
These obligations are now part of the plan the company manages. Excluding the effect of these charges, Kroger's adjusted net earnings were $454 million, or $0.47 per diluted share. Net earnings in the same period last year were $433 million, or $0.44 per diluted share.
Total sales increased 4.0% to $26.6 billion in the second quarter compared to $25.5 billion for the same period last year.
Total sales, excluding fuel, increased 7.3% in the second quarter compared to the same period last year. Total sales, excluding fuel and Roundy's, increased 2.9% in the second quarter compared to the same period last year.
Gross margin was 22.1% of sales for the second quarter. Excluding fuel, Roundy's and the LIFO charge, gross margin decreased 13 basis points from the same period last year.
Kroger recorded a $12 million LIFO charge during the second quarter, compared to a $21 million LIFO charge in the same quarter last year.
Total operating expenses – excluding fuel, Roundy's and pension agreements – decreased 6 basis points as a percent of sales compared to the prior year.
FIFO operating margin on a rolling four quarters basis – excluding fuel, Roundy's, pension agreements, the 2015 and 2014 contributions to the UFCW Consolidated Pension Plan and the 2014 contributions to The Kroger Co. Foundation – decreased 3 basis points compared to the prior year.
The effective income tax rate was 31.1% for the second quarter, compared to 34.4% for the same period last year. This decrease was primarily due to the adoption of new accounting standards for employee share-based payments, which reduced income tax expense by approximately $23 million, or $0.02 per diluted share. ■