Kroger 2007 Annual Report Download - page 45

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CAPITAL EXPENDITURES
Total capital expenditures for 2007 were $2.1 billion, excluding acquisitions.
Approximately 67% of Kroger’s 2007 capital dollars was used to build,
acquire, expand, or remodel food stores. The balance was allocated
among the Company’s other
operating and administrative
segments, including
convenience stores, jewelry
stores, manufacturing
facilities, as well as
technology, logistics and
distribution, and other
miscellaneous projects.
We allocate capital to
projects that we expect to
earn a rate of return in
excess of our internal hurdle
rate of 11.3% after-tax.
These projects include new
stores, major remodels and
expansions of existing stores, as well as distribution facilities, technology
and manufacturing investments.
We primarily target existing markets for new combination stores. In our
experience, such “in-market” growth generally produces higher returns,
with a lower level of risk, by leveraging fixed expenses such as
warehousing, transportation, advertising, and other overhead costs across
an expanding store base.
Capital expenditures reflect our strategy of growth through expansion and
acquisition, as well as our emphasis on self-development and ownership of
real estate, and logistics and technology improvements. Since 1995,
Kroger has been aggressively purchasing the real estate associated with
our storing program. At year-end, approximately 43% of the Company’s
2,486 supermarkets were owned by Kroger. Kroger estimates that it saves
approximately $1 per square foot per year when owning versus leasing
stores.
The Kroger Co. Page 45
Other
13.9%
Supermarkets, including real estate 67.4%
2007 Ca
p
ital Investment Allocation
Technology &
Logistics 13.1%
Mfg, C-Stores,
Jewelry 5.6%