Kroger 2008 Annual Report Download - page 34
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The Kroger Co. Page 33
<Decrease> in OG&A Rate
FY 2006
FY 2007
FY 2008
GAAP Basis
<30 bp>
<60 bp>
<36 bp>
Excluding Retail Fuel Operations
<9 bp>
<33 bp>
<3 bp>
Note B: Operating, general, and administrative expenses consist primarily of employee-related costs
such as wages, health care benefit costs and retirement plan costs, utilities, and credit card fees. Rent
expense, depreciation and amortization expense, and interest expense are not included in OG&A.
Kroger’s retail fuel business can increase the volatility of our quarterly
financial results because it is not uncommon for us to experience quarter-
to-quarter gross margin fluctuations in the fuel business. This is a function
of our significant fuel volumes and the volatility of wholesale fuel prices.
During a period of rising wholesale fuel costs, our gross margins typically
contract. During a period of declining wholesale fuel costs, our gross
margins typically expand. This is why we believe it is important to consider
a longer view when analyzing fuel margins to account for these
fluctuations.
Fuel Margins (Cents Per Gallon)
Q1
Q2
Q3
Q4
YR
FY 2008
9.2¢
17.9¢
23.9¢
9.7¢
14.7¢
FY 2007
8.7¢
16.2¢
8.7¢
12.8¢
11.4¢
Difference
0.5¢
1.7¢
15.2¢
<3.1¢>
3.3¢
Note that Kroger’s fuel margins exclude credit card fees. We include credit
card fees in OG&A expense.