Kroger 2008 Annual Report Download - page 45

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The Kroger Co. Page 44
We believe that long-term shareholder value is determined, in part, by the
return on invested capital and therefore we use a disciplined approach to
evaluate every capital investment:
Capital investments are assessed versus our after-tax hurdle rate with
consideration given to the risk of the specific investment.
The projected incremental sales and EBITDA from each capital
expenditure are added to divisional and corporate bonus bases in order
to motivate the entire organization to achieve returns above our hurdle
rate.
A quarterly re-analysis of each major project is conducted to ensure we
understand the return from major capital projects.
Kroger continues to aggressively close underperforming stores. In fiscal
2008, we closed 46 stores – 32 of these were operational closures. The
term “operational closure” describes a store location that has been
closed without opening another store in the same vicinity to replace it.
The chart on the following page provides Kroger’s real estate activity by
quarter for fiscal 2006, 2007, and 2008.
27%
27%
29%
32%
29%
32%
9%
17%
18%
6%
6%
5%
26%
21%
16%
2006
2007
2008
Capital Investments
Supermarkets
Real Estate
Technology & Logistics
Mfg, C-Stores, Jewelry
Other