Kroger 2010 Annual Report Download - page 106

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A-26
•฀ We฀expect฀net฀earnings฀per฀diluted฀share฀in฀the฀range฀of฀$1.80-$1.92฀for฀2011.฀We฀expect฀the฀second฀
and third quarter earnings per diluted share growth rate to be below the annual growth rate due to
tax benefits recognized in 2010. The growth in the second quarter is expected to be the lowest of the
year.
•฀ We฀expect฀identical฀supermarket฀sales฀growth,฀excluding฀fuel฀sales,฀of฀3.0%-4.0%฀in฀2011.
•฀ For฀2011,฀we฀will฀continue฀to฀focus฀on฀improving฀sales฀growth,฀in฀accordance฀with฀our฀Customer฀1st
strategy, by making investments in gross margin and customer shopping experiences. We expect to
finance these investments primarily with operating cost reductions. We expect non-fuel operating
margins for 2011 to be comparable to 2010, excluding the non-cash goodwill impairment charge.
•฀ For฀2011,฀we฀expect฀fuel฀margins,฀which฀can฀be฀highly฀volatile,฀to฀be฀approximately฀$0.115฀per฀gallon,฀
and we expect continued strong growth in fuel gallons sold.
•฀ For฀2011,฀we฀expect฀our฀annualized฀LIFO฀charge฀to฀be฀approximately฀$50฀million฀to฀$75฀million.฀This฀
forecast is based on estimated cost changes for products in our inventory.
•฀ For฀2011,฀we฀expect฀interest฀expense฀to฀be฀approximately฀$460฀million.
•฀ We฀plan฀to฀use฀cash฀flow฀primarily฀for฀capital฀investments,฀to฀maintain฀our฀current฀debt฀coverage฀
ratios, to pay cash dividends, and to repurchase stock. As market conditions change, we re-evaluate
these uses of cash flow.
•฀ We฀expect฀to฀obtain฀sales฀growth฀from฀new฀square฀footage,฀as฀well฀as฀from฀increased฀productivity฀
from existing locations.
•฀ Capital฀ expenditures฀ reflect฀ our฀ strategy฀ of฀ growth฀ through฀ expansion,฀ as฀ well฀ as฀ focusing฀ on฀
productivity increases from our existing store base through remodels. In addition, we will continue our
emphasis on self-development and ownership of real estate, logistics and technology improvements.
The continued capital spending in technology is focused on improving store operations, logistics,
manufacturing procurement, category management, merchandising and buying practices, and should
reduce merchandising costs. We intend to continue using cash flow from operations to finance capital
expenditure requirements. We expect capital investments for 2011 to be in the range of $1.7-$1.9
billion, excluding acquisitions and purchases of leased facilities. We expect total food store square
footage to grow approximately 1.0%-1.5% before acquisitions and operational closings.
•฀ Based฀on฀current฀operating฀trends,฀we฀believe฀that฀cash฀flow฀from฀operations฀and฀other฀sources฀of฀
liquidity, including borrowings under our commercial paper program and bank credit facility, will be
adequate to meet anticipated requirements for working capital, capital expenditures, interest payments
and scheduled principal payments for the foreseeable future. We also believe we have adequate
coverage of our debt covenants to continue to respond effectively to competitive conditions.
•฀ We฀believe฀we฀have฀adequate฀sources฀of฀cash,฀if฀needed,฀under฀our฀credit฀facility฀and฀other฀borrowing฀
sources.
•฀ We฀expect฀that฀our฀OG&A฀results฀will฀be฀affected฀by฀increased฀costs,฀such฀as฀higher฀employee฀benefit฀
costs and credit card fees, offset by improved productivity from process changes and leverage gained
through sales increases.
•฀ We฀expect฀that฀our฀effective฀tax฀rate฀for฀2011฀will฀be฀approximately฀36.0%,฀excluding฀the฀resolution฀
of any tax issues.