Kroger CFO: Solid balance sheet brings financial flexibility

By Jennifer Lanning Drey

Savannah, Ga., June 22 - Kroger Co. has a strong balance sheet that provides the company significant flexibility in a consolidating industry, Mike Schlotman, Kroger's chief financial officer, said during a Wednesday presentation at the Jefferies Global Consumer Conference in Nantucket, Mass.

Kroger's investment-grade credit rating also adds to its financial flexibility, he said.

Following his formal remarks, Schlotman said there was no geography the company would exclude from its expansion plans under the right circumstances.

"We have a lot of areas in the United States where we can continue to grow, and my expectation is over time we'll continue to expand our geography," he said.

The company's fundamental operating philosophy is to maintain and increase its market share in order to generate free cash flow and earnings, Schlotman said earlier in the presentation.

In addition to earnings growth, Kroger seeks to return value to shareholders through debt reduction, share repurchases and dividend payments, he said.

Over the past 10 years, Kroger has reduced its net total debt by about $1 billion. The company's net total debt to EBITDA ratio was 1.79 times at the end of the first quarter.

Based on its first-quarter results, Kroger believes it is positioned better than originally expected for the full year. The company currently expects identical sales growth excluding fuel of 3.5% to 4.5%, Schlotman said.

Kroger is a Cincinnati-based retail grocery chain.

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