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The Kroger Company , one of the largest grocery retailers, recently posted better-than-expected fourth-quarter fiscal 2012 results on the back of Customer 1st strategy and effective cost management.            

The quarterly earnings of 88 cents a share beat the Zacks Consensus Estimate of 70 cents, and surged from 50 cents earned in the prior-year quarter. Share repurchase activities also provided cushion to the bottom line. The prior-year quarter earnings, exclude a charge associated with the consolidation of pension plan.

However, adjusting for the 53rd week, LIFO charge and charge related to the consolidation of pension plan, quarterly earnings came in at 77 cents a share, up 22.2% from 63 cents delivered in the year-ago quarter.

Healthy results prompted management to provide an upbeat outlook. The Cincinnati-based Kroger now envisions fiscal 2013 earnings between $2.71 and $2.79 per share, reflecting a year-over-year growth of 8% to 11%, which is equivalent to the company’s long-term rate.

The current Zacks Consensus Estimate for fiscal 2013 is $2.62 per share that lies below the company’s guidance range, and is a subject of revision in the near term.

Total sales (including fuel center sales) climbed 12.8% to $24,153.1 million from the prior-year quarter, and came ahead of the Zacks Consensus Estimate of $24,053 million.

Excluding fuel center sales, identical supermarket sales (stores that are open without expansion or relocation for five full quarters) grew 3% to $18,583.3 million, marking the 37th successive quarter of increase.

Kroger, which faces stiff competition from Wal-Mart Stores Inc. and Whole Foods Market Inc. , now expects identical supermarket sales (excluding fuel) growth of 2.5% to 3.5% for fiscal 2013.

Including fuel center sales, identical supermarket sales jumped 3.5% to $21,800 million. We believe that Kroger’s dominant position enables it to sustain top-line growth, expand store base, and boost market share.

Kroger’s customer-centric business model provides a strong value proposition to consumers. It is well positioned to continue its growth momentum primarily through identical supermarket sales growth.

However, Kroger is not immune to the tough economic environment. The intensifying price war among grocery stores to lure budget-constrained consumers may adversely impact Kroger’s sales and margins.

Kroger ended the quarter with cash of $237.1 million, temporary cash investments of $0.8 million, and total debt of $8,879.2 million, reflecting a debt-to-capitalization ratio of 67.8%, and shareholders’ equity of $4,210.8 million. Net debt increased $470.6 million from the prior-year period.

Trailing-twelve months’ net total debt to adjusted EBITDA ratio was 2.04 compared with 2.00 in the prior-year period. Return on invested capital on a 52-week, rolling four quarters basis was 13.4%, in line with the prior-year period.

Total capital expenditures for fiscal 2012 aggregated $2,069.3 million. Management projects capital investments of $2.1 billion to $2.4 billion during fiscal 2013.

During the quarter, Kroger bought back 2.2 million shares for an aggregate amount of $57 million. The company’s healthy free cash flow generating ability has facilitated it to return over $1.5 billion to stakeholders via dividends and share repurchases in 2012.

The company currently operates 2,424 supermarkets and multi-department stores in 31 states under approximately 24 local banners.

Currently, Kroger’s shares maintain a Zacks Rank #3 (Hold). Other stocks worth considering in the food sector include J&J Snack Foods Corp. , which holds a Zacks Rank #1 (Strong Buy) and Kraft Foods Group, Inc. , which carries a Zacks Rank #2 (Buy).

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