Kroger Boosts Shareholder Value with New Share Buyback Plan - Analyst Blog

In line with its shareholder-friendly moves, The Kroger Co. KR recently announced a new share buyback program worth $500.0 million. This will replace the previously closed $1 billion share repurchase authorization.

Kroger's focus on boosting shareholder value is evident from its sustained dividend payouts and share repurchases. During first-quarter fiscal 2014, Kroger bought back 25.7 million shares for an aggregate amount of $1.1 billion.

The company has returned nearly $11 billion to its stockholders via buy backs since the beginning of 2000. Moreover, the company's healthy free cash flow generating ability has facilitated it to return over $1.9 billion to stakeholders via dividends and share repurchases in the last 4 quarters.

Going forward, Kroger aims to attain net debt to EBITDA ratio in the range of 2.00–2.20 by mid to end of 2015. Consequently, management anticipates no significant repurchases in the remainder of the current fiscal. In the last reported quarter, Kroger's trailing-12 months' net total debt to adjusted EBITDA ratio was 2.42 compared with 1.85 in the prior-year period.

Concurrent with the share repurchase declaration, the company announced a quarterly cash dividend of 16.5 cents a share. This will be payable on Sep 1, 2014, to stockholders of record as on Aug 15.

Kroger is actively managing its capital, returning much of its free cash to shareholders via share buybacks and dividends, and deploying cash flows in opening new stores and facilitating entry into newer markets. The company expects to enhance shareholders' return by approximately 10% to 13.5% in the long run, including 2% to 2.5% through dividends.  

These investor-friendly moves further raise the market value of the stock. It bolsters investors' confidence in the company, thereby persuading them to either buy or hold the scrip instead of selling it. Looking ahead, Kroger remains confident of its growth potential.
 
Kroger's customer-centric business model also provides a strong value proposition to consumers, and makes it likely to deliver higher earnings. Additionally, having a dominant position among the nation's largest grocery retailers enables the company to sustain growth in top and bottom lines, expand its store count and boost market share.

Kroger currently carries a Zacks Rank #3 (Hold). Other better-ranked retail stocks in the industry include Citi Trends, Inc. CTRN and Sprouts Farmers Market, Inc. SFM, both carrying a Zacks Rank #1 (Strong Buy), and Restoration Hardware Holdings, Inc. RH with a Zacks Rank #2 (Buy).

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