For Immediate Release
Chicago, IL – September 20, 2010 – Zacks.com Analyst Blog features: The Kroger Company (KR), GameStop Corporation (GME),Wal-Mart Stores Inc. (WMT), Costco Wholesale Corporation (COST). and Brinker International Inc. (EAT).
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Here are highlights from Friday's Analyst Blog:
Kroger Enhances Return
After a hiatus of a day since its earnings release on September 14, 2010, The Kroger Company (KR), one of the largest grocery retailers in the U.S., hit the market with the news of dividend increase, reflecting its plan to utilize its free cash to enhance shareholders' return, thereby boosting investor confidence on the stock.
The Cincinnati-based company, Kroger, raised its quarterly dividend by 10.5%. This is the fourth time the company has hiked its dividend since the inception of the program in 2006.
The board approved an increase in annual dividend to 42 cents a share (or 10.5 cents quarterly) from 38 cents a share (or 9.5 cents quarterly). The increased dividend will be paid on December 1, 2010, to stockholders of record as of November 15, 2010.
Another financial mechanism, which Kroger makes use of from time to time to create value for shareholders is the share repurchase program. The company's board of directors in June 2010, authorized the repurchase of $500 million of shares, to replace $225 million that was remaining under the $1 billion share buyback program, announced in January 2008.
During second quarter 2010, Kroger bought back 7.3 million shares at a price of $20.43 per share, aggregating $148.3 million. The company still has $409.2 million at its disposal under the new share repurchase program.
With signs of recovery in the economy, share repurchases and dividend increases have now become common trends among companies sitting on surplus cash. These strategies not only enhance shareholders' return but also boost earnings per share and raise the market value of the remaining shares.
Most recently, GameStop Corporation (GME), the video game and entertainment software retailer, notified that its board has approved $500 million in additional repurchase fund, of which $300 million will be utilized to repurchase shares and $200 million will be spent to buy back Senior Notes in order to lower its debt level.
Overall, 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, the intensifying price war among grocery stores to lure price-focused consumers has compelled Kroger to cut prices, hurting its sales and margins. Consumers are trading down to cheaper substitute brands and shopping for groceries at low-price leaders such as Wal-Mart Stores Inc. (WMT) and Costco Wholesale Corporation (COST).
Kroger, which currently operates 2,468 supermarkets and multi-department stores in 31 states under approximately 24 local banners, has a Zacks Rank #3, which translates into a short-term ‘Neutral' recommendation, and is in line with our long-term Neutral rating for the stock.
Brinker's Finance Chief Steps Down
Dallas-based Brinker International Inc. (EAT), which operates Chili's Grill & Bar and Maggiano's Little Italy restaurants, announced today that its chief finance officer (CFO) Charles M. Sonsteby will resign from his position on October 1. Sonsterby is leaving the company to join an executive position at Michaels Stores Inc.
Sonsteby had started his journey at Brinker International in 1990, subsequently holding an array of managerial positions. In 2001, he held the position of chief financial officer. Under his leadership, Brinker solidified its financial footing and internal governance processes.
Management has chosen an internal candidate as a replacement for Sonsteby. Guy Constant, currently senior vice president of the finance department and chief financial officer at Chili's Grill & Bar, will serve responsibilities of Brinker's executive vice president as well as chief financial officer following Sonsteby's departure. Constant has served leadership roles in finance, compensation and investor relations since he joined Brinker International in 2004.
Irving-based Michaels Stores Inc. is North America's largest specialty retailer of arts, crafts, framing, floral and seasonal merchandise for hobbyists and do-it-yourself home decorators. At Michaels Stores, Sonsteby will succeed former CFO Elaine Crowley, who left in August to join Mattress Giant in the same post.
Brinker International reported its fourth quarter earnings in mid-August. The company's adjusted earnings for both fourth quarter and fiscal 2010 missed the Zacks Consensus Estimate on the back of sagging comparable restaurant sales, hurt by a sluggish economic environment. During the fourth quarter, total revenue inched up 0.1% year over year to $743.1 million driven by a 3.0% rise in restaurant capacity from an additional operating week, but missed the Zacks Consensus Estimate of $772 million.
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