kroger, essay
An Equity Valuation and Analysis of
Kroger Co.
As of November 1, 2007
Brandon Dunn
Cliff Fielden
Trey Keith
Sean Murass
brandon.dunn@ttu.edu cfielden2@yahoo.com trey.keith@ttu.edu murass02@yahoo.com 0
Table of Contents
Executive Summary……………………………………………………………………..……………..4
Business & Industry Analysis…………………………………………………………….………..11
Company Overview………………………………………………………………………….11
Industry Overview……………………………………………………………………………13
Five Forces Model………………………………………………………………………………………15
Rivalry Among Existing Firms…………………………………………………………….16
Threat of New Entrants…………………………………………………………………….24
Threat of Substitute Products……………………………………………….…………..28
Bargaining Power of Buyers…………………………………………………….………..30
Bargaining Power of Suppliers…………………………………………………….…….32
Value Chain Analysis………………………………………………………………………………….36
Firm Competitive Advantage Analysis…………………………………………………………..40
Accounting Analysis……………………………………………………………………….………….47
Key Accounting Policies…………………………………………………………………….47
Accounting Flexibility……………………………………………………………………….55
Actual Accounting Strategy……………………………………………………………….58
Quality of Disclosure…………………………………………………………..……………61
Qualitative Analysis……………………………………………………….…………………61
Quantitative Analysis of Disclosure…………………………………………….………65
Sales Manipulation Diagnostic………………………………………….……..66
Sales Manipulation Chart…………………………………………………………71
Expense Manipulation Diagnostic…………………………………………….72
Expense Manipulation Chart………………………………………….………..79
Potential Red Flags………………………………………………………………..………..80
Undo Accounting Distortions………………………………………………………..…..82
Financial Analysis, Forecast Financials, and Cost of Capital Estimation....83
Financial Ratio Analysis…………………………………………………..……..83
1
Liquidity Analysis……………………………………………………………………84
Profitability Analysis……………………………………………………………….98
Capital Structure Analysis……………………………………….…………….109
SGR/IGR Analysis………………………………………………..……………….115
Financial Statement
Kroger Co.
As of November 1, 2007
Brandon Dunn
Cliff Fielden
Trey Keith
Sean Murass
brandon.dunn@ttu.edu cfielden2@yahoo.com trey.keith@ttu.edu murass02@yahoo.com 0
Table of Contents
Executive Summary……………………………………………………………………..……………..4
Business & Industry Analysis…………………………………………………………….………..11
Company Overview………………………………………………………………………….11
Industry Overview……………………………………………………………………………13
Five Forces Model………………………………………………………………………………………15
Rivalry Among Existing Firms…………………………………………………………….16
Threat of New Entrants…………………………………………………………………….24
Threat of Substitute Products……………………………………………….…………..28
Bargaining Power of Buyers…………………………………………………….………..30
Bargaining Power of Suppliers…………………………………………………….…….32
Value Chain Analysis………………………………………………………………………………….36
Firm Competitive Advantage Analysis…………………………………………………………..40
Accounting Analysis……………………………………………………………………….………….47
Key Accounting Policies…………………………………………………………………….47
Accounting Flexibility……………………………………………………………………….55
Actual Accounting Strategy……………………………………………………………….58
Quality of Disclosure…………………………………………………………..……………61
Qualitative Analysis……………………………………………………….…………………61
Quantitative Analysis of Disclosure…………………………………………….………65
Sales Manipulation Diagnostic………………………………………….……..66
Sales Manipulation Chart…………………………………………………………71
Expense Manipulation Diagnostic…………………………………………….72
Expense Manipulation Chart………………………………………….………..79
Potential Red Flags………………………………………………………………..………..80
Undo Accounting Distortions………………………………………………………..…..82
Financial Analysis, Forecast Financials, and Cost of Capital Estimation....83
Financial Ratio Analysis…………………………………………………..……..83
1
Liquidity Analysis……………………………………………………………………84
Profitability Analysis……………………………………………………………….98
Capital Structure Analysis……………………………………….…………….109
SGR/IGR Analysis………………………………………………..……………….115
Financial Statement