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Kroger inks pension fund deal
January 9th, 2012
CINCINNATI – Kroger Co.’s earnings stand to get a lift in fiscal 2012 with the merger of four of the UFCW/multi-employer pension funds to which the company contributes into a new fund as of January 1.
The supermarket giant said the arrangement is slated to cut its annual pension contribution expense and will secure the pension benefits of over 65,000 Kroger associates from 14 UFCW local unions. Of all active participants in the four funds, Kroger associates account for 92%. With the decreased pension cost, fiscal 2012 net earnings are expected to climb by 4 cents to 6 cents per diluted share, according to Kroger.
The company said the gain was not contemplated in its fiscal 2012 guidance for earnings-per-share growth of 8% to 10% provided on December 1.
Absent the agreement, contributions and the related expense would have continued to increase in 2012 and beyond, Kroger pointed out.
"Given the challenging environment that exists for pension plans today, we are pleased to have reached an agreement that provides a meaningful future benefit for Kroger associates who participate in these plans," chief financial officer J. Michael Schlotman said in a statement on the pension plan merger. "The unique characteristics of these plans, coupled with our strong financial position and today’s low interest rate environment, give us the ability to contribute to the new fund in a manner that we expect to produce significant future savings."
The agreement sets a pension benefit formula through 2021, which Kroger noted concludes collective bargaining with the 14 UFCW local unions on this subject for the next 10 years.