Company plans to trim capital spending this year

CINCINNATI — Kroger Co. on Thursday reported a profit of $2 billion in fiscal 2016, an increase of 3.1% from the preceding year. Revenue rose 5% to $115.3 billion. Excluding fuel, total sales increased 6.7%, the company said.

Mergers with Milwaukee-based grocer Roundy’s and specialty pharmacy ModernHEALTH contributed to its 2016 profit growth, Kroger said. Gross margin last year was 22.4% of sales.

For its fiscal fourth quarter, Kroger reported a profit of $506 million on revenue of $27.6 billion.

Kroger’s identical-store sales, excluding fuel, increased 1% in the fiscal year ended January 28.

Comps declined 0.7% in the fourth quarter, ending a growth streak of 52 consecutive quarters.

Rodney McMullen, Kroger’s chairman and chief executive officer, said Kroger would continue to cut costs this year to maintain competitiveness.

“We are lowering costs to invest those savings in our people, our business and technology,” McMullen said in a statement. “This approach will enable us to deliver on our long-term net earnings per diluted share growth rate target of 8% to 11%, plus an increasing dividend, as [the company] has in the past. In 2016, Kroger grew market share, increased tonnage and hired more than 12,000 new store associates. For 2017 and beyond, we will continue delivering for our customers while also setting the company up for our next phase of growth and customer-first innovation.”

Looking forward, Kroger said it anticipates that the operating environment will improve in the second half of 2017. The company said it expects a 1% gain in identical-store sales excluding fuel.

Kroger said it would spend less this year on building new stores and renovating existing ones. After allocating $3.6 billion for capital spending in 2016, the company expects to spend $3.2 billion to $3.5 billion this year on capital projects, excluding mergers, acquisitions and purchases of leased facilities.