Kroger said Tuesday that its acquisition of Matthews-based Harris Teeter helped its 2014 sales and earnings surge compared with the year prior.
Sales for Cincinnati-based Kroger rose 10.3 percent in 2014 compared to the year before “primarily due to” its $2.8 billion purchase of Harris Teeter, which closed in January 2014, Kroger said in a securities filing Tuesday. Sales at supermarkets open at least one year grew 5.2 percent.
In the filing, Kroger detailed how the deal with Harris Teeter supported its bottom-line growth even after it took on more debt and spent more on general expenses and rent. Kroger also said its 2014 gross margins were up to 21.2 percent from 20.6 percent in 2013 -- an increase, the company said, driven in part by the merger with Harris Teeter.
“The merger allows us to expand into the fast-growing southeastern and mid-Atlantic markets and into Washington, D.C.,” Kroger said in the filing.
In March, Kroger also reported better-than-expected fourth-quarter earnings as it snatched up customers from competitors and built on existing business from Harris Teeter and Vitacost.com, an e-commerce vitamin vendor Kroger purchased in July. Both deals, CEO Rodney McMullen said in an investor call, present “meaningful growth opportunities for Kroger.”
Partially offsetting the gains from the deal, Kroger said its rent expense was $707 million in 2014, compared with $613 million in 2013 -- a rise, the supermarket chain said, driven by the Harris Teeter merger. The Harris Teeter purchase required Kroger to take on more debt in 2014, driving up its interest expenses.