In a move expected to reduce Kroger Co.’s annual pension contribution expense and secure pension benefits for more than 65,000 employees, the Cincinnati-based grocer will merge four of the UFCW/multi-employer pension funds into a new fund Jan. 1, according to the Los Angeles Business Journal.
Kroger expects to contribute about $650 million to the new fund in January 2012, pending market conditions, discussions with rating agencies and the approval of three remaining United Food and Commercial Workers local.
The company will take a 73 cents-per-share charge to earnings in the fourth quarter of 2011. The exact effect on net earnings per diluted share will depend on the amount contributed, according to the company.
“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,” Mike Schlotman, Kroger’s chief financial officer, said in a news release. “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 arrangement will result in a reduced pension expense next year and increase fiscal year 2012 net earnings by 4 cents to 6 cents per share. This was not factored into guidance for next year’s guidance of earnings-per-share growth of 8 percent to 10 percent that Kroger provided on Dec. 1.
The plan covers Kroger employees from 14 UFCW local unions.
Cincinnati-based Kroger is the nation’s largest traditional grocery retailer, employing more than 338,000 people in 2,439 supermarkets and multi-department stores in 31 states.