Why did Kroger's net income went from 1B$ to 500M$ in 2012?

Hello first of all let me say that I'm a novice investor and not educated in finance however I do consider myself well educated in general and can propose a possible answer for you. Remember here Kroger is a large established chain with many stores and various expenses (inventory, employees, store expenses, etc). These expenses won't change much from year to year as again they are established stores that aren't in a fast expansion state. You can see the cost of productsdoesn't change much, seen by looking at the income statement with the relatively flat "cost of revenue". In other words the money spent in order to get inventory to eventually make money with. Kroger through some basic math using the total revenue and cost of revenue can be seen to have a profit margin of about 20% both in 2015 and 2012. In other words for ever dollar they sell of something about 20 cents is "gross profit".

In 2012 the total revenue was less, meaning customers didn't spend as much at kroger as they do now. This was about 20% less revenue than the 2015 column shows, a big hit to sales. Next as we progress down the income statement we come to "sales, general and admin." or SG&A. Here we see the part about actually being in the business of running kroger. It seems nothing changes much from 2012-2014 and a slight increase in 2015. These expenses are salaries of high paid executives, rent of stores, and general taxes seen on operations. Well back in 2012 when revenue was down the expenses were roughly the same. The CEO probably got similar pay, the rent for stores or marketing expenses remained roughly the same leading to a similar expense (as 2014). Then their other operating items was again rather expensive considering it cost about the same in 2012 as 2014 (again roughly these small % changes do matter for the stock but here i'm just trying to get the income reasoning down). These expenses lead to a rather disappointing operating income or income from selling product in kroger's stores just a few lines down on the income statement. Then the income statement needs to include interest on loans and taxes to the gov't. At this point with an established company interest stays about the same. Just cause they made less doesn't mean the APR on loans changed so it remained a relatively flat expense. All these together lead to a sub-optimal net income and shows the problems with well established companies that have flat expenses. This is why they usually must cut costs to make money rather than sell more product. At this point it would be hard to make a large shift in how much money people spent at kroger because who doesn't know about kroger? You'd have to make some other change to really see a difference.

With a question like this I strongly recommend reading up on how financial statements work if you feel you could learn more. I just picked up the book "Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports". It explains them to professionals who need it for their job without wanting to go back to school for an accounting degree. It leads to good ideas in layman's terms that can be expanded on for the savy investor.

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