Second Quarter Highlights
- Identical Sales without fuel increased 1.2%
- Operating Profit of $815
million; EPS of $0.64
- Adjusted FIFO Operating Profit of $984 million and Adjusted EPS of $0.93
- Achieved strong Adjusted Free Cash Flow
- Executed its go-to-market strategy to deliver value for
customers
- Grew digital sales 11%
- Increased total households, customer visits and loyal
households
CINCINNATI, Sept. 12,
2024 /PRNewswire/ -- The Kroger Co. (NYSE: KR)
today reported its second quarter 2024 results, reaffirmed guidance
and updated investors on how Leading with Fresh and Accelerating
with Digital continues to position Kroger for long-term
sustainable growth.
Comments from Chairman and CEO Rodney McMullen
"Kroger achieved solid results in the second quarter
demonstrating the strength and resiliency of our model.
We are growing households and increasing customer visits
by offering a compelling combination of affordable prices and
personalized promotions on great quality products, all through a
unique seamless experience. We appreciate our associates for their
focus on full, fresh and friendly, which elevates the customer
experience.
Our long-term model is to consistently invest to lower
prices so more customers shop with us, which in turn fuels our
alternative profit businesses and drives greater
efficiencies This flywheel enables Kroger to
deliver exceptional value for customers and investing in our
associates, and by doing so, we are well-positioned to generate
attractive and sustainable returns for shareholders."
Comments from Chairman and CEO Rodney McMullen on the pending merger with
Albertsons
"As we near the close of the FTC's preliminary injunction
hearing, we are confident in the facts and the strength of our
position. The food industry has always been competitive and will
continue to be after this merger. We are committed to closing this
merger because bringing Kroger and Albertsons together will provide
meaningful and measurable benefits – lower prices, secure jobs and
expanded access to fresh, affordable food – for customers,
associates, and communities across the country."
Second Quarter Financial Results
|
2Q24 ($ in
millions; except EPS)
|
2Q23 ($ in
millions; except EPS)
|
ID Sales* (Table 4)
|
1.2 %
|
1.0 %
|
Earnings (Loss) Per Share**
|
$0.64
|
($0.25)
|
Adjusted EPS (Table 6)
|
$0.93
|
$0.96
|
Operating (Loss) Profit**
|
$815
|
($479)
|
Adjusted FIFO Operating Profit (Table
7)
|
$984
|
$989
|
FIFO Gross Margin Rate*
|
Increased 42 basis points
|
OG&A Rate*
|
Increased 65 basis points
|
* Without fuel and
adjustment items, if applicable.
|
** The 2nd
quarter of 2023 includes a $1.4 billion ($1.54 loss per share)
charge related to nationwide opioid settlement
framework.
|
Total company sales were $33.9
billion in both the second quarters of 2024 and 2023.
Excluding fuel, sales increased 1.3% compared to the same period
last year.
Gross margin was 22.6% of sales for the second
quarter. The FIFO gross margin rate, excluding fuel,
increased 42 basis points compared to the same period
last year. This result reflected Kroger's ability to improve
margin, while maintaining competitive pricing and helping customers
manage their budgets. The increase in rate was primarily
attributable to favorable product mix in our grocery business
including Our Brands, lower shrink
and sourcing benefits partially offset by lower pharmacy
margins.
The LIFO charge for the quarter was $21 million, compared to a LIFO charge of
$4 million for the same period last
year.
The Operating, General & Administrative
rate increased 65 basis points, excluding fuel and adjustment
items, compared to the same period last year. This increase in rate
was driven by investments in associate wages, increased incentive
plan costs, hurricane related costs and an increase in costs due to
the severity of general liability claims, partially offset by
continued execution of cost savings
initiatives.
Capital Allocation Strategy
Kroger expects to continue to generate strong free cash
flow and remains committed to investing in the business to drive
long-term sustainable net earnings growth, as well as maintaining
its current investment grade debt rating. The Company expects to
continue to pay its quarterly dividend and expects this to increase
over time, subject to board approval. Kroger has paused its share
repurchase program to prioritize de-leveraging following the
proposed merger with Albertsons.
Kroger's net total debt to adjusted EBITDA ratio is 1.24
compared to 1.31 a year ago (Table 5). The company's net total debt
to adjusted EBITDA ratio target range is 2.30 to 2.50. Kroger's
strong balance sheet provides ample opportunities for the Company
to pursue growth and enhance shareholder value.
Full-Year 2024 Guidance*
Reaffirmed
- Adjusted FIFO Operating Profit of $4.6 – $4.8
billion
- Adjusted net earnings per diluted share of $4.30 – $4.50
- Adjusted Free Cash Flow of $2.5 – $2.7
billion**
- Adjusted effective tax rate of 23%***
Updated
- Identical Sales without fuel of 0.75% – 1.75%
- Capital expenditures of $3.6 – $3.8
billion
* Without adjusted
items, if applicable. Kroger is unable to provide a full
reconciliation of the GAAP and non-GAAP measures used in 2024
guidance without unreasonable effort because it is not possible to
predict certain of our adjustment items with a reasonable degree of
certainty. This information is dependent upon future events and may
be outside of our control and its unavailability could have a
significant impact on 2024 GAAP financial results.
|
** Adjusted free cash
flow excludes planned payments related to the restructuring of
multi-employer pension plans, payments related to opioid
settlements and merger-related expenses.
|
*** The adjusted tax
rate reflects typical tax adjustments and does not reflect changes
to the rate from the completion of income tax audit examinations
and changes in tax laws and policies, which cannot be
predicted.
|
Comments from Interim CFO Todd
Foley
"Our solid sales results through the first two quarters of
the year give us the confidence to raise the low end of our
full-year identical sales without fuel guidance by 50 basis points.
We now expect identical sales without fuel to be in the range of
0.75% to 1.75%.
Our positive customer trends are driving sales momentum
that we expect to continue in the second half of the
year."
Second Quarter 2024 Highlights
Leading with Fresh
- Introduced 223 new Our Brands items, including the
expansion of the Smart Way™ product line
- Celebrated seven awards earned
by Murray's Cheese varieties at the American Cheese Society
Competition
- Introduced seasonal fresh favorite Hatch
Chiles and Harvest Apple
Private Selection® products
Accelerating with Digital
- Increased delivery sales by 17% over last year led by
Customer Fulfillment Centers
- Grew eCommerce households by 14% compared to last
year
- Held Boost Bonus Days, a
two-week mega-sales event with exclusive access for Boost by Kroger
Plus members
Associate Experience
- Received the top score on the Disability
Equality Index® making the company one of the Best
Places to Work for Disability Inclusion for the fifth consecutive
year
- Celebrated 67 female leaders named as Top Women in
Grocery Honorees by Progressive Grocer
- Received four Brandon Hall Group – Excellence in Human
Capital Management Awards®
Live Our Purpose
- Honored more than 14,000 students named as
Zero Heroes for supporting the Zero Hunger | Zero Waste mission to
create communities free from hunger and waste
- Announced the 6th year of
Kroger's Wellness Festival, a two-day event
celebrating physical, mental and emotional health for the whole
family
- Recognized as one of the World's Most Trustworthy
Companies for 2024 by Newsweek and Statista
Subsequent Event
- Successfully completed debt offering for
$10.5 billion, with the net proceeds
expected to partially fund the cash consideration for the proposed
merger. A portion of the proceeds of the offering is subject to a
special mandatory redemption if the merger does not
close
About Kroger
At
The Kroger Co.
(NYSE: KR), we are dedicated to our Purpose: to Feed the Human
Spirit™. We are, across our family of companies nearly 420,000
associates who serve over eleven million customers daily through a
seamless digital shopping experience and retail food stores under a
variety of banner
names, serving America through food inspiration
and uplift, and creating #ZeroHungerZeroWaste communities by 2025.
To learn more about us, visit
our newsroom and investor
relations site.
Kroger's second quarter 2024 ended on August 17, 2024.
Note: Fuel sales have historically had a low gross margin
rate and operating expense rate as compared to corresponding rates
on non-fuel sales. As a result, Kroger discusses the changes in
these rates excluding the effect of fuel.
Please refer to the supplemental information presented in
the tables for reconciliations of the non-GAAP financial measures
used in this press release to the most comparable GAAP financial
measure and related disclosure. As noted above, Kroger is unable to
provide a full reconciliation of the GAAP and non-GAAP measures
used in its guidance without unreasonable effort because it is not
possible to predict certain of our adjustment items with a
reasonable degree of certainty. This information is dependent upon
future events and may be outside of our control and its
unavailability could have a significant impact on GAAP financial
results.
This press release contains certain statements that
constitute "forward-looking statements" about Kroger's financial
position and the future performance of the company. These
statements are based on management's assumptions and beliefs in
light of the information currently available to it. Such statements
are indicated by words or phrases such as "achieve," "committed,"
"confident," "continue," "deliver," "enables," "expect," "future,"
"guidance," "model," "outlook," "strategy," "target," "trends,"
"well-positioned," "will," and variations of such words and similar
phrases. Various uncertainties and other factors could cause actual
results to differ materially from those contained in the
forward-looking statements. These include the specific risk factors
identified in "Risk Factors" in our annual report on Form 10-K for
our last fiscal year and any subsequent filings, as well as the
following:
Kroger's ability to achieve sales, earnings, incremental
FIFO operating profit, and adjusted free cash flow goals may be
affected by: our proposed transaction with Albertsons, including,
among other things, our ability to consummate the proposed
transaction and related divestiture plan, including on the terms of
the merger agreement and divestiture plan, on the anticipated
timeline, with the required regulatory approvals, and/or resolution
of pending litigation challenging the merger; labor negotiations;
potential work stoppages; changes in the unemployment rate;
pressures in the labor market; changes in government-funded benefit
programs; changes in the types and numbers of businesses that
compete with Kroger; pricing and promotional activities of existing
and new competitors, and the aggressiveness of that competition;
Kroger's response to these actions; the state of the
economy, including interest rates, the inflationary,
disinflationary and/or deflationary trends and such trends in
certain commodities, products and/or operating costs;
the geopolitical environment including wars and conflicts; unstable
political situations and social unrest; changes in tariffs; the
effect that fuel costs have on consumer spending; volatility of
fuel margins; manufacturing commodity costs; supply constraints;
diesel fuel costs related to Kroger's logistics operations; trends
in consumer spending; the extent to which Kroger's customers
exercise caution in their purchasing in response to economic
conditions; the uncertainty of economic growth or recession; stock
repurchases; changes in the regulatory environment in which Kroger
operates; Kroger's ability to retain pharmacy sales from third
party payors; consolidation in the healthcare industry, including
pharmacy benefit managers; Kroger's ability to negotiate
modifications to multi-employer pension plans; natural disasters or
adverse weather conditions; the effect of public health crises or
other significant catastrophic events; the potential costs and
risks associated with potential cyber-attacks or data security
breaches; the success of Kroger's future growth plans; the ability
to execute our growth strategy and value creation model, including
continued cost savings, growth of our alternative profit
businesses, and our ability to better serve our customers and to
generate customer loyalty and sustainable growth through our
strategic pillars of fresh, our brands, personalization, and
seamless; and the successful integration of merged companies and
new partnerships; and the risks relating to or arising from our
proposed nationwide opioid litigation settlement, including our
ability to finalize and effectuate the settlement, the scope and
coverage of the ultimate settlement and the expected financial or
other impacts that could result from the settlement. Our ability to
achieve these goals may also be affected by our ability to manage
the factors identified above. Our ability to execute our financial
strategy may be affected by our ability to generate cash
flow.
Kroger's adjusted effective tax rate may differ from the
expected rate due to changes in tax laws and policies, the status
of pending items with various taxing authorities, and the
deductibility of certain expenses.
Kroger assumes no obligation to update the information
contained herein unless required by applicable law. Please refer to
Kroger's reports and filings with the Securities and Exchange
Commission for a further discussion of these risks and
uncertainties.
Note: Kroger's quarterly conference call with investors
will broadcast live at 10 a.m. (ET)
on September 12, 2024
at ir.kroger.com. An
on-demand replay of the webcast will be available at approximately
1 p.m. (ET) on Thursday, September 12,
2024.
2nd Quarter 2024 Tables
Include:
- Consolidated Statements of Operations
- Consolidated Balance Sheets
- Consolidated Statements of Cash Flows
- Supplemental Sales Information
- Reconciliation of Net Total Debt and Net Earnings
Attributable to The Kroger Co. to Adjusted EBITDA
- Net Earnings Per Diluted Share Excluding the Adjustment
Items
- Operating Profit Excluding the Adjustment
Items
Table
1.
|
THE KROGER
CO.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in millions, except
per share amounts)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SECOND
QUARTER
|
|
YEAR-TO-DATE
|
|
|
|
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SALES
|
|
|
$
33,912
|
|
100.0 %
|
|
$
33,853
|
|
100.0 %
|
|
$
79,181
|
|
100.0 %
|
|
$ 79,018
|
|
100.0 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MERCHANDISE COSTS,
INCLUDING ADVERTISING,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WAREHOUSING AND
TRANSPORTATION (a),
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AND LIFO CHARGE
(b)
|
|
26,261
|
|
77.4
|
|
26,475
|
|
78.2
|
|
61,385
|
|
77.5
|
|
61,555
|
|
77.9
|
|
OPERATING, GENERAL AND
ADMINISTRATIVE (a)
|
|
5,886
|
|
17.4
|
|
6,935
|
|
20.5
|
|
13,490
|
|
17.0
|
|
14,328
|
|
18.1
|
|
RENT
|
|
|
199
|
|
0.6
|
|
206
|
|
0.6
|
|
469
|
|
0.6
|
|
470
|
|
0.6
|
|
DEPRECIATION AND
AMORTIZATION
|
|
751
|
|
2.2
|
|
716
|
|
2.1
|
|
1,728
|
|
2.2
|
|
1,674
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING PROFIT
(LOSS)
|
|
815
|
|
2.4
|
|
(479)
|
|
(1.4)
|
|
2,109
|
|
2.7
|
|
991
|
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST
EXPENSE
|
|
(84)
|
|
(0.2)
|
|
(93)
|
|
(0.3)
|
|
(207)
|
|
(0.3)
|
|
(247)
|
|
(0.3)
|
|
NON-SERVICE COMPONENT
OF COMPANY-SPONSORED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PENSION PLAN
BENEFITS
|
|
3
|
|
-
|
|
8
|
|
-
|
|
6
|
|
-
|
|
17
|
|
-
|
|
(LOSS) GAIN ON
INVESTMENTS
|
|
(121)
|
|
(0.4)
|
|
367
|
|
1.1
|
|
(105)
|
|
(0.1)
|
|
290
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS (LOSS)
BEFORE INCOME TAX EXPENSE
|
|
613
|
|
1.8
|
|
(197)
|
|
(0.6)
|
|
1,803
|
|
2.3
|
|
1,051
|
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE
(BENEFIT)
|
|
148
|
|
0.4
|
|
(18)
|
|
(0.1)
|
|
382
|
|
0.5
|
|
268
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS (LOSS)
INCLUDING NONCONTROLLING INTERESTS
|
|
465
|
|
1.4
|
|
(179)
|
|
(0.5)
|
|
1,421
|
|
1.8
|
|
783
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
ATTRIBUTABLE TO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCONTROLLING
INTERESTS
|
|
(1)
|
|
-
|
|
1
|
|
-
|
|
8
|
|
-
|
|
1
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS (LOSS)
ATTRIBUTABLE TO THE KROGER CO.
|
|
$
466
|
|
1.4 %
|
|
$
(180)
|
|
(0.5 %)
|
|
$ 1,413
|
|
1.8 %
|
|
$
782
|
|
1.0 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS (LOSS)
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER BASIC COMMON
SHARE
|
|
$
0.64
|
|
|
|
$ (0.25)
|
|
|
|
$
1.94
|
|
|
|
$
1.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE NUMBER OF
COMMON SHARES USED IN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
CALCULATION
|
|
723
|
|
|
|
719
|
|
|
|
722
|
|
|
|
718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS (LOSS)
ATTRIBUTABLE TO THE KROGER CO.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER DILUTED COMMON
SHARE
|
|
$
0.64
|
|
|
|
$ (0.25)
|
|
|
|
$
1.93
|
|
|
|
$
1.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE NUMBER OF
COMMON SHARES USED IN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED
CALCULATION
|
|
727
|
|
|
|
719
|
|
|
|
728
|
|
|
|
725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIVIDENDS DECLARED PER
COMMON SHARE
|
|
$
0.32
|
|
|
|
$
0.29
|
|
|
|
$
0.61
|
|
|
|
$
0.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
Certain percentages may
not sum due to rounding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
The Company defines
First-In First-Out (FIFO) gross profit as sales minus merchandise
costs, including advertising, warehousing and
transportation, but
excluding the Last-In First-Out (LIFO) charge.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company defines
FIFO gross margin as FIFO gross profit divided by sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company defines
FIFO operating profit as operating profit excluding the LIFO
charge.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company defines
FIFO operating margin as FIFO operating profit divided by
sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The above FIFO
financial metrics are important measures used by management to
evaluate operational effectiveness. Management
believes
these FIFO financial
metrics are useful to investors and analysts because they measure
our day-to-day operational effectiveness.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Merchandise costs
("COGS") and operating, general and administrative expenses
("OG&A") exclude depreciation and amortization expense
and
rent expense which are
included in separate expense lines.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
LIFO charges of $21 and
$4 were recorded in the second quarters of 2024 and 2023,
respectively. For the year-to-date period, LIFO charges
of
$62 and $102 were
recorded for 2024 and 2023, respectively.
|
|
|
|
|
|
|
|
|
Table
2.
|
THE KROGER
CO.
|
CONSOLIDATED BALANCE
SHEETS
|
(in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 17,
|
|
August 12,
|
|
|
|
|
|
|
|
|
2024
|
|
2023
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
Cash
|
|
$
233
|
|
$
263
|
|
|
|
Temporary cash
investments
|
|
2,553
|
|
2,157
|
|
|
|
Store deposits
in-transit
|
|
1,091
|
|
1,141
|
|
|
|
Receivables
|
|
2,149
|
|
1,820
|
|
|
|
Inventories
|
|
6,643
|
|
6,828
|
|
|
|
Assets held for
sale
|
|
589
|
|
-
|
|
|
|
Prepaid and other
current assets
|
|
805
|
|
642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
14,063
|
|
12,851
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
25,708
|
|
24,894
|
Operating lease
assets
|
|
6,786
|
|
6,697
|
Intangibles,
net
|
|
866
|
|
885
|
Goodwill
|
|
2,673
|
|
2,916
|
Other assets
|
|
1,347
|
|
1,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
51,443
|
|
$
50,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREOWNERS' EQUITY
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
Current portion of
long-term debt including obligations
|
|
|
|
|
|
|
|
|
|
|
under finance
leases
|
|
$
196
|
|
$
716
|
|
|
|
Current portion of
operating lease liabilities
|
|
666
|
|
669
|
|
|
|
Accounts
payable
|
|
10,344
|
|
10,400
|
|
|
|
Accrued salaries and
wages
|
|
1,261
|
|
1,182
|
|
|
|
Liabilities held for
sale
|
|
192
|
|
-
|
|
|
|
Other current
liabilities
|
|
3,473
|
|
3,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
16,132
|
|
16,537
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
including obligations under finance leases
|
|
12,034
|
|
12,075
|
Noncurrent operating
lease liabilities
|
|
6,485
|
|
6,369
|
Deferred income
taxes
|
|
1,531
|
|
1,452
|
Pension and
postretirement benefit obligations
|
|
377
|
|
419
|
Other long-term
liabilities
|
|
2,372
|
|
2,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
38,931
|
|
39,598
|
|
|
|
|
|
|
|
|
|
|
|
Shareowners'
equity
|
|
12,512
|
|
10,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Shareowners' Equity
|
|
$
51,443
|
|
$
50,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total common shares
outstanding at end of period
|
|
723
|
|
719
|
Total diluted shares
year-to-date
|
|
728
|
|
725
|
|
|
|
|
|
|
Note:
|
The Company
reclassified $2.8 billion of liabilities from other current
liabilities to accounts payable on the
Consolidated Balance
Sheet for the quarter ended August 12, 2023 to conform to the
current year
presentation. This
reclassification was made to the Consolidated Balance Sheet to more
accurately present
these current
liabilities. A similar reclassification was made to the
Consolidated Statement of Cash Flows
resulting in a change
to accounts payable and accrued expenses within net cash provided
by operating
activities for the
quarter ended August 12, 2023.
|
|
|
|
|
|
|
Table
3.
|
THE KROGER
CO.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEAR-TO-DATE
|
|
|
|
|
|
|
|
|
2024
|
|
2023
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net earnings including
noncontrolling interests
|
|
|
$
1,421
|
|
$
783
|
|
Adjustments to
reconcile net earnings including noncontrolling
|
|
|
|
|
|
|
|
interests to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
1,728
|
|
1,674
|
|
|
|
Operating lease asset
amortization
|
|
|
327
|
|
330
|
|
|
|
LIFO charge
|
|
|
62
|
|
102
|
|
|
|
Stock-based employee
compensation
|
|
|
89
|
|
92
|
|
|
|
Deferred income
taxes
|
|
|
(31)
|
|
(278)
|
|
|
|
Gain on the sale of
assets
|
|
|
(9)
|
|
(43)
|
|
|
|
(Gain) loss on
investments
|
|
|
105
|
|
(290)
|
|
|
|
Other
|
|
|
41
|
|
78
|
|
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Store deposits
in-transit
|
|
|
124
|
|
(14)
|
|
|
|
|
|
Receivables
|
|
|
(256)
|
|
227
|
|
|
|
|
|
Inventories
|
|
|
271
|
|
630
|
|
|
|
|
|
Prepaid and other
current assets
|
|
|
(202)
|
|
68
|
|
|
|
|
|
Accounts
payable
|
|
|
176
|
|
403
|
|
|
|
|
|
Accrued
expenses
|
|
|
(74)
|
|
(359)
|
|
|
|
|
|
Income taxes receivable
and payable
|
|
|
95
|
|
252
|
|
|
|
|
|
Operating lease
liabilities
|
|
|
(296)
|
|
(378)
|
|
|
|
|
|
Other
|
|
|
(107)
|
|
1,087
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
|
|
3,464
|
|
4,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
Payments for property
and equipment, including payments for lease buyouts
|
|
(2,179)
|
|
(1,954)
|
|
Proceeds from sale of
assets
|
|
|
309
|
|
89
|
|
Other
|
|
|
|
|
(35)
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by
investing activities
|
|
|
(1,905)
|
|
(1,795)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Payments on long-term
debt including obligations under finance leases
|
|
(99)
|
|
(708)
|
|
Dividends
paid
|
|
|
(420)
|
|
(376)
|
|
Proceeds from issuance
of capital stock
|
|
|
93
|
|
36
|
|
Treasury stock
purchases
|
|
|
(116)
|
|
(47)
|
|
Other
|
|
|
|
|
(100)
|
|
(69)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by
financing activities
|
|
|
(642)
|
|
(1,164)
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH
AND TEMPORARY
|
|
|
|
|
|
|
CASH
INVESTMENTS
|
|
|
917
|
|
1,405
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND TEMPORARY CASH
INVESTMENTS:
|
|
|
|
|
|
|
BEGINNING OF
YEAR
|
|
|
1,883
|
|
1,015
|
|
END OF
PERIOD
|
|
|
$
2,800
|
|
$
2,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
capital investments:
|
|
|
|
|
|
|
Payments for property
and equipment, including payments for lease buyouts
|
|
$
(2,179)
|
|
$
(1,954)
|
|
Payments for lease
buyouts
|
|
|
46
|
|
-
|
|
Changes in
construction-in-progress payables
|
|
|
57
|
|
183
|
|
|
Total capital
investments, excluding lease buyouts
|
|
|
$
(2,076)
|
|
$
(1,771)
|
|
|
|
|
|
|
|
|
|
|
|
Disclosure of cash flow
information:
|
|
|
|
|
|
|
|
Cash paid during the
year for interest
|
|
|
$
192
|
|
$
308
|
|
|
Cash paid during the
year for income taxes
|
|
|
$
197
|
|
$
290
|
|
|
|
|
|
|
|
|
|
|
|
Table 4.
Supplemental Sales Information
|
(in millions, except
percentages)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Items identified below
should not be considered as alternatives to sales or any other GAAP
measure of performance. Identical sales is an
industry-specific
measure, and it is important to review it in conjunction
with Kroger's financial results reported in accordance with
GAAP. Other
companies in our
industry may calculate identical sales differently than Kroger
does, limiting the comparability of the measure.
|
|
|
|
|
|
|
|
|
|
|
|
IDENTICAL SALES (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SECOND
QUARTER
|
|
YEAR-TO-DATE
|
|
|
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXCLUDING
FUEL
|
|
$
|
29,224
|
|
$
|
28,875
|
|
$
|
68,125
|
|
$
|
67,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXCLUDING
FUEL
|
|
1.2 %
|
|
1.0 %
|
|
0.8 %
|
|
2.4 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Kroger defines
identical sales, excluding fuel, as sales to retail customers,
including sales from all departments at identical
supermarket
locations, Kroger
Specialty Pharmacy businesses, jewelry and ship-to-home
solutions. Kroger defines a supermarket as identical when
it
has been in operation
without expansion or relocation for five full quarters.
Kroger defines Kroger Specialty Pharmacy businesses as
identical when physical
locations have been in operation continuously for five full
quarters and discontinued patient therapies are excluded
from the identical
sales calculation starting in the quarter of transfer or
termination. We include Kroger Delivery sales powered by
Ocado
as identical if the
delivery occurs in an existing Kroger Supermarket geography or when
the location has been in operation for five full
quarters. Starting in
the first quarter of 2024, Kroger Specialty Pharmacy
businesses were not included in identical sales due to
being
classified as held for
sale, while they were included in identical sales in the second
quarter and year-to-date periods of 2023.
|
Table 5.
Reconciliation of Net Total Debt and
|
Net Earnings
Attributable to The Kroger Co. to Adjusted EBITDA
|
(in millions, except
for ratio)
|
(unaudited)
|
|
|
|
|
|
|
|
The items identified
below should not be considered an alternative to any GAAP measure
of performance or access to liquidity. Net total debt
to
adjusted EBITDA is an
important measure used by management to evaluate the Company's
access to liquidity. The items below should be reviewed
in
conjunction
with Kroger's financial results reported in accordance with
GAAP.
|
|
|
|
|
|
|
|
The following table
provides a reconciliation of net total debt.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 17,
|
|
August 12,
|
|
|
|
|
2024
|
|
2023
|
|
Change
|
|
|
|
|
|
|
|
Current portion of
long-term debt including obligations
|
|
|
|
|
|
|
under
finance leases
|
|
$
196
|
|
$
716
|
|
$
(520)
|
Long-term debt
including obligations under finance leases
|
|
12,034
|
|
12,075
|
|
(41)
|
|
|
|
|
|
|
|
Total debt
|
|
12,230
|
|
12,791
|
|
(561)
|
|
|
|
|
|
|
|
Less: Temporary cash
investments
|
|
2,553
|
|
2,157
|
|
396
|
|
|
|
|
|
|
|
Net total debt
|
|
$
9,677
|
|
$
10,634
|
|
$
(957)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table
provides a reconciliation from net earnings attributable to The
Kroger Co. to adjusted EBITDA, as defined in the Company's
credit
agreement, on a rolling
four quarter 52-week basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROLLING FOUR QUARTERS
ENDED
|
|
|
|
|
August 17,
|
|
August 12,
|
|
|
|
|
2024
|
|
2023
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to The Kroger Co.
|
|
$
2,795
|
|
$
1,632
|
|
|
LIFO charge
|
|
73
|
|
488
|
|
|
Depreciation and
amortization
|
|
3,179
|
|
3,065
|
|
|
Interest
expense
|
|
401
|
|
479
|
|
|
Income tax
expense
|
|
781
|
|
565
|
|
|
Adjustment for pension
plan withdrawal liabilities
|
|
-
|
|
25
|
|
|
Adjustment for loss on
investments
|
|
244
|
|
9
|
|
|
Adjustment for Home
Chef contingent consideration
|
|
-
|
|
2
|
|
|
Adjustment for merger
related costs (a)
|
|
544
|
|
139
|
|
|
Adjustment for opioid
settlement charges (b)
|
|
-
|
|
1,560
|
|
|
Adjustment for goodwill
and fixed asset impairment charges related to
Vitacost.com
|
|
-
|
|
164
|
|
|
53rd week EBITDA
adjustment
|
|
(187)
|
|
-
|
|
|
Other
|
|
(10)
|
|
(9)
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
$
7,820
|
|
$
8,119
|
|
|
|
|
|
|
|
|
|
Net total debt to
adjusted EBITDA ratio on a 52-week basis
|
|
1.24
|
|
1.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Merger related
costs primarily include third party professional fees and credit
facility fees associated with the proposed merger
with Albertsons Companies, Inc.
|
|
|
|
|
|
|
|
|
|
(b) Opioid settlement
charges include settlements with the nationwide opioid settlement
framework and the States of West Virginia
and New Mexico.
|
|
|
Table 6. Net
Earnings Per Diluted Share Excluding the Adjustment
Items
|
(in millions, except
per share amounts)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The purpose of this
table is to better illustrate comparable operating results from our
ongoing business, after removing the effects on net earnings (loss)
per diluted common share for certain items
described below.
Adjusted net earnings and adjusted net earnings per diluted share
are useful metrics to investors and analysts because they present
more accurately year-over-year
comparisons for net
earnings (loss) and net earnings (loss) per diluted share because
adjusted items are not the result of normal operations. Items
identified in this table should not be considered
alternatives to net
earnings (loss) attributable to The Kroger Co. or any other
GAAP measure of performance. These items should not be reviewed in
isolation or considered substitutes for the
Company's financial
results as reported in accordance with GAAP. Due to the
nature of these items, as further described below, it is important
to identify these items and to review them in
conjunction with the
Company's financial results reported in accordance with
GAAP.
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
The following table
summarizes items that affected the Company's financial results
during the periods presented.
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|
|
|
|
|
|
|
|
|
|
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|
SECOND
QUARTER
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|
YEAR-TO-DATE
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|
|
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2024
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2023
|
|
2024
|
|
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
attributable to The Kroger Co.
|
|
$
|
466
|
|
$
|
(180)
|
|
$
|
1,413
|
|
$
|
782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment for loss
(gain) on investments (a)(b)
|
|
|
92
|
|
|
(282)
|
|
|
80
|
|
|
(223)
|
|
Adjustment for merger
related costs (a)(c)
|
|
|
123
|
|
|
47
|
|
|
266
|
|
|
81
|
|
Adjustment for opioid
settlement charges (a)(d)
|
|
|
-
|
|
|
1,114
|
|
|
-
|
|
|
1,163
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Held for sale income
tax adjustment
|
|
|
-
|
|
|
-
|
|
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(31)
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|
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-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2024 and 2023
Adjustment Items
|
|
|
215
|
|
|
879
|
|
|
315
|
|
|
1,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to The Kroger Co.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
excluding the
adjustment items above
|
|
$
|
681
|
|
$
|
699
|
|
$
|
1,728
|
|
$
|
1,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
attributable to The Kroger Co.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
per diluted common
share
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|
$
|
0.64
|
|
$
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(0.25)
|
|
$
|
1.93
|
|
$
|
1.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment for loss
(gain) on investments (e)
|
|
|
0.12
|
|
|
(0.39)
|
|
|
0.10
|
|
|
(0.31)
|
|
Adjustment for merger
related costs (e)
|
|
|
0.17
|
|
|
0.06
|
|
|
0.37
|
|
|
0.11
|
|
Adjustment for opioid
settlement charges (e)
|
|
|
-
|
|
|
1.54
|
|
|
-
|
|
|
1.60
|
|
Held for sale income
tax adjustment (e)
|
|
|
-
|
|
|
-
|
|
|
(0.04)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2024 and 2023
Adjustment Items
|
|
|
0.29
|
|
|
1.21
|
|
|
0.43
|
|
|
1.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to The Kroger Co. per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted common share
excluding the adjustment items above
|
|
$
|
0.93
|
|
$
|
0.96
|
|
$
|
2.36
|
|
$
|
2.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of
common shares used in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted
calculation
|
|
|
727
|
|
|
725
|
|
|
728
|
|
|
725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 6. Net
Earnings Per Diluted Share Excluding the Adjustment Items
(continued)
|
(in millions, except
per share amounts)
|
(unaudited)
|
|
|
|
|
(a)
|
The amounts presented
represent the after-tax effect of each adjustment.
|
|
|
(b)
|
The pre-tax adjustments
for loss (gain) on investments were $121 and ($367) in the second
quarters of 2024 and 2023, respectively. The year-to-date pre-tax
adjustments for loss (gain) on
investments were $105 and ($290) in the first two quarters of 2024
and 2023, respectively.
|
|
|
(c)
|
The pre-tax adjustments
to OG&A expenses for merger-related costs were $148 and $54 in
the second quarters of 2024 and 2023, respectively. The
year-to-date pre-tax adjustments to OG&A
expenses for
merger-related costs were $323 and $94 in 2024 and 2023,
respectively.
|
|
|
(d)
|
The pre-tax adjustment
to OG&A expenses for opioid settlement charges was $1,413 in
the second quarter of 2023. The year-to-date pre-tax adjustments to
OG&A expenses for opioid
settlement charges was
$1,475 in the first two quarters of 2023.
|
|
|
(e)
|
The amounts presented
represent the net earnings (loss) per diluted common share effect
of each adjustment.
|
|
|
Note:
|
2024 Second Quarter
Adjustment Items include adjustments for the loss on investments
and merger related costs.
|
|
|
|
2024 Adjustment Items
include the Second Quarter Ajustment Items plus the adjustments
that occurred in the first quarter of 2024 for gain on investments,
merger related costs and held for
sale income
tax.
|
|
|
|
2023 Second Quarter
Adjustment Items include adjustments for the gain on investments,
merger related costs and opioid settlement
charges.
|
|
|
|
2023 Adjustment Items
include the Second Quarter Ajustment Items plus the adjustments
that occurred in the first quarter of 2023 for loss on investments,
merger related costs and opioid
settlement
charges.
|
Table 7. Operating
Profit Excluding the Adjustment Items
|
(in
millions)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The purpose of this
table is to better illustrate comparable operating results from our
ongoing business, after removing the effects on operating profit
(loss) for certain
items described
below. Adjusted FIFO operating profit is a useful metric to
investors and analysts because it presents more accurately
year-over-year comparisons
for operating profit
(loss) because adjusted items are not the result of normal
operations. Items identified in this table should not be
considered alternatives to operating
profit (loss) or any
other GAAP measure of performance. These items should not be
reviewed in isolation or considered substitutes for the Company's
financial
results as reported in
accordance with GAAP. Due to the nature of these items, as
further described below, it is important to identify these items
and to review
them in conjunction
with the Company's financial results reported in accordance with
GAAP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table
summarizes items that affected the Company's financial results
during the periods presented.
|
|
|
|
|
|
|
SECOND
QUARTER
|
|
YEAR-TO-DATE
|
|
|
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
(loss)
|
|
$
|
815
|
|
$
|
(479)
|
|
$
|
2,109
|
|
$
|
991
|
|
LIFO charge
|
|
|
21
|
|
|
4
|
|
|
62
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIFO Operating profit
(loss)
|
|
|
836
|
|
|
(475)
|
|
|
2,171
|
|
|
1,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment for merger
related costs (a)
|
|
|
148
|
|
|
54
|
|
|
323
|
|
|
94
|
|
Adjustment for opioid
settlement charges (b)
|
|
|
-
|
|
|
1,413
|
|
|
-
|
|
|
1,475
|
|
Other
|
|
|
-
|
|
|
(3)
|
|
|
(11)
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2024 and 2023
Adjustment items
|
|
|
148
|
|
|
1,464
|
|
|
312
|
|
|
1,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted FIFO operating
profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
excluding the
adjustment items above
|
|
$
|
984
|
|
$
|
989
|
|
$
|
2,483
|
|
$
|
2,658
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Merger related costs
primarily include third party professional fees and credit facility
fees associated with the proposed merger with Albertsons Companies,
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
Opioid settlement
charges include settlements with the nationwide opioid settlement
framework and the State of West Virginia.
|
View original content to download
multimedia:https://www.prnewswire.com/news-releases/kroger-reports-second-quarter-2024-results-and-updates-full-year-identical-sales-without-fuel-guidance-302246497.html
SOURCE The Kroger Co.