Exhibit 99.1
Kroger
Reports Second Quarter 2024 Results and
Updates
Full-Year Identical Sales Without Fuel Guidance
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 $0.93 |
| · | Achieved
strong Adjusted Free Cash Flow |
| · | Executed
its go-to-market strategy to deliver value for customers |
| o | Increased
total households, customer visits and loyal households |
CINCINNATI,
September 12, 2024 – The Kroger Co. (NYSE: KR) today reported its second quarter 2024 results, reaffirmed guidance and
updated investors on how Leading with Fresh and Accelerating with Digital continues to position Kroger for long-term sustainable
growth.
Comments from Chairman and CEO Rodney
McMullen
“Kroger achieved solid results
in the second quarter demonstrating the strength and resiliency of our model.
We are growing households and increasing
customer visits by offering a compelling combination of affordable prices and personalized promotions on great quality products, all
through a unique seamless experience. We appreciate our associates for their focus on full, fresh and friendly, which elevates the customer
experience.
Our
long-term model is to consistently invest to lower prices so more customers shop with us, which in turn fuels our alternative profit
businesses and drives greater efficiencies. This
flywheel enables Kroger to deliver exceptional value for customers and investing in our associates, and by doing so, we are well-positioned
to generate attractive and sustainable returns for shareholders.”
Comments from Chairman and CEO Rodney
McMullen on the pending merger with Albertsons
“As we near the close of the FTC’s
preliminary injunction hearing, we are confident in the facts and the strength of our position. The food industry has always been competitive
and will continue to be after this merger. We are committed to closing this merger because bringing Kroger and Albertsons together will
provide meaningful and measurable benefits – lower prices, secure jobs and expanded access to fresh, affordable food – for
customers, associates, and communities across the country.”
Second Quarter Financial Results
| |
2Q24
($ 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:
| 1. | Consolidated
Statements of Operations |
| 2. | Consolidated
Balance Sheets |
| 3. | Consolidated
Statements of Cash Flows |
| 4. | Supplemental
Sales Information |
| 5. | Reconciliation
of Net Total Debt and Net Earnings Attributable to The Kroger Co. to Adjusted EBITDA |
| 6. | Net
Earnings Per Diluted Share Excluding the Adjustment Items |
| 7. | Operating
Profit Excluding the Adjustment Items |
--30--
Contacts: Media: Erin Rolfes (513) 762-1080;
Investors: Rob Quast (513) 762-4969
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.
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 | |
| 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 | |
| Held for sale income tax adjustment | |
| - | | |
| - | | |
| (31 | ) | |
| - | |
| | |
| | | |
| | | |
| | | |
| | |
| 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 | |
$ | 0.64 | | |
$ | (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. |
