UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,D.C. 20549
FORM
CURRENT REPORT
Pursuantto Section13 or 15(d)of the Securities Exchange Act of 1934
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Check the appropriate box below if the Form8-K filingis intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Indicate by check mark whether the registrant is an emerginggrowth company as defined in Rule405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule12b-2 ofthe Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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| Item 2.02 | Results of Operations and Financial Condition. |
On June20, 2024, The Kroger Co. (NYSE:KR) issued a press releaseannouncing its first quarter 2024 results. Attached hereto as Exhibit99.1, and furnished herewith, is a copy of that release.
| Item 9.01 | Financial Statements and Exhibits. |
(d)Exhibits.
| ExhibitNo. | Description | |
| 99.1 | Press Release dated June20, 2024 | |
| 104 | Cover PageInteractive Data File (embedded within the Inline XBRL document). |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| The Kroger Co. | ||
| June20, 2024 | By: | /s/ Christine S. Wheatley |
| Christine S. Wheatley | ||
| Senior Vice President, General Counsel and Secretary | ||
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Exhibit 99.1
Kroger Reports FirstQuarter 2024 Results and
Reaffirms Guidance
First Quarter Highlights
| · | Identical Sales without fuel increased 0.5% |
| · | Operating Profit of $1,294 million; EPS of $1.29 |
| · | Adjusted FIFO Operating Profit of $1,499 million and Adjusted EPS of $1.43 |
| · | Executed its go-to-market strategy to deliver value for customers |
| o | Grew digital sales more than 8%, with Delivery and Pickup combining for double-digit growth |
| o | Increased total households, loyal households and customer visits |
CINCINNATI, June20, 2024 –TheKroger Co. (NYSE: KR) today reported its first quarter 2024 results, reaffirmed guidance and updated investors on how Leading withFresh and Accelerating with Digital continues to position Kroger for long-term sustainable growth.
Comments from Chairman and CEO Rodney McMullen
“Kroger is off to a solid start in 2024 led by better-than-expectedperformance of our grocery business.
Kroger is delivering exceptional value at a time when many customersneed it more than ever, by providing affordable prices with personalized promotions. We appreciate our associates who are elevating thecustomer experience and improving store execution. Together, this is growing households and increasing customer visits.
The long-term investments we have made to strengthen and diversifyour model enables us to manage economic cycles and gives us the confidence to deliver on our full year outlook. By delivering value forcustomers and investing in our associates, Kroger remains well-positioned to generate attractive and sustainable returns for our shareholders.”
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First Quarter Financial Results
| 1Q24 ($ in millions; except EPS) | 1Q23 ($ in millions; except EPS) | |
| ID Sales* (Table 4) | 0.5% | 3.5% |
| Earnings Per Share | $1.29 | $1.32 |
| Adjusted EPS (Table 6) | $1.43 | $1.51 |
| Operating Profit | $1,294 | $1,470 |
| Adjusted FIFO Operating Profit (Table 7) | $1,499 | $1,669 |
| FIFO Gross Margin Rate* | Decreased 7 basis points | |
| OG&A Rate* | Increased 22 basis points | |
* Without fuel and adjustment items, if applicable.
Total company sales were $45.3 billion in the first quarter comparedto $45.2 billion for the same period last year. Excluding fuel, sales increased 0.6% compared to the same period last year.
Gross margin was 22.4% of sales for the first quarter. The FIFO grossmargin rate, excluding fuel, decreased 7 basis points compared to the same period last year. The decrease in rate was primarily attributableto lower pharmacy margins and increased price investments, partially offset by favorable product mix reflecting Our Brands marginperformance.
The LIFO charge for the quarter was $41 million, compared to a LIFOcharge of $99 million for the same period last year. The decreased charge for the quarter was due to lower inflation expectations forthe current year compared to last year.
The Operating, General& Administrative rate increased 22basis points, excluding fuel and adjustment items, compared to the same period last year. This increase in rate was driven by plannedinvestments in associate wages and increased incentive plan costs, partially offset by continued execution of cost savings initiatives.
Capital Allocation Strategy
Kroger expects to continue to generate strongfree cash flow and remains committed to investing in the business to drive long-term sustainable net earnings growth, as well as maintainingits current investment grade debt rating. The Company expects to continue to pay its quarterly dividend and expects this to increase overtime, subject to board approval. Kroger has paused its share repurchase program to prioritize de-leveraging following the proposed mergerwith Albertsons.
Kroger’s net total debt to adjustedEBITDA ratio is 1.25 compared to 1.34 a year ago (Table 5). The company’s net total debt to adjusted EBITDA ratio target range is2.30 to 2.50. Kroger’s strong balance sheet provides ample opportunities for the Company to pursue growth and enhance shareholdervalue.
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Full-Year 2024 Guidance*
Reaffirmed
| · | Identical Sales without fuel of 0.25% – 1.75% |
| · | 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** |
| · | Capital expenditures of $3.4 – $3.6 billion |
| · | Adjusted effective tax rate of 23%*** |
* Without adjusted items, if applicable. Kroger is unable to providea full reconciliation of the GAAP and non-GAAP measures used in 2024 guidance without unreasonable effort because it is not possibleto predict certain of our adjustment items with a reasonable degree of certainty. This information is dependent upon future events andmay 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 therestructuring of multi-employer pension plans, payments related to opioid settlements and merger-related expenses.
*** The adjusted tax rate reflects typical tax adjustments and doesnot reflect changes to the rate from the completion of income tax audit examinations and changes in tax laws, which cannot be predicted.
First Quarter 2024 Highlights
Leading with Fresh
| · | Introduced 346 new Our Brands items |
| · | Achieved a new record for quarterly floral salesled by strong Valentine’s Day and Mother’s Day sales |
| · | Launched a new brand, Field& Vine, whichoffers high quality and regionally grown berries |
Accelerating with Digital
| · | Increased delivery sales by 17% over last year led by Customer FulfillmentCenters |
| · | Increased digitally engaged households by 9% compared to last year |
| · | Expanded new Kroger Precision Marketing advertising capabilities on Meta’splatforms |
| · | Achieved a new record for quarterly pickup fill rate |
Associate Experience
| · | Awardedthe 2024 Platinum Bell Seal for Workplace Mental Health by Mental Health America | |
| · | Recognized as one of the All-Time Top Corporations for Women Business Enterprisesby the WBENC | |
| · | Namedas a Best Workplace for Diverse Professionals by Mogul |
Live Our Purpose
| · | Featured on the 2024 Axios Harris Poll 100, an annual ranking of the most visible and trusted companies in America |
| · | Sponsored the 2024 National STEM Festival through Kroger’s Zero Hunger | Zero Waste Foundation |
| · | Celebrated Earth Month with a contribution to the World Wildlife Fund and introduction of a new reusable bag campaign |
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About Kroger
AtTheKrogerCo. (NYSE: KR), we are dedicatedto our Purpose: to Feed the Human Spirit™. We are, across our family of companies nearly 420,000 associates who serve over elevenmillion customers daily through a seamless digital shopping experience and retail food stores under a variety ofbannernames, serving America through food inspiration and uplift, and creating #ZeroHungerZeroWaste communitiesby 2025. To learn more about us, visit ournewsroomandinvestorrelationssite.
Kroger's first quarter 2024 ended on May25,2024.
Note: Fuel sales have historically had a lowgross margin rate and operating expense rate as compared to corresponding rates on non-fuel sales. As a result, Kroger discusses the changesin these rates excluding the effect of fuel.
Please refer to the supplemental informationpresented in the tables for reconciliations of the non-GAAP financial measures used in this press release to the most comparable GAAPfinancial measure and related disclosure. As noted above, Kroger is unable to provide a full reconciliation of the GAAP and non-GAAP measuresused in its guidance without unreasonable effort because it is not possible to predict certain of our adjustment items with a reasonabledegree of certainty. This information is dependent upon future events and may be outside of our control and its unavailability could havea significant impact on GAAP financial results.
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This press release contains certain statements that constitute “forward-lookingstatements” about Kroger’s financial position and the future performance of the company. These statements are based on management’sassumptions and beliefs in light of the information currently available to it. Such statements are indicated by words or phrases suchas “achieve,” “committed,” “confidence,” “continue,” “deliver,” “expect,” “future,” “guidance,” “model,” “outlook,” “strategy,” “target,” “trends,” “well-positioned,” and variations of such words and similar phrases. Various uncertainties and otherfactors could cause actual results to differ materially from those contained in the forward-looking statements. These include the specificrisk factors identified in “Risk Factors” in our annual report on Form10-K for our last fiscal year and any subsequentfilings, 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: the risks relating to or arising from our proposednationwide opioid litigation settlement, including our ability to finalize and effectuate the settlement, the scope and coverage of theultimate settlement and the expected financial or other impacts that could result from the settlement; our proposed transaction with Albertsons,including, among other things, our ability to consummate the proposed transaction and related divestiture plan, including on the termsof the merger agreement and divestiture plan, on the anticipated timeline, with the required regulatory approvals, and/or resolution ofpending litigation challenging the merger; labor negotiations; potential work stoppages; changes in the unemployment rate; pressures inthe 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 theseactions; the state of the economy, including interest rates, the inflationary, disinflationary and/or deflationary trends and such trendsin certain commodities, products and/or operating costs; the geopolitical environment including wars and conflicts; unstable politicalsituations and social unrest; changes in tariffs; the effect that fuel costs have on consumer spending; volatility of fuel margins; manufacturingcommodity costs; supply constraints; diesel fuel costs related to Kroger’s logistics operations; trends in consumer spending; theextent to which Kroger’s customers exercise caution in their purchasing in response to economic conditions; the uncertainty of economicgrowth or recession; stock repurchases; changes in the regulatory environment in which Kroger operates; Kroger’s ability to retainpharmacy sales from third party payors; consolidation in the healthcare industry, including pharmacy benefit managers; Kroger’sability to negotiate modifications to multi-employer pension plans; natural disasters or adverse weather conditions; the effect of publichealth crises or other significant catastrophic events; the potential costs and risks associated with potential cyber-attacks or datasecurity breaches; the success of Kroger's future growth plans; the ability to execute our growth strategy and value creation model, includingcontinued cost savings, growth of our alternative profit businesses, and our ability to better serve our customers and to generate customerloyalty and sustainable growth through our strategic pillars of fresh, our brands, personalization, and seamless; and the successful integrationof merged companies and new partnerships. Our ability to achieve these goals may also be affected by our ability to manage the factorsidentified above. Our ability to execute our financial strategy may be affected by our ability to generate cash flow.
Kroger’s adjusted effective tax ratemay differ from the expected rate due to changes in tax laws, the status of pending items with various taxing authorities, and the deductibilityof certain expenses.
Kroger assumes no obligation to update theinformation contained herein unless required by applicable law. Please refer to Kroger's reports and filings with the Securities and ExchangeCommission for a further discussion of these risks and uncertainties.
Note: Kroger's quarterly conference callwith investors will broadcast live at 10 a.m.(ET) on June20, 2024 atir.kroger.com. An on-demand replay of thewebcast will be available at approximately 1 p.m.(ET) on Thursday, June20, 2024.
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1st 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
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Table 1.
THE KROGER CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)
| FIRST QUARTER | ||||||||||||||||
| 2024 | 2023 | |||||||||||||||
| SALES | $ | 45,269 | 100.0 | % | $ | 45,165 | 100.0 | % | ||||||||
| OPERATING EXPENSES | ||||||||||||||||
| MERCHANDISE COSTS, INCLUDING ADVERTISING, WAREHOUSING AND TRANSPORTATION (a), AND LIFO CHARGE (b) | 35,124 | 77.6 | 35,080 | 77.7 | ||||||||||||
| OPERATING, GENERAL AND ADMINISTRATIVE (a) | 7,604 | 16.8 | 7,393 | 16.4 | ||||||||||||
| RENT | 269 | 0.6 | 265 | 0.6 | ||||||||||||
| DEPRECIATION AND AMORTIZATION | 978 | 2.1 | 957 | 2.1 | ||||||||||||
| OPERATING PROFIT | 1,294 | 2.9 | 1,470 | 3.3 | ||||||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| INTEREST EXPENSE | (123 | ) | (0.3 | ) | (153 | ) | (0.3 | ) | ||||||||
| NON-SERVICE COMPONENT OF COMPANY-SPONSORED PENSION PLAN BENEFITS | 4 | - | 9 | - | ||||||||||||
| GAIN (LOSS) ON INVESTMENTS | 16 | - | (78 | ) | (0.2 | ) | ||||||||||
| NET EARNINGS BEFORE INCOME TAX EXPENSE | 1,191 | 2.6 | 1,248 | 2.8 | ||||||||||||
| INCOME TAX EXPENSE | 235 | 0.5 | 286 | 0.6 | ||||||||||||
| NET EARNINGS INCLUDING NONCONTROLLING INTERESTS | 956 | 2.1 | 962 | 2.1 | ||||||||||||
| NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | 9 | - | - | - | ||||||||||||
| NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. | $ | 947 | 2.1 | % | $ | 962 | 2.1 | % | ||||||||
| NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER BASIC COMMON SHARE | $ | 1.30 | $ | 1.33 | ||||||||||||
| AVERAGE NUMBER OF COMMON SHARES USED IN BASIC CALCULATION | 721 | 717 | ||||||||||||||
| NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE | $ | 1.29 | $ | 1.32 | ||||||||||||
| AVERAGE NUMBER OF COMMON SHARES USED IN DILUTED CALCULATION | 727 | 724 | ||||||||||||||
| DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.29 | $ | 0.26 | ||||||||||||
| 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 $41 and $99 were recorded in the first quarters of 2024 and 2023, respectively. |
Table 2.
THE KROGER CO.
CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)
| May 25, | May 20, | |||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 345 | $ | 241 | ||||
| Temporary cash investments | 2,501 | 2,391 | ||||||
| Store deposits in-transit | 1,226 | 1,143 | ||||||
| Receivables | 1,968 | 1,766 | ||||||
| Inventories | 6,694 | 7,030 | ||||||
| Assets held for sale | 607 | - | ||||||
| Prepaid and other current assets | 684 | 633 | ||||||
| Total current assets | 14,025 | 13,204 | ||||||
| Property, plant and equipment, net | 25,537 | 24,935 | ||||||
| Operating lease assets | 6,695 | 6,659 | ||||||
| Intangibles, net | 864 | 893 | ||||||
| Goodwill | 2,673 | 2,916 | ||||||
| Other assets | 1,647 | 1,586 | ||||||
| Total Assets | $ | 51,441 | $ | 50,193 | ||||
| LIABILITIES AND SHAREOWNERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Current portion of long-term debt including obligations under finance leases | $ | 198 | $ | 1,319 | ||||
| Current portion of operating lease liabilities | 665 | 664 | ||||||
| Accounts payable | 10,777 | 10,450 | ||||||
| Accrued salaries and wages | 1,208 | 1,130 | ||||||
| Liabilities held for sale | 242 | - | ||||||
| Other current liabilities | 3,150 | 3,567 | ||||||
| Total current liabilities | 16,240 | 17,130 | ||||||
| Long-term debt including obligations under finance leases | 12,021 | 12,114 | ||||||
| Noncurrent operating lease liabilities | 6,412 | 6,353 | ||||||
| Deferred income taxes | 1,535 | 1,694 | ||||||
| Pension and postretirement benefit obligations | 386 | 427 | ||||||
| Other long-term liabilities | 2,434 | 1,595 | ||||||
| Total Liabilities | 39,028 | 39,313 | ||||||
| Shareowners' equity | 12,413 | 10,880 | ||||||
| Total Liabilities and Shareowners' Equity | $ | 51,441 | $ | 50,193 | ||||
| Total common shares outstanding at end of period | 722 | 718 | ||||||
| Total diluted shares year-to-date | 727 | 724 | ||||||
| Note: | TheCompany reclassified $3.1 billion of liabilities from other current liabilities to accounts payable on the Consolidated Balance Sheetfor the quarter ended May 20, 2023 to conform to the current year presentation. This reclassification was made to the Consolidated BalanceSheet to more accurately present these current liabilities. A similar reclassification was made to the Consolidated Statement of CashFlows resulting in a change to accounts payable and accrued expenses within net cash provided by operating activities for the quarterended May 20, 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 | $ | 956 | $ | 962 | ||||
| Adjustments to reconcile net earnings including noncontrolling interests to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 978 | 957 | ||||||
| Operating lease asset amortization | 187 | 188 | ||||||
| LIFO charge | 41 | 99 | ||||||
| Stock-based employee compensation | 57 | 49 | ||||||
| Deferred income taxes | (64 | ) | (5 | ) | ||||
| Gain on the sale of assets | (9 | ) | (41 | ) | ||||
| (Gain) loss on investments | (16 | ) | 78 | |||||
| Other | 19 | 73 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Store deposits in-transit | (11 | ) | (16 | ) | ||||
| Receivables | (102 | ) | 274 | |||||
| Inventories | 225 | 419 | ||||||
| Prepaid and other current assets | (70 | ) | 82 | |||||
| Accounts payable | 622 | 200 | ||||||
| Accrued expenses | (465 | ) | (416 | ) | ||||
| Income taxes receivable and payable | 180 | 198 | ||||||
| Operating lease liabilities | (137 | ) | (215 | ) | ||||
| Other | (66 | ) | (26 | ) | ||||
| Net cash provided by operating activities | 2,325 | 2,860 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Payments for property and equipment, including payments for lease buyouts | (1,304 | ) | (1,028 | ) | ||||
| Proceeds from sale of assets | 304 | 86 | ||||||
| Other | (14 | ) | (5 | ) | ||||
| Net cash used by investing activities | (1,014 | ) | (947 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Payments on long-term debt including obligations under finance leases | (54 | ) | (62 | ) | ||||
| Dividends paid | (210 | ) | (188 | ) | ||||
| Proceeds from issuance of capital stock | 85 | 23 | ||||||
| Treasury stock purchases | (103 | ) | (29 | ) | ||||
| Other | (66 | ) | (40 | ) | ||||
| Net cash used by financing activities | (348 | ) | (296 | ) | ||||
| NET INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS | 963 | 1,617 | ||||||
| CASH AND TEMPORARY CASH INVESTMENTS: | ||||||||
| BEGINNING OF YEAR | 1,883 | 1,015 | ||||||
| END OF PERIOD | $ | 2,846 | $ | 2,632 | ||||
| Reconciliation of capital investments: | ||||||||
| Payments for property and equipment, including payments for lease buyouts | $ | (1,304 | ) | $ | (1,028 | ) | ||
| Payments for lease buyouts | 37 | - | ||||||
| Changes in construction-in-progress payables | 37 | (71 | ) | |||||
| Total capital investments, excluding lease buyouts | $ | (1,230 | ) | $ | (1,099 | ) | ||
| Disclosure of cash flow information: | ||||||||
| Cash paid during the year for interest | $ | 70 | $ | 164 | ||||
| Cash paid during the year for income taxes | $ | 119 | $ | 92 | ||||
Table 4. Supplemental Sales Information
(in millions, except percentages)
(unaudited)
Itemsidentified below should not be considered as alternatives to sales or any other GAAP measure of performance.Identical salesis an industry-specific measure, and it is important to review it in conjunction with Kroger's financial results reported in accordancewith GAAP.Other companies in our industry may calculate identical sales differently than Kroger does, limiting the comparabilityof the measure.
IDENTICAL SALES (a)
| FIRST QUARTER | ||||||||
| 2024 | 2023 | |||||||
| EXCLUDING FUEL | $ | 38,900 | $ | 38,704 | ||||
| EXCLUDING FUEL | 0.5 | % | 3.5 | % | ||||
| (a) | Krogerdefines identical sales, excluding fuel, as sales to retail customers, including sales from all departments at identical supermarketlocations, Kroger Specialty Pharmacy businesses, jewelry and ship-to-home solutions.Kroger defines a supermarket as identicalwhen it has been in operation without expansion or relocation for five full quarters.Kroger defines Kroger Specialty Pharmacybusinesses as identical when physical locations have been in operation continuously for five full quarters and discontinued patient therapiesare excluded from the identical sales calculation starting in the quarter of transfer or termination.We define Kroger Deliveryidentical sales powered by Ocado based on geography.We include Kroger Delivery sales powered by Ocado as identical if thedelivery occurs in an existing Kroger Supermarket geography.If the Kroger Delivery sales powered by Ocado occur in a newgeography, these sales are included as identical when deliveries have occurred to the new geography for five full quarters. For the firstquarter of 2024, Kroger Specialty Pharmacy businesses were not included in identical sales due to being classified as held for sale. |
Table5. Reconciliation of Net Total Debt and
Net Earnings Attributable to The Kroger Co. to Adjusted EBITDA
(in millions, except for ratio)
(unaudited)
Theitems identified below should not be considered an alternative to any GAAP measure of performance or access to liquidity.Nettotal debt to adjusted EBITDA is an important measure used by management to evaluate the Company's access to liquidity.Theitems below should be reviewed in conjunction with Kroger's financial results reported in accordance with GAAP.
Thefollowing table provides a reconciliation of net total debt.
| May 25, | May 20, | |||||||||||
| 2024 | 2023 | Change | ||||||||||
| Current portion of long-term debt including obligations under finance leases | $ | 198 | $ | 1,319 | $ | (1,121 | ) | |||||
| Long-term debt including obligations under finance leases | 12,021 | 12,114 | (93 | ) | ||||||||
| Total debt | 12,219 | 13,433 | (1,214 | ) | ||||||||
| Less: Temporary cash investments | 2,501 | 2,391 | 110 | |||||||||
| Net total debt | $ | 9,718 | $ | 11,042 | $ | (1,324 | ) | |||||
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 | ||||||||
| May 25, | May 20, | |||||||
| 2024 | 2023 | |||||||
| Net earnings attributable to The Kroger Co. | $ | 2,149 | $ | 2,542 | ||||
| LIFO charge | 55 | 632 | ||||||
| Depreciation and amortization | 3,146 | 3,032 | ||||||
| Interest expense | 411 | 511 | ||||||
| Income tax expense | 616 | 793 | ||||||
| Adjustment for pension plan withdrawal liabilities | - | 25 | ||||||
| Adjustment for (gain) loss on investments | (245 | ) | 274 | |||||
| Adjustment for Home Chef contingent consideration | - | 13 | ||||||
| Adjustment for merger related costs (a) | 450 | 85 | ||||||
| Adjustment for opioid settlement charges (b) | 1,413 | 147 | ||||||
| Adjustment for goodwill and fixed asset impairment charges related to Vitacost.com | - | 164 | ||||||
| 53rd week EBITDA adjustment | (187 | ) | - | |||||
| Other | (14 | ) | (7 | ) | ||||
| Adjusted EBITDA | $ | 7,794 | $ | 8,211 | ||||
| Net total debt to adjusted EBITDA ratio on a 52-week basis | 1.25 | 1.34 | ||||||
| (a) | Mergerrelated costs primarily include third party professional fees and credit facility fees associated with the proposed merger with AlbertsonsCompanies, Inc. |
| (b) | Opioidsettlement 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)
Thepurpose of this table is to better illustrate comparable operating results from our ongoing business, after removing the effects on netearnings per diluted common share for certain items described below.Adjusted net earnings and adjusted net earnings per dilutedshare are useful metrics to investors and analysts because they present more accurately year-over-year comparisons for net earnings andnet earnings per diluted share because adjusted items are not the result of normal operations.Items identified in this tableshould not be considered alternatives to net earnings attributable to The Kroger Co. or any other GAAP measure of performance.Theseitems should not be reviewed in isolation or considered substitutes for the Company's financial results as reported in accordance withGAAP.Due to the nature of these items, as further described below, it is important to identify these items and to reviewthem in conjunction with the Company's financial results reported in accordance with GAAP.
Thefollowing table summarizes items that affected the Company's financial results during the periods presented.
| FIRST QUARTER | ||||||||
| 2024 | 2023 | |||||||
| Net earnings attributable to The Kroger Co. | $ | 947 | $ | 962 | ||||
| Adjustment for (gain) loss on investments (a)(b) | (12 | ) | 59 | |||||
| Adjustment for merger related costs (a)(c) | 143 | 34 | ||||||
| Adjustment for opioid settlement charges (a)(d) | - | 49 | ||||||
| Held for sale income tax adjustment | (31 | ) | - | |||||
| 2024 and 2023 Adjustment Items | 100 | 142 | ||||||
| Net earnings attributable to The Kroger Co. excluding the adjustment items above | $ | 1,047 | $ | 1,104 | ||||
| Net earnings attributable to The Kroger Co. per diluted common share | $ | 1.29 | $ | 1.32 | ||||
| Adjustment for (gain) loss on investments (e) | (0.02 | ) | 0.08 | |||||
| Adjustment for merger related costs (e) | 0.20 | 0.05 | ||||||
| Adjustment for opioid settlement charges (e) | - | 0.06 | ||||||
| Held for sale income tax adjustment (e) | (0.04 | ) | - | |||||
| 2024 and 2023 Adjustment Items | 0.14 | 0.19 | ||||||
| Net earnings attributable to The Kroger Co. per diluted common share excluding the adjustment items above | $ | 1.43 | $ | 1.51 | ||||
| Average number of common shares used in diluted calculation | 727 | 724 | ||||||
Table 6. Net Earnings Per Diluted Share Excluding the Adjustment Items (continued)
(in millions, except per share amounts)
(unaudited)
| (a) | Theamounts presented represent the after-tax effect of each adjustment. |
| (b) | Thepre-tax adjustments for (gain) loss on investments were $(16) and $78 in the first quarters of 2024 and 2023, respectively. |
| (c) | Thepre-tax adjustments to OG&A expenses for merger-related costs were $175 and $40 in the first quarters of 2024 and 2023, respectively. |
| (d) | Thepre-tax adjustment to OG&A expenses for opioid settlement charges was $62. |
| (e) | Theamounts presented represent the net earnings (loss) per diluted common share effect of each adjustment. |
| Note: | 2024First Quarter Adjustment Items include adjustments for the gain on investments, merger related costs and held for sale income tax. |
| 2023First Quarter Adjustment Items include adjustments for the loss on investments, merger related costs and opioid settlement charges. |
Table 7. Operating Profit Excluding the Adjustment Items
(in millions)
(unaudited)
Thepurpose of this table is to better illustrate comparable operating results from our ongoing business, after removing the effects on operatingprofit for certain items described below.Adjusted FIFO operating profit is a useful metric to investors and analysts becauseit presents more accurately year-over-year comparisons for operating profit because adjusted items are not the result of normal operations.Itemsidentified in this table should not be considered alternatives to operating profit or any other GAAP measure of performance.Theseitems should not be reviewed in isolation or considered substitutes for the Company's financial results as reported in accordance withGAAP.Due to the nature of these items, as further described below, it is important to identify these items and to reviewthem in conjunction with the Company's financial results reported in accordance with GAAP.
The following table summarizes items that affectedthe Company's financial results during the periods presented.
| FIRST QUARTER | ||||||||
| 2024 | 2023 | |||||||
| Operating profit | $ | 1,294 | $ | 1,470 | ||||
| LIFO charge | 41 | 99 | ||||||
| FIFO Operating profit | 1,335 | 1,569 | ||||||
| Adjustment for merger related costs (a) | 175 | 40 | ||||||
| Adjustment for opioid settlement charges (b) | - | 62 | ||||||
| Other | (11 | ) | (2 | ) | ||||
| 2024 and 2023 Adjustment items | 164 | 100 | ||||||
| Adjusted FIFO operating profit excluding the adjustment items above | $ | 1,499 | $ | 1,669 | ||||
| (a) | Mergerrelated costs primarily include third party professional fees and credit facility fees associated with the proposed merger with AlbertsonsCompanies, Inc. |
| (b) | Opioidsettlement charges include the settlement with the State of West Virginia. |
Cover | Jun. 20, 2024 |
|---|---|
| Cover [Abstract] | |
| Document Type | 8-K |
| Amendment Flag | false |
| Document Period End Date | Jun. 20, 2024 |
| Entity File Number | 1-303 |
| Entity Registrant Name | Kroger Co. |
| Entity Central Index Key | 0000056873 |
| Entity Tax Identification Number | 31-0345740 |
| Entity Incorporation, State or Country Code | OH |
| Entity Address, Address Line One | 1014 Vine Street |
| Entity Address, City or Town | Cincinnati |
| Entity Address, State or Province | OH |
| Entity Address, Postal Zip Code | 45202 |
| City Area Code | 513 |
| Local Phone Number | 762-4000 |
| Written Communications | false |
| Soliciting Material | false |
| Pre-commencement Tender Offer | false |
| Pre-commencement Issuer Tender Offer | false |
| Title of 12(b) Security | CommonStock $1 par value |
| Trading Symbol | KR |
| Security Exchange Name | NYSE |
| Entity Emerging Growth Company | false |
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