Kroger Q2 2024 Earnings Release
September 12, 2024
Q2 2024 Results
|
+1.2% |
$815M |
$0.64 |
|
ID Sales(1) |
GAAP Operating Profit |
GAAP EPS |
|
+11% |
$984M |
$0.93 |
|
Digital Sales |
Adj. FIFO Operating Profit |
Adj. EPS |
|
3% decline |
||
(1) Without fuel
3
2024 Full-Year Guidance*
|
FY24 Guidance as of |
FY24 Guidance as of |
||||||
|
Adjusted Metric |
June 20, 2024 |
September 12, 2024 |
|||||
|
Identical Sales |
0.25% - |
1.75% |
0.75% - 1.75% |
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|
without fuel (%)* |
|||||||
|
Operating Profit ($B)* |
$4.6 |
- $4.8 |
$4.6 |
- $4.8 |
|||
|
EPS ($)* |
$4.30 |
- $4.50 |
$4.30 |
- $4.50 |
|||
|
Free Cash Flow ($B)** |
$2.5 |
- $2.7 |
$2.5 |
- $2.7 |
|||
|
Cap Ex ($B) |
$3.4 |
- $3.6 |
$3.6 |
- $3.8 |
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|
Tax Rate*** |
23% |
23% |
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- 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. |
4 |
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*** 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. |
Q2 2024 Highlights
Leading with Fresh, Accelerating with Digital
Progress on our go-to-market strategy
Fresh
Celebrated seven awards earned by Murray's Cheese varieties at the American Cheese Society Competition
Our Brands
Introduced 223 new Our Brands items, including the expansion of the Smart Way product line
Personalization
Grew eCommerce households by 14%, increasing customer loyalty and promoting growth in alternative profit businesses like Kroger Precision Marketing
Delivered more effective promotions leading to a greater unit uplift than the industry
Seamless
Increased delivery sales by 17% over last year led by Customer Fulfillment Centers
Strong execution in Pickup led to improvement in wait times and fill rates, and a 33% improvement in perfect orders
5
5
Strengthening our Value Creation Model
Delivering Sustainable Total Shareholder Return of 8 - 11%*
Grocery
Strong store execution and exceptional value led to growth in total households, loyal households and customer visits
Improved FIFO gross margin rate ex-fuel through favorable product mix in our grocery business including Our Brands, lower shrink and sourcing benefits
Health & Wellness
Strong sales growth ahead of expectations
Fuel
Fuel reward activity through our loyalty program led to gallon sales which outpaced the industry
Cents per gallon fuel margin increased compared to last year
Revenue
+
Traffic
Alternative Profits
Growth from alternative profit businesses, led by Kroger Precision Marketing, which remains on track to deliver more than 20% Media growth this year
Strong Grocery,
Fuel and Health
- Wellness Business
Data
+
Traffic
Fast Growing
Alternative Profit
Businesses
6
*Total shareholder return assumes no change in Kroger's PE Ratio.
Associate Experience
- Inclusive Workplace: 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
- Celebrating Our Leaders: Celebrated 67 female leaders named as Top Women in Grocery Honorees by Progressive Grocer
- Associate-Focused: Received four Brandon Hall Group - Excellence in Human Capital Management Awards®
7
Live Our Purpose
|
Recognized as one of the World's Most |
Awarded scholarships to 120 children of |
|
Trustworthy Companies for 2024 by |
Kroger Employees. Since 2008, Kroger |
|
Newsweek and Statista |
has awarded more than 3,300 scholarships |
|
totaling $4.8 million for Kroger Scholars |
Provided meals in coordination with the USO for military service members during LA Fleet Week in 2024
Recognized as one of the Most Sustainable U.S. Companies for 2024 by Barron's
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
Named one of America's Climate
Leaders 2024 by USA Today
8
Investment Thesis
|
Strong Business with |
Proven Value |
Strong Balance Sheet & |
|
Exciting Growth Opportunities |
Creation Model |
Resilient Free Cash Flow |
|
• Conveniently located +2,700 stores |
• Net Earnings Growth, 3-5% |
• Strong Free Cash Flow Yield |
|
• First Party Data on 62M Households |
• ID Sales Growth (ex. Fuel), 2- |
• Investment Grade Debt Rating |
|
• ~$30B Our Brands Business |
4% |
• Current Net Debt to Adjusted |
|
• Margin Improvements (net of |
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|
• Significant Digital Business, |
EBITDA 1.24x |
|
|
investments), 1-2% |
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|
$12B |
• Cost Savings, $1B Annually |
|
|
• High Growth, Margin |
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Accretive Alternative Profits |
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• Disciplined Capital Investments |
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• Cash Payout 5-6% (Dividends & |
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|
Share Repurchases(1)) |
|
Accelerated Go-To-Market Strategy |
• Significant efficiency opportunities |
• Accelerated Free Cash Flow Yield |
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• |
Fresher products, faster |
• Combined TSR above Kroger's |
• Investment Grade Debt Rating |
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• Strong Balance Sheet Positioned |
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+ |
• |
Best-in-class personalized experience |
standalone TSR model of 8 - 11% |
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|
in first four years post-close |
for Future Growth |
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Broader selection of Our Brands |
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• |
High Growth, Margin |
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products |
• |
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• |
Enhanced Seamless experience |
Accretive Alternative Profits |
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Combined company financial expectations to be updated upon closing |
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(1) Kroger has paused its share repurchase program to prioritize de-leveraging following the proposed merger with Albertsons. During this period, value will be created for shareholders through |
|
|
dividends and the effect of reduced net debt. |
9 |
Appendix
10
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 |
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|
OTHER INCOME (EXPENSE) |
|||||||||||||||||||
|
INTEREST EXPENSE |
(84) |
(0.2) |
(93) |
(0.3) |
(207) |
(0.3) |
(247) |
(0.3) |
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|
NON-SERVICE COMPONENT OF COMPANY-SPONSORED |
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|
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 |
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|
NET EARNINGS (LOSS) ATTRIBUTABLE TO THE KROGER CO. |
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|
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 |
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|
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-InFirst-Out (FIFO) gross profit as sales minus merchandise costs, including advertising, warehousing and transportation, but excluding the Last-InFirst-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.
- 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.
- 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.
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Disclaimer
The Kroger Company published this content on 12 September 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on September 12, 2024 at 12:14:38 UTC.
