Kroger Company (the) · NYSE:KR
Kroger Company (the) — The Kroger — Q4 2023 Earnings Presentation
31 slides from Kroger Company (the)'s earnings presentation, Mar 7, 2024
Slide 1: Kroger Q4 2023 Earnings Release
Kroger Q4 2023 Earnings Release March 7, 2024
Slide 2: Safe Harbor
Safe Harbor This presentation includes certain statements that constitute “forward-looking statements” about Kroger’s financial position and expected performance, including our proposed transaction with Albertsons Companies. These statements are based on management’s assumptions and beliefs in light
Slide 3: Table of Contents
2023 INVESTOR DECK Table of Contents Value Creation Model 4th Quarter and Full-Year 2023 Financial Results Full-Year 2024 Guidance and Capital Allocation Priorities Investment Thesis and Albertson Merger Update 3
Slide 4: Value Creation Model
2023 INVESTOR DECK Value Creation Model 4
Slide 5: Recap: Our Value Creation Model — TSR of 8-11%
2023 INVESTOR DECK Recap: Our Value Creation Model — TSR of 8-11% Strong 3-5 Supermarket, Fuel and Health & Wellness % Business Net Earnings Growth 8-11 % Data Revenue + + Traffic Traffic 5-6 % Total Shareholder Fast Growing Return* Alternative Profit Businesses Share Repurchase & Dividends *Total s
Slide 6: Delivering Above Our Growth Algorithm
2023 INVESTOR DECK Delivering Above Our Growth Algorithm 4 YR CAGR* TSR Model Vs. Model (23 vs. 19) Sales Growth(1) 2-4% +4.9% Adj. FIFO Net Operating Profit 3-5% +12.5% Adj. EPS 6-9% +20.1% iTSR(2) 8-11% +22.5% (1) Without fuel (2) iTSR = Earnings Per Share Growth + Dividend Yield; 8-11% represents
Slide 7: 4th Quarter and Full-Year 2023 Financial Results
2023 INVESTOR DECK 4th Quarter and Full-Year 2023 Financial Results 7
Slide 8: Q4 2023 Results
2023 INVESTOR DECK Q4 2023 Results 53 WEEKS EXCLUDING THE 53RD WEEK $1,194M $1.01 $1,007M (0.8)% $0.81 GAAP Operating Profit GAAP EPS GAAP Operating Profit GAAP EPS ID Sales(1) +0.1% $1,307M $1.34 $1,120M $1.14 Underlying Adj. EPS Adj. EPS | +15% Growth Adj. FIFO Operating Profit Adj. FIFO Operating
Slide 9: Full-Year 2023 Results
2023 INVESTOR DECK Full-Year 2023 Results 53 WEEKS EXCLUDING THE 53RD WEEK $3.1B $2.96 $2.9B $2.76 +0.9% GAAP Operating Profit GAAP EPS GAAP Operating Profit GAAP EPS ID Sales(1) +2.3% $5.0B $4.76 $4.8B $4.56 Underlying Adj. FIFO Operating Profit Adj. EPS Adj. FIFO Operating Profit Adj. EPS | +8% Gr
Slide 10: Progress on our go-to-market strategy
2023 INVESTOR DECK 2023 Highlights Fresh Personalization Leading with Fresh, Celebrated the 10th anniversary of our $1B Home Chef brand Delivered over 4B coupons in 2023, +1B more compared to 2022 Accelerating with Digital Accelerated Fresh Produce Initiative with Grew digitally engaged households b
Slide 11: Strengthening our Value Creation Model
2023 INVESTOR DECK Strengthening our Value Creation Model Delivering Sustainable Total Shareholder Return of 8 – 11%* Supermarket Fuel Improved FIFO gross margin ex-fuel Our customers saved 14% more on fuel Strong through strong Our Brands rewards vs. last year, driving more customer Supermarket, pe
Slide 12: Environmental Sustainability and Social Impact Strategy
2023 INVESTOR DECK Environmental Sustainability Progress 2025 Zero Hunger | Zero Waste Commitments (2017 – 2022) and Social Impact Strategy Meals: Direct 3B meals to our communities (achieved in early 2023, two years ahead of schedule) 3B meals We imagine a world where everyone is Thriving Together
Slide 13: Associate Experience
2023 INVESTOR DECK Associate Experience • Investing in our Associates: Increased associate wages resulting in average hourly wage of nearly $19 and rate of nearly $25 with comprehensive benefits factored in, which is a 33% increase in rate in the last 5 years • Industry-Leading Culture: Named by Com
Slide 14: Full-Year 2024 Guidance and Capital Allocation Priorities
2023 INVESTOR DECK Full-Year 2024 Guidance and Capital Allocation Priorities 14
Slide 15: 2024 Full-Year Guidance
2023 INVESTOR DECK 2024 Full-Year Guidance* Adjusted Metric FY24 Guidance IDs (%)* 0.25% – 1.75% EPS ($)* $4.30 – $4.50 Operating Profit ($B)* $4.6 – $4.8 Free Cash Flow ($B)** $2.5 – 2.7 Cap Ex ($B) $3.4 – $3.6 Tax Rate*** 23% * Without adjusted items, if applicable. Kroger is unable to provide a f
Slide 16: Capital Allocation — Delivering our TSR Model
2023 INVESTOR DECK Capital Allocation — Delivering our TSR Model 2024 Since 2019: 2019 • CapEx to support sales growth Maintain the has increased by $300M Business & Maintain the Other* • CapEx for margin expansion Business & Other has increased by $300M $3.4 - Sales Sales Growth $3.0B Growth $3.6B
Slide 17: 2024 Capital Investments Driving Sales Growth
2023 INVESTOR DECK 2024 Capital Investments Driving Sales Growth Stores Customer/Product Initiatives Digital (impact store & digital sales) • 245 store remodels, incorporating latest sales • Customer Experience including in-stock visibility, initiatives and operational efficiencies • End-to-End Fres
Slide 18: 2024 Capital Investments Driving Margin Expansion
2023 INVESTOR DECK 2024 Capital Investments Driving Margin Expansion Cost Out / Waste Reduction Supply Chain • Digital: Lower cost to pick a digital order through automation, process • Expand capacity: Expanded distribution center capacity with new and improvement and enhanced data/reporting relocat
Slide 19: Investment Thesis and Albertsons Merger Update
2023 INVESTOR DECK Investment Thesis and Albertsons Merger Update 19
Slide 20: Albertsons Merger Update
2023 INVESTOR DECK Albertsons Merger Update Commitments to Confident in Enhanced Integration Path to Close Customers, Associates Value Creation for and Divestiture and Communities Shareholders • Kroger is committed to • Expected average TSR well • Making significant progress to • Transaction subject
Slide 21: Investment Thesis
2023 INVESTOR DECK Investment Thesis Strong Business with Proven Value Strong Balance Sheet & Exciting Growth Opportunities(1) 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 60M Households •
Slide 22: Appendix
Appendix 22
Slide 23: Table 1. Consolidated Statements of Operations
Table 1. THE KROGER CO. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share amounts) (unaudited) FOURTH QUARTER YEAR-TO-DATE 2023 2022 2023 2022 SALES $ 37,064 100.0% $ 34,823 100.0% $ 150,039 100.0% $ 148,258 100.0% OPERATING EXPENSES MERCHANDISE COSTS, INCLUDING ADVERTISING, WAREH
Slide 24: Table 2. Consolidated Balance Sheets
Table 2. THE KROGER CO. CONSOLIDATED BALANCE SHEETS (in millions) (unaudited) February 3, January 28, 2024 2023 ASSETS Current Assets Cash $ 235 $ 336 Temporary cash investments 1,648 679 Store deposits in-transit 1,234 1,127 Receivables 2,136 2,234 Inventories 7,105 7,560 Prepaid and other current
Slide 25: Table 3. Consolidated Statements of Cash Flows
Table 3. THE KROGER CO. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited) YEAR-TO-DATE 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings including noncontrolling interests $ 2,169 $ 2,249 Adjustments to reconcile net earnings including noncontrolling interests to net cash pr
Slide 26: Table 4. Supplemental Sales Information
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 w
Slide 27: Table 5. Reconciliation of Net Total Debt and Adjusted EBITDA
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 adj
Slide 28: Table 6. Net Earnings Per Diluted Share Excluding Adjustment Items
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 per diluted common share for
Slide 29: Table 6. Net Earnings Per Diluted Share Excluding Adjustment Items (continued)
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 adjustment to OG&A expenses for pension plan withdrawal liabilities was
Slide 30: Table 7. Operating Profit Excluding the Adjustment Items
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 for certain items described below. Adjusted FIFO operating profi
Slide 31: Table 8. Adjusted Free Cash Flow
Table 8. Adjusted Free Cash Flow (in millions) (unaudited) Adjusted free cash flow is an important performance measure used by management, and management believes it is also a useful metric for investors and analysts to evaluate the Company's ability to generate additional funding from business oper