Kroger Company (the) · NYSE:KR
Kroger Company (the) — The Kroger — Q4 2022 Earnings Presentation
40 slides from Kroger Company (the)'s earnings presentation, Mar 2, 2023
Slide 1: Think Food, Think Kroger
Think Food, Think Kroger March 2023
Slide 2: Safe Harbor
Safe Harbor This presentation includes certain statements that constitute “forward-looking statements” about Kroger’s financial position and expected performance. These statements are based on management’s assumptions and beliefs in light of currently available information. Such statements are indic
Slide 3: Table of Contents
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Table of Contents Delivering on Our Commitments Leading with Fresh and Accelerating with Digital Go-to-Market Strategy Value Creation Model 4th Quarter and Full-Year 2022 Financial Results Full-Year 2023 Guidance and Capital Allocation Priorities Inve
Slide 4: Delivering on Our Commitments
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Delivering on Our Commitments Leading with Fresh and Accelerating with Digital 4
Slide 5: Kroger is Building Momentum
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Kroger is Building Momentum 2023+ 2022 2020 – 2021 Strengthened during Navigated challenging Consistent execution of the pandemic as inflationary cycle, grew go-to-market strategy underlying food at overall households and positions us to deliver home
Slide 6: Leading With Fresh, Accelerating with Digital Scorecard 2021 & 2022
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Leading With Fresh, Accelerating with Digital Scorecard 2021 & 2022 Delivered on Our Value Drove Results Through Our Advanced Our Purpose to Creation Model Go-to-Market Strategy Feed the Human Spirit Sales Growth Fresh Associate Investments Built off
Slide 7: Go-to-Market Strategy
Go-to-Market Strategy 7
Slide 8: Go-to-Market Strategy
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Go-to-Market Strategy 8
Slide 9: Kroger is Winning with Fresh
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Increasing Our Separation from Competitors in Fresh Kroger is Winning with Fresh because we know Fresh is important to customers v v Supplier Customers 9
Slide 10: Our Brands Driving Growth and Profitability
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Opening Price Point Kroger Brand Great Value National Brand Equivalent Our Brands Driving or Better Growth and Profitability Distinct Brands with Clear Strategic Positioning Private Selection Simple Truth Premium Leads with Organic + Free From 10
Slide 11: Data & Personalization Enhance Loyalty
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Data & Personalization Enhance Loyalty Kroger Plus Program Personalized coupons 60m households $1.4B saved by customers Fuel Rewards Next generation loyalty platform 14% more rewards redeemed >50% have not previously in 2022 engaged in Delivery 11
Slide 12: Seamless Ecosystem
Kroger Precision In-Store Marketing Pickup Seamless Start shopping basket and engage with digital coupons Pickup from conveniently located store network Ecosystem Enables Customers to Shop Without Compromise or Complexity Personalization Ship-to-Home Delivery 2-3 day delivery Same Day / Next Day del
Slide 13: Digital Plans to Grow Sales and Grow Profits
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Digital Plans to Grow Sales and Grow Profits Provide a Compelling, Kroger-Owned Digital Deliver Best-in-Class Fulfillment Destination • Freshness and Quality • Personalization • Customer Fulfillment Centers • Boost • More Capacity and Better Lead Time
Slide 14: Driving Margin Expansion Through Alternative Profit Growth
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Driving Margin Expansion Through Alternative Profit Growth $1.2B+ in 2022 & growing a POWERED BY: 14
Slide 15: Investing in Our Associates to Promote Retention & Engagement
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Investing in Our Associates to Promote Retention & Engagement Wages Benefits Well-Being Advancement Training Simplify Work Will invest over $770m in Associates in 2023 15
Slide 16: Environmental, Social & Governance (ESG) Strategy
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Environmental, Social & Governance (ESG) Strategy Progress 2025 Zero Hunger | Zero Waste Commitments (2017 – 2021) We imagine a world where everyone is Thriving Together Meals: Direct 3B meals to our communities 2.3B meals Surplus food: Optimize surpl
Slide 17: Value Creation Model
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Value Creation Model 17
Slide 18: Recap: Our Value Creation Model — TSR of 8-11%
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Recap: Our Value Creation Model — TSR of 8-11% Strong Supermarket, Revenue 3-5 % Traffic & Fuel & Pharmacy Business Net Earnings Growth 8-11 % Data & Fast Growing 5-6 % Alternative Profit Businesses Total Shareholder Traffic Return* Share Repurchase &
Slide 19: Delivering Above Our Growth Algorithm
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Delivering Above Our Growth Algorithm 3 YR CAGR TSR Model Vs. Model (22 vs. 19) Sales Growth(1) 2-4% +6.2% Adj. FIFO Net Operating Profit 3-5% +19.3% Adj. EPS 6-9% +24.5% iTSR(2) 8-11% +26.6% (1) Without fuel (2) iTSR = Earnings Per Share Growth + Div
Slide 20: 4th Quarter and Full-Year 2022 Financial Results
4th Quarter and Full-Year 2022 Financial Results 20
Slide 21: Full-Year 2022 Results
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Full-Year 2022 Results +5.6% $4.1B $3.06 ID Sales(1) GAAP Operating Profit GAAP EPS +4% $5.1B $4.23 Adj. FIFO Operating Profit Adj. EPS Digital Sales +18% Growth +15% Growth (1) without fuel and adjustment items, if applicable. Identical sales without
Slide 22: Q4 2022 Results
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Q4 2022 Results +6.2% $826M $0.62 ID Sales(1) GAAP Operating Profit GAAP EPS +12% $1,274M $0.99 Adj. FIFO Operating Profit Adj. EPS Digital Sales +26% Growth +9% Growth (1) without fuel and adjustment items, if applicable. Identical sales without fuel
Slide 23: Full-Year 2023 Guidance and Capital Allocation Priorities
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Full-Year 2023 Guidance and Capital Allocation Priorities 23
Slide 24: 2023 Full-Year Guidance
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER 2023 Full-Year Guidance Adjusted Metric Including 53rd week IDs (%)* 1.0% – 2.0% with underlying growth of 2.5% - 3.5% excluding Express Scripts EPS ($)* $4.45 – $4.60 including ~15c impact from 53rd week Operating Profit ($B)* $5.0 – $5.2 Tax Rate**
Slide 25: Capital Allocation — Driving TSR & Improving ROIC
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Capital Allocation — Driving TSR & Improving ROIC Since 2019: 2023 • CapEx supporting sales 2019 growth has increased $300M Maintain the Business & Maintain the Other • CapEx for margin expansion Business & has increased by $300M Other $3.4 - • Overal
Slide 26: Capital Investments Driving Sales Growth
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Capital Investments Driving Sales Growth Stores Customer/Product Initiatives Digital (impact store & digital sales) • Remodels to support latest sales initiatives and • Customer Experience including in-stock visibility, operational efficiencies • End-
Slide 27: Capital Investments Driving Margin Expansion
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Capital Investments Driving Margin Expansion Cost Out / Waste Reduction (driving $1B in savings annually) Supply Chain • Digital: Lower cost to pick a digital order through automation, process • Expand capacity: Expanded distribution center capacity w
Slide 28: Investment Thesis and Albertsons Merger Update
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Investment Thesis and Albertsons Merger Update 28
Slide 29: Investment Thesis
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER 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
Slide 30: Albertsons Merger Update
2023 BUSINESS UPDATE // THINK FOOD, THINK KROGER Albertsons Merger Update Commitments to Confident in Enhanced Integration Path to Close Customers, Associates Value Creation for Planning Remains Unchanged and Communities Shareholders • Kroger is committed to • Expected average TSR well • Launched in
Slide 31: Appendix
Appendix 31
Slide 32: 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 2022 2021 2022 2021 SALES $ 34,823 100.0% $ 33,048 100.0% $ 148,258 100.0% $ 137,888 100.0% OPERATING EXPENSES MERCHANDISE COSTS, INCLUDING ADVERTISING, WAREH
Slide 33: Table 2. Consolidated Balance Sheets
Table 2. THE KROGER CO. CONSOLIDATED BALANCE SHEETS (in millions) (unaudited) January 28, January 29, 2023 2022 ASSETS Current Assets Cash $ 249 $ 311 Temporary cash investments 579 1,510 Store deposits in-transit 1,227 1,082 Receivables 2,234 1,828 Inventories 7,560 6,783 Prepaid and other current
Slide 34: Table 3. Consolidated Statements of Cash Flows
Table 3. THE KROGER CO. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited) YEAR-TO-DATE 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings including noncontrolling interests $ 2,249 $ 1,666 Adjustments to reconcile net earnings including noncontrolling interests to net cash pr
Slide 35: 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 wi
Slide 36: Table 5. Reconciliation of Net Total Debt and Net Earnings to 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 37: Table 6. Net Earnings Per Diluted Share Excluding the 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 38: Table 6. Net Earnings Per Diluted Share Excluding the 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 39: 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 40: 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