FINANCIAL RESULTS / TRAFFIC RESULTS/ M&A

Kroger Reports Third Quarter 2024 Results and Narrows Guidance Range

3Q24 ($ in millions; except EPS)

3Q23 ($ in millions; except EPS)

ID Sales* (Table 4)

2.3 %

(0.6 %)

Earnings Per Share

$0.84

$0.88

Adjusted EPS (Table 6)

$0.98

$0.95

Operating Profit

$828

$912

Adjusted FIFO Operating Profit (Table 7)

$1,017

$1,022

FIFO Gross Margin Rate*

Increased 51 basis points

OG&A Rate*

Increased 22 basis points

Guidance as of
September 12, 2024

Guidance as of

December 5, 2024

Identical Sales without fuel

0.75% – 1.75%

1.20% – 1.50%

Adjusted FIFO Operating Profit

$4.6 – $4.8 billion

$4.6 – $4.7 billion

Adjusted net earnings per diluted share

$4.30 – $4.50

$4.35 – $4.45

Adjusted Free Cash Flow**

$2.5 – $2.7 billion

$2.5 – $2.7 billion

Capital expenditures

$3.6 – $3.8 billion

$3.6 – $3.8 billion

Adjusted effective tax rate***

23 %

22.5 %

* 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.

Table 1.
THE KROGER CO.

CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)

THIRD QUARTER

YEAR-TO-DATE

2024

2023

2024

2023

SALES

$    33,634

100.0 %

$    33,957

100.0 %

$   112,815

100.0 %

$     112,975

100.0 %

OPERATING EXPENSES

MERCHANDISE COSTS, INCLUDING ADVERTISING,

WAREHOUSING AND TRANSPORTATION (a),

AND LIFO CHARGE (b)

25,948

77.2

26,477

78.0

87,332

77.4

88,032

77.9

OPERATING, GENERAL AND ADMINISTRATIVE (a)

5,898

17.5

5,646

16.6

19,388

17.2

19,974

17.7

RENT

203

0.6

201

0.6

672

0.6

671

0.6

DEPRECIATION AND AMORTIZATION

757

2.3

721

2.1

2,486

2.2

2,396

2.1

OPERATING PROFIT

828

2.5

912

2.7

2,937

2.6

1,902

1.7

OTHER INCOME (EXPENSE)

NET INTEREST EXPENSE

(86)

(0.3)

(94)

(0.3)

(294)

(0.3)

(341)

(0.3)

NON-SERVICE COMPONENT OF COMPANY-SPONSORED

PENSION PLAN BENEFITS

3

–

7

–

9

–

24

–

(LOSS) GAIN ON INVESTMENTS

(20)

(0.1)

26

0.1

(125)

(0.1)

317

0.3

GAIN ON SALE OF BUSINESS

79

0.2

–

–

79

0.1

–

–

NET EARNINGS BEFORE INCOME TAX EXPENSE

804

2.4

851

2.5

2,606

2.3

1,902

1.7

INCOME TAX EXPENSE

187

0.6

204

0.6

568

0.5

472

0.4

NET EARNINGS INCLUDING NONCONTROLLING INTERESTS

617

1.8

647

1.9

2,038

1.8

1,430

1.3

NET (LOSS) INCOME ATTRIBUTABLE TO

NONCONTROLLING INTERESTS

–

1

–

7

–

2

–

NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. 

$          618

1.8 %

$          646

1.9 %

$       2,031

1.8 %

$         1,428

1.3 %

NET EARNINGS ATTRIBUTABLE TO THE KROGER CO.

PER BASIC COMMON SHARE

$         0.85

$         0.89

$         2.79

$           1.97

AVERAGE NUMBER OF COMMON SHARES USED IN

BASIC CALCULATION

723

719

722

718

NET EARNINGS ATTRIBUTABLE TO THE KROGER CO.

PER DILUTED COMMON SHARE

$         0.84

$         0.88

$         2.77

$           1.95

AVERAGE NUMBER OF COMMON SHARES USED IN

DILUTED CALCULATION

728

725

728

725

DIVIDENDS DECLARED PER COMMON SHARE

$         0.32

$         0.29

$         0.93

$           0.84

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 $4 and $29 were recorded in the third quarters of 2024 and 2023, respectively. For the year-to-date period, LIFO charges of

$66 and $131 were recorded for 2024 and 2023, respectively.

Table 2.

THE KROGER CO.

CONSOLIDATED BALANCE SHEETS

(in millions)

(unaudited)

November 9,

November 4,

2024

2023

ASSETS

Current Assets

     Cash

$                   235

$                   254

     Temporary cash investments

13,123

1,471

     Store deposits in-transit

1,082

1,197

     Receivables

2,193

1,938

     Inventories

7,585

7,931

     Prepaid and other current assets

807

648

     Total current assets

25,025

13,439

Property, plant and equipment, net

25,698

24,882

Operating lease assets

6,829

6,752

Intangibles, net

865

890

Goodwill

2,674

2,916

Other assets

1,327

2,142

     Total Assets

$              62,418

$              51,021

LIABILITIES AND SHAREOWNERS’ EQUITY

Current Liabilities

     Current portion of long-term debt including obligations

     under finance leases

$                   187

$                   724

     Current portion of operating lease liabilities

667

668

     Accounts payable

10,521

10,748

     Accrued salaries and wages

1,185

1,177

     Other current liabilities

3,714

3,468

     Total current liabilities

16,274

16,785

Long-term debt including obligations under finance leases

22,414

12,039

Noncurrent operating lease liabilities

6,512

6,408

Deferred income taxes

1,556

1,506

Pension and postretirement benefit obligations

371

387

Other long-term liabilities

2,397

2,705

     Total Liabilities

49,524

39,830

Shareowners’ equity

12,894

11,191

     Total Liabilities and Shareowners’ Equity

$              62,418

$              51,021

Total common shares outstanding at end of period

724

719

Total diluted shares year-to-date

728

725

The Company reclassified $2.6 billion of liabilities from other current liabilities to accounts payable on the

Consolidated Balance Sheet for the quarter ended November 4, 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 November 4, 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

$            2,038

$            1,430

Adjustments to reconcile net earnings including noncontrolling

interests to net cash provided by operating activities:

Depreciation and amortization

2,486

2,396

Operating lease asset amortization

465

472

LIFO charge

66

131

Stock-based employee compensation

133

124

Deferred income taxes

9

(261)

Gain on the sale of assets

(8)

(45)

Gain on sale of business 

(79)

–

Loss (gain) on investments

125

(317)

Other

29

120

Changes in operating assets and liabilities:

Store deposits in-transit

134

(70)

Receivables

(238)

133

Inventories

(662)

(502)

Prepaid and other current assets

(204)

45

Accounts payable

578

991

Accrued expenses

77

(387)

Income taxes receivable and payable

28

148

Operating lease liabilities

(451)

(539)

Other

(136)

999

Net cash provided by operating activities

4,390

4,868

CASH FLOWS FROM INVESTING ACTIVITIES:

Payments for property and equipment, including payments for lease buyouts

(3,133)

(2,907)

Proceeds from sale of assets

310

94

Net proceeds from sale of business

464

–

Other

(43)

68

Net cash used by investing activities

(2,402)

(2,745)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of long-term debt

10,499

–

Payments on long-term debt including obligations under finance leases

(145)

(755)

Dividends paid

(651)

(586)

Financing fees paid

(116)

–

Proceeds from issuance of capital stock

106

42

Treasury stock purchases

(125)

(54)

Other

(81)

(60)

Net cash provided (used) by financing activities

9,487

(1,413)

NET INCREASE IN CASH AND TEMPORARY

CASH INVESTMENTS

11,475

710

CASH AND TEMPORARY CASH INVESTMENTS:

BEGINNING OF YEAR

1,883

1,015

END OF PERIOD

$          13,358

$            1,725

Reconciliation of capital investments:

Payments for property and equipment, including payments for lease buyouts

$           (3,133)

$           (2,907)

Payments for lease buyouts

46

–

Changes in construction-in-progress payables

271

421

Total capital investments, excluding lease buyouts

$           (2,816)

$           (2,486)

Disclosure of cash flow information:

Cash paid during the year for net interest

$                168

$                380

Cash paid during the year for income taxes

$                526

$                579

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)

THIRD QUARTER

YEAR-TO-DATE

2024

2023

2024

2023

EXCLUDING FUEL

$                     29,470

$                     28,818

$                     97,595

$                       96,397

EXCLUDING FUEL

2.3 %

(0.6) %

1.2 %

1.5 %

(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 third 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.

November 9,

November 4,

2024

2023

Change

Current portion of long-term debt including obligations

   under finance leases

$                   187

$                   724

$       (537)

Long-term debt including obligations under finance leases (a)

22,414

12,039

10,375

     Total debt

22,601

12,763

9,838

Less: Temporary cash investments (a)

13,123

1,471

11,652

     Net total debt

$                9,478

$              11,292

$    (1,814)

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

November 9,

November 4,

2024

2023

Net earnings attributable to The Kroger Co.

$                2,767

$                1,878

LIFO charge

48

365

Depreciation and amortization

3,215

3,102

Net interest expense

394

454

Income tax expense 

763

643

Adjustment for pension plan withdrawal liabilities

–

25

Adjustment for loss (gain) on investments

290

(225)

Adjustment for Home Chef contingent consideration

–

2

Adjustment for merger related costs (b)

646

203

Adjustment for opioid settlement charges

–

1,475

Adjustment for gain on sale of Kroger Specialty Pharmacy

(79)

–

Adjustment for goodwill and fixed asset impairment charges related to Vitacost.com

–

164

53rd week EBITDA adjustment

(187)

–

Other

(12)

(8)

Adjusted EBITDA

$                7,845

$                8,078

Net total debt to adjusted EBITDA ratio on a 52-week basis

1.21

1.40

(a)

$4.7 billion of debt subject to a special mandatory redemption issued in the third quarter of 2024 is included in long-term debt including 
obligations under finance leases and temporary cash investments.

(b)

Merger related costs primarily include third party professional fees and credit facility fees associated with the proposed merger with Albertsons

Companies, Inc.

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 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 and net earnings 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 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.

THIRD QUARTER

YEAR-TO-DATE

2024

2023

2024

2023

Net earnings attributable to The Kroger Co.

$

618

$

646

$

2,031

$

1,428

Adjustment for loss (gain) on investments (a)(b)

16

(21)

96

(244)

Adjustment for merger related costs (a)(c) 

145

73

411

153

Adjustment for opioid settlement charges (a)(d) 

–

–

–

1,163

Adjustment for gain on sale of Kroger Specialty Pharmacy (a)(e)

(60)

–

(60)

–

Held for sale income tax adjustment

–

–

(31)

–

2024 and 2023 Adjustment Items

101

52

416

1,072

Net earnings attributable to The Kroger Co.

excluding the adjustment items above

$

719

$

698

$

2,447

$

2,500

Net earnings attributable to The Kroger Co.

per diluted common share

$

0.84

$

0.88

$

2.77

$

1.95

Adjustment for loss (gain) on investments (f)

0.02

(0.03)

0.13

(0.34)

Adjustment for merger related costs (f) 

0.20

0.10

0.56

0.21

Adjustment for opioid settlement charges (f) 

–

–

–

1.60

Adjustment for gain on sale of Kroger Specialty Pharmacy (f)

(0.08)

–

(0.08)

–

Held for sale income tax adjustment (f)

–

–

(0.04)

–

2024 and 2023 Adjustment Items

0.14

0.07

0.57

1.47

Net earnings attributable to The Kroger Co. per 

diluted common share excluding the adjustment items above

$

0.98

$

0.95

$

3.34

$

3.42

Average number of common shares used in

diluted calculation

728

725

728

725

(a)

The amounts presented represent the after-tax effect of each adjustment.

(b)

The pre-tax adjustments for loss (gain) on investments were $20 and ($27) in the third quarters of 2024 and 2023, respectively. The year-to-date pre-tax adjustments for loss (gain) on

investments were $125 and ($317) in the first three quarters of 2024 and 2023, respectively.

(c)

The pre-tax adjustments to OG&A expenses for merger-related costs were $186 and $84 in the third quarters of 2024 and 2023, respectively. The year-to-date pre-tax adjustments to OG&A

expenses for merger-related costs were $509 and $178 in the first three quarters of 2024 and 2023, respectively.

(d)

The year-to-date pre-tax adjustments to OG&A expenses for opioid settlement charges was $1,475 in the first three quarters of 2023.

(e)

The pre-tax adjustment for gain on sale of Kroger Specialty Pharmacy was ($79).

(f)

The amounts presented represent the net earnings (loss) per diluted common share effect of each adjustment.

Note:

2024 Third Quarter Adjustment Items include adjustments for the loss on investments, merger related costs and the gain on sale of Kroger Specialty Pharmacy.

2024 Adjustment Items include the Third Quarter Ajustment Items plus the adjustments that occurred in the first two quarters of 2024 for loss on investments, merger related costs and held for

sale income tax.

2023 Third Quarter Adjustment Items include adjustments for the gain on investments and merger related costs. 

2023 Adjustment Items include the Third Quarter Adjustment Items plus the adjustments that occurred in the first two quarters of 2023 for gain 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 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 because adjusted items are not the result of normal operations.  Items identified in this table should not be considered alternatives to operating

profit 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.

THIRD QUARTER

YEAR-TO-DATE

2024

2023

2024

2023

Operating profit

$

828

$

912

$

2,937

$

1,902

LIFO charge

4

29

66

131

FIFO Operating profit

832

941

3,003

2,033

Adjustment for merger related costs (a)

186

84

509

178

Adjustment for opioid settlement charges

–

–

–

1,475

Other

(1)

(3)

(12)

(6)

2024 and 2023 Adjustment items

185

81

497

1,647

Adjusted FIFO operating profit

excluding the adjustment items above

$

1,017

$

1,022

$

3,500

$

3,680

(a)

Merger related costs primarily include third party professional fees and credit facility fees associated with the proposed merger with Albertsons Companies, Inc.