01—Abstract
Summary
Summary of the 10-K filed March 29, 2022. Cited figures are marked; the original filing is the authoritative source.
The Kroger Co. reported fiscal 2021 (52 weeks ended January 29, 2022) with sales of $137.89 billiona, up 4.1%, driven mainly by supermarket fuel sales, which rose 54.7%.
Sales excluding fuel increased 0.2%, against a strong prior year, and identical sales excluding fuel rose 0.2%, for a two-year stacked growth rate of 14.3%. Net earnings attributable to The Kroger Co. fell 36.0% to $1.66 billionb, or $2.17 per diluted share, while adjusted net earnings per diluted share rose 6.1% to $3.68. Operating profit increased 25.1% to $3.48 billion, and adjusted FIFO operating profit rose 6.3% to $4.31 billion.
The filing attributes the GAAP earnings decline largely to adjusted items, including a $449 millionc charge for multi-employer pension withdrawal liabilities and an $821 million unrealized loss on the Ocado investment. Cash flow from operations was $6.19 billion, and the company returned $2.2 billion to shareholders through share repurchases of $1.65 billion and dividends of $589 million. Total debt including finance leases decreased $49 million to $13.4 billion.
Management reaffirmed a net total debt to adjusted EBITDA target of 2.30 to 2.50 and a long-term total shareholder return target of 8% to 11%. The company also cited higher LIFO charges of $197 milliond amid rising product cost inflation, and a 2022 dividend of $0.21 per share declared for payment on June 1, 2022.
Kroger continues to frame its strategy around fresh, Our Brands, personalization, and seamless digital offerings, with digital sales two-year stacked growth of 113% and alternative profit streams contributing an incremental $150 million of operating profit in 2021. The company also disclosed an estimated $1.1 billion share of underfunding in multi-employer pension plans, and it reported a $1.8 billion in cash and temporary cash investments at year end.
02—Key points
Key Highlights
- Sales of $137.89 billion rose 4.1%, with supermarket fuel sales up 54.7% and sales without fuel up 0.2%.
- GAAP net earnings attributable to Kroger fell 36.0% to $1.66 billion ($2.17 per diluted share), while adjusted EPS rose 6.1% to $3.68.
- Operating profit rose 25.1% to $3.48 billion; adjusted FIFO operating profit rose 6.3% to $4.31 billion.
- Identical sales excluding fuel rose 0.2% in 2021 on top of a 14.1% increase in 2020, a two-year stacked growth of 14.3%.
- Operating cash flow was $6.19 billion; $2.2 billion was returned to shareholders through buybacks ($1.65 billion) and dividends ($589 million).
- Adjusted items included a $449 million multi-employer pension withdrawal charge and an $821 million unrealized investment loss tied to Ocado.
- Management targets a net total debt to adjusted EBITDA ratio of 2.30 to 2.50 and long-term total shareholder return of 8% to 11%.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed March 29, 2022Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $137.89B$132.50B | +4.1% |
| Operating Income | $3.48B$2.78B | +25.1% |
| Interest Expense | $571.00M$544.00M | +5.0% |
| Net Income | $1.67B$2.59B | −35.6% |
| EPS (Basic) | $2.20$3.31 | −33.5% |
| EPS (Diluted) | $2.17$3.27 | −33.6% |
| Shares Outstanding (Basic) | 744.00M773.00M | −3.8% |
| Shares Outstanding (Diluted) | 754.00M781.00M | −3.5% |
05—Questions
Frequently Asked Questions
Why did GAAP earnings fall while adjusted earnings rose?
Net earnings attributable to The Kroger Co. fell 36.0% to $1.66 billion, largely because of 2021 Adjusted Items, including a $449 million pre-tax charge for multi-employer pension withdrawal liabilities and an $821 million unrealized loss on the Ocado investment. Excluding these items, adjusted net earnings rose 2.3% to $2.80 billion, and adjusted EPS rose 6.1% to $3.68.
How much did Kroger spend on share repurchases and dividends?
Kroger repurchased $1.65 billion of shares in 2021 and paid $589 million in dividends, or $0.78 per share, totaling about $2.2 billion returned to shareholders. A $1.0 billion repurchase program was approved on December 30, 2021, with $821 million remaining under it as of January 29, 2022.
What is driving the sales increase?
Total sales rose 4.1% to $137.89 billion, primarily because supermarket fuel sales increased 54.7%, driven by a 7.9% increase in gallons sold and a 43.6% increase in the average retail fuel price. Sales without fuel increased only 0.2%.
What is the outlook for leverage and the dividend?
Kroger is committed to maintaining its investment grade debt rating and a net total debt to adjusted EBITDA target of 2.30 to 2.50. It expects to continue paying comparable quarterly dividends that will increase over time, and it declared a $0.21 per share quarterly dividend payable June 1, 2022.
What risks are highlighted for the business?
The filing highlights rising inflation, including a $197 million LIFO charge in 2021 versus a $7 million credit in 2020, along with labor costs tied to about 310 collective bargaining agreements, multi-employer pension underfunding estimated at about $1.1 billion share, COVID-19 uncertainty, and cybersecurity exposure.
06—Continue