01—Abstract
Summary
Summary of the 10-K filed March 28, 2023. Cited figures are marked; the original filing is the authoritative source.
The Kroger Co. reported fiscal 2022 (52 weeks ended January 28, 2023) sales of $148.26 billiona, up 7.5% from $137.89 billion in 2021, and net earnings attributable to The Kroger Co. of $2.24 billion, or $3.06 per diluted share, compared with $1.66 billion, or $2.17 per diluted share, in 2021.
Excluding Adjusted Items, net earnings per diluted share were $4.23b, a 14.9% increase from $3.68. Identical sales excluding fuel rose 5.6%, and Our Brands represented over $30 billion of sales. Operating profit was $4.13 billion, and adjusted FIFO operating profit was $5.08 billion.
The LIFO charge rose to $626 millionc from $197 million, attributed to higher product cost inflation, primarily in grocery. Cash provided by operating activities was $4.50 billion, versus $6.19 billion in 2021. The company's pending merger with Albertsons Companies, Inc., announced October 13, 2022, dominates the outlook.
The filing states the transaction implies a total enterprise value of approximately $24.6 billiond and expects closing in early 2024, subject to regulatory clearance. Kroger has committed a $17.4 billion bridge facility, reduced to $12.65 billion after $4.75 billion of term loans were committed, and paused share repurchases in the third quarter of 2022 to prioritize de-leveraging. A $600 million termination fee applies if the agreement is terminated at the Outside Date while all conditions other than regulatory approval are satisfied.
Other items include a $164 million goodwill and fixed asset impairment at Vitacost.com, an $85 million opioid settlement with New Mexico, and an estimated $2.5 billion share of multi-employer pension underfunding, up about $1.4 billion. Total debt including finance leases was $13.4 billion, and the company paid $0.94 per share in dividends during 2022, with a quarterly dividend of $0.26 declared in March 2023.
02—Key points
Key Highlights
- Sales of $148.26 billion rose 7.5%, with fuel sales up 26.9% on a 28.5% increase in average retail fuel price.
- Diluted EPS was $3.06 (up 41.0%); adjusted diluted EPS excluding Adjusted Items was $4.23 (up 14.9%).
- Identical sales excluding fuel grew 5.6%, and Our Brands identical sales grew 9.0%; digital sales rose 4%, with Delivery up 25%.
- Pending Albertsons merger implies a total enterprise value of about $24.6 billion; closing is expected in early 2024, and a $600 million termination fee applies in certain circumstances.
- Share repurchases were paused in Q3 2022 to prioritize de-leveraging; $1.0 billion remains authorized under the September 2022 program.
- LIFO charge increased to $626 million from $197 million due to higher product cost inflation, primarily in grocery.
- Operating cash flow fell to $4.50 billion from $6.19 billion, driven by working capital changes, including higher inventory and timing of payables and receivables.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed March 28, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $148.26B$137.89B | +7.5% |
| Operating Income | $4.13B$3.48B | +18.7% |
| Interest Expense | $535.00M$571.00M | −6.3% |
| Net Income | $2.25B$1.67B | +35.0% |
| EPS (Basic) | $3.10$2.20 | +40.9% |
| EPS (Diluted) | $3.06$2.17 | +41.0% |
| Shares Outstanding (Basic) | 718.00M744.00M | −3.5% |
| Shares Outstanding (Diluted) | 727.00M754.00M | −3.6% |
05—Questions
Frequently Asked Questions
How did Kroger perform financially in fiscal 2022?
Sales rose 7.5% to $148.26 billion and net earnings attributable to Kroger were $2.24 billion, or $3.06 per diluted share, up from $2.17 per diluted share in 2021. Excluding Adjusted Items, diluted EPS was $4.23, up 14.9%.
What is the status of the Albertsons merger?
Kroger entered into a merger agreement with Albertsons on October 13, 2022, at $34.10 per share, subject to reductions including a special dividend and any SpinCo adjustments; the adjusted price is expected to be $27.25. The transaction is expected to close in early 2024, subject to regulatory clearance, and Kroger has committed bridge and term loan financing.
Why did Kroger pause its share repurchases?
The company paused its share repurchase program during the third quarter of 2022 to prioritize de-leveraging following the proposed merger with Albertsons. No shares were repurchased under the $1.0 billion September 2022 authorization.
What were the main one-time charges in 2022?
Key charges included a $164 million goodwill and fixed asset impairment related to Vitacost.com, an $85 million legal settlement with the State of New Mexico over opioid claims, $44 million in merger-related costs, and a $728 million loss on investments, largely from the Ocado investment.
What is Kroger's exposure to multi-employer pension plans?
Kroger estimates its share of underfunding in multi-employer pension plans at approximately $2.5 billion, or $1.9 billion net of tax, an increase of about $1.4 billion from 2021, mainly due to lower-than-expected asset returns. The company states this underfunding is not its direct liability, but contributions to most funds are expected to increase.
06—Continue