01—Abstract
Summary
Summary of the 10-Q filed June 23, 2023. Cited figures are marked; the original filing is the authoritative source.
The Kroger Co. reported first-quarter 2023 results for the 16-week period ended May 20, 2023.
Sales were $45.17 billiona, up 1.3% from $44.60 billion, while sales without fuel rose 3.5% to $40.07 billion. Net earnings attributable to The Kroger Co. were $962 million, or $1.32 per diluted share, compared with $664 million, or $0.90 per diluted share, a year earlier. Adjusted net earnings per diluted share were $1.51, up 4.1% from $1.45.
Operating profit was $1.47 billionb, roughly flat with the prior year, while adjusted FIFO operating profit rose 4.2% to $1.67 billion. Cash from operations was $2.86 billion, compared with $1.10 billion a year earlier, and cash and temporary cash investments rose to $2.63 billion. The quarter included a $62 million charge for a West Virginia opioid litigation settlement, and $40 million in merger-related costs tied to the pending Albertsons merger.
The $78 millionc unrealized loss on the Ocado investment was also excluded from adjusted results. The company reaffirmed its full-year identical sales without fuel and adjusted net earnings per diluted share guidance. Identical sales without fuel grew 3.5%, and the company noted that growth would have been 5.0% excluding the effect of the terminated Express Scripts pharmacy agreement.
The proposed Albertsons merger, at $34.10d per share before adjustments, is expected to close in early 2024, subject to regulatory clearance. The adjusted per-share price is currently expected to be $27.25, pending SpinCo adjustments.
The company has $17.4 billion of bridge commitments, reduced to $12.65 billion after term loan agreements, and recorded no commercial paper or revolver borrowings at quarter end. Share repurchases were paused in the third quarter of 2022 and remained limited to $29 million in the first quarter.
02—Key points
Key Highlights
- Sales rose 1.3% to $45.17 billion, with sales without fuel up 3.5% to $40.07 billion.
- Diluted EPS was $1.32, up from $0.90, and adjusted diluted EPS was $1.51, up 4.1% from $1.45.
- Operating profit was $1.47 billion, roughly flat, while adjusted FIFO operating profit grew 4.2% to $1.67 billion.
- Cash from operations was $2.86 billion, compared with $1.10 billion in the prior-year quarter.
- A $62 million opioid settlement charge with West Virginia and $40 million in merger-related costs were excluded from adjusted results.
- The pending Albertsons merger is expected to close in early 2024, with the adjusted per-share cash price currently expected at $27.25.
- Full-year identical sales without fuel and adjusted EPS guidance were reaffirmed.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed June 23, 2023Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $45.16B$44.60B | +1.3% |
| Operating Income | $1.47B$1.50B | −2.3% |
| Interest Expense | $153.00M$177.00M | −13.6% |
| Net Income | $962.00M$666.00M | +44.4% |
| EPS (Basic) | $1.33$0.91 | +46.2% |
| EPS (Diluted) | $1.32$0.90 | +46.7% |
| Shares Outstanding (Basic) | 717.00M722.00M | −0.7% |
| Shares Outstanding (Diluted) | 724.00M733.00M | −1.2% |
05—Questions
Frequently Asked Questions
How did Kroger perform in the first quarter of 2023?
Sales were $45.17 billion, up 1.3%. Net earnings attributable to Kroger were $962 million, or $1.32 per diluted share, versus $0.90 a year earlier. Adjusted diluted EPS was $1.51, up 4.1%.
What drove the increase in cash flow?
Cash from operations was $2.86 billion versus $1.10 billion, driven by changes in operating assets and liabilities, including a decrease in pharmacy receivables, favorable FIFO inventory cash flows, and lower cash taxes paid after applying an income tax receivable.
What is the status of the Albertsons merger?
Kroger and Albertsons entered a merger agreement on October 13, 2022, at $34.10 per share before adjustments. The transaction is expected to close in early 2024, subject to regulatory clearance. The adjusted cash price is currently expected to be $27.25, pending SpinCo adjustments, and the Company is paying a $600 million termination fee in certain circumstances.
What were the one-time charges in the quarter?
The quarter included a $62 million legal settlement charge for opioid claims with West Virginia, $40 million in pre-tax merger-related costs, and a $78 million unrealized loss on the Ocado investment. These were excluded from adjusted results.
How is Kroger's balance sheet and capital allocation positioned?
Cash and temporary cash investments were $2.63 billion at May 20, 2023, and there were no commercial paper or revolver borrowings. Total debt rose $55 million to include finance leases. Share repurchases were limited to $29 million, and the $1.0 billion repurchase program has not been used since its September 2022 authorization.
06—Continue