01—Abstract
Summary
Summary of the 10-Q filed September 20, 2024. Cited figures are marked; the original filing is the authoritative source.
The Kroger Co. reported solid second-quarter 2024 results for the 12 weeks ended August 17, 2024, with net earnings attributable to The Kroger Co. of $466 milliona, or $0.64 per diluted share, compared with a net loss of $180 million, or $(0.25) per diluted share, in the second quarter of 2023.
Sales were $33.91 billionb, up 0.2%, while adjusted net earnings per diluted share were $0.93, a 3.1% decrease from $0.96. For the first two quarters of 2024, net earnings were $1.41 billion, or $1.93 per diluted share, and adjusted net earnings were $2.36 per diluted share, down 4.5%. Identical sales excluding fuel rose 1.2% in the quarter, and digital sales increased 11%.
Operating profit was $815 millionc in the quarter, and cash flow from operations for the first two quarters was $3.46 billion, down from $4.36 billion a year earlier. The filing is dominated by the proposed merger with Albertsons Companies, Inc. The FTC and several states are seeking to block the deal, and a preliminary injunction hearing in the FTC federal litigation began on August 26, 2024. The merger agreement carries a $600 million termination fee in certain circumstances, and the Merger Outside Date is October 9, 2024, subject to extension.
Merger-related costs were $148 milliond in the second quarter and $323 million in the first two quarters. To fund the cash consideration, Kroger issued $10.5 billion of senior notes on August 20, 2024, and entered into a $5.0 billion revolving credit facility upon the merger's closing. The company also agreed to divest stores and banners to C&S Wholesale Grocers, LLC in connection with the merger.
Opioid settlement charges recorded in 2023 remain a source of liabilities. Kroger recorded $1.41 billion of opioid settlement charges in the second quarter of 2023, and $1.0 billion of estimated settlement liability remained at August 17, 2024, with the agreement subject to conditions that have not yet been satisfied. Cash and temporary cash investments were $2.79 billion at quarter end, and the company paused share repurchases in 2022 to prioritize debt reduction.
02—Key points
Key Highlights
- Second-quarter 2024 net earnings attributable to The Kroger Co. were $466 million, or $0.64 per diluted share, versus a net loss of $180 million, or $(0.25) per diluted share, in the prior-year quarter.
- Adjusted net earnings per diluted share were $0.93 for the second quarter, a 3.1% decrease from $0.96, and $2.36 for the first two quarters, a 4.5% decrease from $2.47.
- Sales were $33.91 billion for the second quarter, up 0.2%, with identical sales excluding fuel up 1.2% and digital sales up 11%.
- Operating profit was $815 million for the second quarter, compared with an operating loss of $479 million a year earlier, which included opioid settlement charges.
- Pending Albertsons merger faces an FTC administrative proceeding and federal litigation, with a preliminary injunction hearing beginning August 26, 2024; the merger outside date is October 9, 2024, subject to extension.
- Kroger issued $10.5 billion of senior notes on August 20, 2024 to help fund the cash consideration for the Albertsons merger, and terminated the bridge term loan commitment as a result.
- Cash and temporary cash investments rose to $2.79 billion at August 17, 2024, and $420 million was returned to shareholders through dividends in the first two quarters.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2025filed September 20, 2024Financial Statements
Q2 FY2025 against Q2 FY2024
| Line item | Q2 FY2025Q2 FY2024 | Change |
|---|---|---|
| Revenue | $33.91B$33.85B | +0.2% |
| Operating Income | $815.00M-$479.00M | +270.1% |
| Interest Expense | $84.00M$93.00M | −9.7% |
| Net Income | $465.00M-$179.00M | +359.8% |
| EPS (Basic) | $0.64$-0.25 | +356.0% |
| EPS (Diluted) | $0.64$-0.25 | +356.0% |
| Shares Outstanding (Basic) | 723.00M719.00M | +0.6% |
| Shares Outstanding (Diluted) | 727.00M719.00M | +1.1% |
05—Questions
Frequently Asked Questions
How did Kroger perform in the second quarter of 2024?
Kroger reported net earnings attributable to The Kroger Co. of $466 million, or $0.64 per diluted share, compared with a net loss of $180 million, or $(0.25) per diluted share, a year earlier. Sales were $33.91 billion, up 0.2%, and operating profit was $815 million. Adjusted net earnings per diluted share were $0.93, down 3.1% from $0.96.
What is the status of the proposed Albertsons merger?
The merger remains pending. The FTC instituted an administrative proceeding and, with nine states, filed federal litigation seeking a preliminary injunction; a hearing began on August 26, 2024. Washington and Colorado attorneys general have also sued, and private plaintiffs have sought to enjoin the deal. The filing states the expected timing of the merger is unclear, and the Merger Outside Date is October 9, 2024, as may be extended. Kroger would owe a $600 million termination fee in specified circumstances.
How is Kroger financing the Albertsons acquisition?
On August 20, 2024, Kroger issued $10.5 billion of senior notes across seven tranches maturing from 2026 to 2064. Some series, totaling $5.0 billion, are subject to a special mandatory redemption at 101% if the merger does not close. Kroger also terminated its $17.4 billion bridge commitment and amended its revolving credit facility to $5.0 billion upon merger closing.
What liabilities remain from the opioid litigation?
Kroger recorded $1.41 billion of opioid settlement charges in the second quarter of 2023. As of August 17, 2024, it carried $284 million in other current liabilities and $1.13 billion... more precisely $1,129 million in other long-term liabilities for the estimated settlement liability, with payments of approximately $1.24 billion and $177 million over 11 and 6 years. The company states it cannot predict whether the agreement will become effective.
How is Kroger's cash position and capital allocation?
Cash and temporary cash investments were $2.8 billion at August 17, 2024, up from $1.9 billion at fiscal year-end 2023. Operating cash flow was $3.46 billion for the first two quarters of 2024, down from $4.36 billion. Kroger paid $420 million in dividends and repurchased $116 million of shares in the first half, mostly to offset option-related dilution, while its $1.0 billion September 2022 repurchase program remains unused.
06—Continue