01—Abstract
Summary
Summary of the 10-Q filed December 13, 2024. Cited figures are marked; the original filing is the authoritative source.
The Kroger Co. reported third-quarter 2024 sales of $33.63 billiona, down 1.0% from $33.96 billion a year earlier, mainly reflecting lower supermarket fuel sales and the sale of Kroger Specialty Pharmacy.
Identical sales excluding fuel rose 2.3% in the quarter, though net earnings attributable to Kroger fell to $618 millionb ($0.84 per diluted share) from $646 million ($0.88). Adjusted net earnings per diluted share rose 3.2% to $0.98 for the quarter, while operating profit declined 9.2% to $828 million. For the first three quarters, operating profit was $2.94 billion and net earnings per diluted share were $2.77, though adjusted EPS of $3.34 was down 2.3%.
The balance sheet changed significantly during the period. Kroger issued $10.5 billionc of senior notes in August 2024 to fund part of the cash consideration for its proposed merger with Albertsons, lifting cash and temporary cash investments to $13.36 billion and long-term debt to $22.41 billion. On December 10, 2024, a federal court issued a preliminary injunction blocking the merger, and on December 11, 2024 Kroger terminated the merger agreement, stating it owes no Parent Termination Fee.
Albertsons has sued Kroger in Delaware seeking a $600 milliond termination fee, and Kroger denies the allegations. Kroger also terminated its September 2022 repurchase program and authorized a new $7.5 billion program, of which $5.0 billion is expected to be executed through an accelerated share repurchase. Operating cash flow for the first three quarters was $4.39 billion, down from $4.87 billion.
Kroger paid $651 million in dividends in the period, and the filing discloses that the company is in the process of a multi-year technology transformation and that Todd A. Foley signed as Interim Chief Financial Officer.
02—Key points
Key Highlights
- Third-quarter sales were $33.63 billion, down 1.0%; identical sales excluding fuel rose 2.3%, and sales without fuel grew 1.5%.
- Net earnings attributable to Kroger were $618 million ($0.84 per diluted share) in Q3 versus $646 million ($0.88) a year earlier; adjusted EPS was $0.98, up 3.2%.
- Operating profit was $828 million in Q3, down 9.2%, while first-three-quarter operating profit rose to $2.94 billion from $1.90 billion.
- Kroger issued $10.5 billion of senior notes in Q3 2024, raising cash and temporary cash investments to $13.36 billion and total debt to $22.6 billion.
- The Albertsons merger was terminated on December 11, 2024 after a preliminary injunction; Albertsons has sued for a $600 million termination fee, which Kroger disputes.
- A new $7.5 billion share repurchase program was authorized, with $5.0 billion expected through an accelerated share repurchase program.
- Operating cash flow fell to $4.39 billion for the first three quarters from $4.87 billion, and $651 million was paid in dividends.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2025filed December 13, 2024Financial Statements
Q3 FY2025 against Q3 FY2024
| Line item | Q3 FY2025Q3 FY2024 | Change |
|---|---|---|
| Revenue | $33.63B$33.96B | −1.0% |
| Operating Income | $828.00M$912.00M | −9.2% |
| Net Income | $617.00M$647.00M | −4.6% |
| EPS (Basic) | $0.85$0.89 | −4.5% |
| EPS (Diluted) | $0.84$0.88 | −4.5% |
| Shares Outstanding (Basic) | 723.00M719.00M | +0.6% |
| Shares Outstanding (Diluted) | 728.00M725.00M | +0.4% |
05—Questions
Frequently Asked Questions
What happened to the Albertsons merger?
A federal court in Oregon issued a preliminary injunction on December 10, 2024 blocking the merger, and a Washington state court issued a permanent injunction the same day. Kroger delivered a termination notice to Albertsons on December 11, 2024, stating it has no obligation to pay the Parent Termination Fee because Albertsons failed to comply with its merger covenants. Albertsons has sued Kroger in Delaware seeking a $600 million termination fee and additional damages, and Kroger intends to defend the case.
How is Kroger's debt position changed?
Total debt, including finance leases, was $22.6 billion as of November 9, 2024, up $10.4 billion from fiscal year-end 2023, mainly due to the $10.5 billion senior notes issued in August 2024. Of those notes, $4.7 billion carry a special mandatory redemption feature, and Kroger has set a December 18, 2024 redemption date at 101% of principal plus accrued interest. Kroger had no outstanding commercial paper or revolver borrowings as of November 9, 2024.
What is the status of Kroger's share repurchases and capital returns?
Kroger repurchased $125 million of shares in the first three quarters of 2024 under its 1999 program, which is limited to option-exercise proceeds. On December 11, 2024, the Board terminated the September 2022 $1.0 billion program and authorized a new $7.5 billion program, of which $5.0 billion is expected to be executed through an accelerated share repurchase. Dividends paid were $651 million in the first three quarters, with $0.32 per share paid in the third quarter.
What drove the change in Kroger's profitability this quarter?
Operating profit fell 9.2% in the third quarter to $828 million, due to higher OG&A and depreciation expenses as a share of sales and lower fuel operating profit, partly offset by a higher FIFO gross margin rate and a lower LIFO charge. Merger-related costs of $186 million were excluded from adjusted results. Kroger Specialty Pharmacy, sold October 4, 2024 for $464 million, produced a $79 million pre-tax gain.
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