01—Abstract
Summary
Summary of the 8-K filed June 20, 2024. Cited figures are marked; the original filing is the authoritative source.
The Kroger Co. (NYSE: KR) reported first quarter 2024 results on June 20, 2024, reaffirming its full-year 2024 guidance.
Sales were $45.3 billiona, compared with $45.2 billion a year earlier, and operating profit was $1,294 million, down from $1,470 million. Diluted EPS was $1.29, compared with $1.32, while adjusted EPS was $1.43, compared with $1.51. Identical sales without fuel rose 0.5%, down from 3.5% in the prior-year quarter.
Adjusted FIFO operating profit was $1,499 millionb, compared with $1,669 million. The filing attributes the gross margin pressure primarily to lower pharmacy margins and increased price investments, partly offset by favorable product mix from Our Brands. Operating, general and administrative rate rose 22 basis points, reflecting planned associate wage investments and higher incentive plan costs.
Kroger reported a net total debt to adjusted EBITDA ratio of 1.25, versus 1.34 a year earlier, against a target range of 2.30 to 2.50. It has paused its share repurchase program to prioritize de-leveraging following the proposed merger with Albertsons. Full-year 2024 guidance was reaffirmed, including identical sales without fuel of 0.25% to 1.75%, adjusted FIFO operating profit of $4.6 to $4.8 billionc, adjusted net earnings per diluted share of $4.30 to $4.50, adjusted free cash flow of $2.5 to $2.7 billion, and capital expenditures of $3.4 to $3.6 billion.
02—Key points
Key Highlights
- Net earnings attributable to The Kroger Co. were $947 million, or $1.29 per diluted share, versus $962 million, or $1.32, a year earlier.
- Adjusted EPS was $1.43, down from $1.51, and adjusted FIFO operating profit was $1,499 million, down from $1,669 million.
- Identical sales without fuel increased 0.5%, down from 3.5% in the first quarter of 2023.
- FIFO gross margin rate, excluding fuel, decreased 7 basis points, driven by lower pharmacy margins and increased price investments.
- Kroger paused its share repurchase program to prioritize de-leveraging following the proposed Albertsons merger; the net total debt to adjusted EBITDA ratio improved to 1.25 from 1.34.
- Full-year 2024 guidance was reaffirmed, including adjusted FIFO operating profit of $4.6 to $4.8 billion and adjusted EPS of $4.30 to $4.50.
- Digital sales grew more than 8%, with delivery sales up 17% led by Customer Fulfillment Centers.
03—Questions
Frequently Asked Questions
Why did Kroger's profitability decline in the first quarter of 2024?
Operating profit fell to $1,294 million from $1,470 million. The filing cites a 22 basis point rise in the OG&A rate, driven by planned associate wage investments and higher incentive plan costs, along with a 7 basis point decline in the FIFO gross margin rate, attributed to lower pharmacy margins and increased price investments. The LIFO charge was lower at $41 million versus $99 million, which partly offset these pressures.
Is Kroger still on track to meet its 2024 guidance?
Yes. Kroger reaffirmed its full-year 2024 guidance, including adjusted FIFO operating profit of $4.6 to $4.8 billion, adjusted EPS of $4.30 to $4.50, adjusted free cash flow of $2.5 to $2.7 billion, and capital expenditures of $3.4 to $3.6 billion.
Will Kroger continue to repurchase its shares?
Not for now. The filing states that Kroger has paused its share repurchase program to prioritize de-leveraging following the proposed merger with Albertsons. The company does expect to continue paying its quarterly dividend and to increase it over time, subject to board approval.
How strong is Kroger's balance sheet?
Kroger reported a net total debt to adjusted EBITDA ratio of 1.25, compared with 1.34 a year earlier, and net total debt of $9.72 billion, down from $11.04 billion. The company's stated target range for this ratio is 2.30 to 2.50, and it expects to maintain its current investment grade debt rating.
04—Continue