Kroger(KR) - 2025 Q3 - Quarterly Report

Financial Performance - Kroger reported solid third quarter results driven by strong pharmacy and digital performance, reflecting the effectiveness of its value creation model[110]. - Sales for the third quarter ended November 9, 2024, were $33,634 million, a decrease of 1.0$33,957 million for the same period in 2023[1]. - Identical sales excluding fuel increased by 2.3% in the third quarter and 1.2% in the first three quarters of 2024 compared to the same periods in 2023[123]. - Operating profit for the third quarter was $828 million, representing a 9.2$912 million in the third quarter of 2023[118]. - Adjusted net earnings attributable to The Kroger Co. per diluted common share were $0.98 for the third quarter, a 3$0.95 in the same quarter of 2023[117]. - Digital sales increased by 11% in the third quarter and 10% in the first three quarters of 2024 compared to the same periods in 2023[123]. - Net earnings attributable to The Kroger Co. for the third quarter of 2024 were $618 million, a decrease of 4.3$646 million in the third quarter of 2023[140]. - Total sales to retail customers without fuel for the third quarter of 2024 were $30,023 million, reflecting a 1.5$29,580 million in the third quarter of 2023[145]. - The company achieved adjusted FIFO operating profit of $1,017 million for the third quarter, a 0.5$1,022 million in the same quarter of 2023[119]. - The gross margin rate for the third quarter of 2024 was 22.85%, up from 22.03% in the third quarter of 2023, primarily due to the sale of the Kroger Specialty Pharmacy business and strong performance in Our Brands[156]. Shareholder Returns and Capital Management - Kroger aims to achieve total shareholder return within the target range of 8% to 11% over time[108]. - The company has authorized a new share repurchase program totaling $7.5 billion, with$5.0 billion expected to be repurchased through an accelerated share repurchase program[107]. - The company paused its share repurchase program in Q3 2022 to prioritize deleveraging following the proposed merger with Albertsons[107]. - During Q3 2024, the company repurchased approximately 146,000 shares for $9 million at an average price of$55.98 per share; total repurchases for the first three quarters amounted to $125 million for 2.3 million shares[198]. - The company announced a new share repurchase program of$7.5 billion on December 11, 2024, with $5.0 billion expected to be repurchased via an accelerated share repurchase program[200]. Debt and Liquidity - Kroger is committed to maintaining its investment grade debt rating and a net total debt to adjusted EBITDA ratio target range of 2.30 to 2.50[107]. - Total debt increased by$10,375 million primarily due to issuing $10,500 million of senior notes for the proposed merger with Albertsons[114]. - Total debt increased to$22.6 billion as of November 9, 2024, up $10.4 billion from$12.2 billion at the end of fiscal year 2023, primarily due to the issuance of $10.5 billion in senior notes[196]. - As of November 9, 2024, the company held cash and temporary cash investments of$13.4 billion, reflecting net proceeds from a $10.5 billion senior notes issuance in Q3 2024[201]. - The company expects to meet its short-term and long-term liquidity needs through cash flows from operating activities and other liquidity sources, including borrowings under its commercial paper program and bank credit facility[202]. - The company operates with a working capital deficit due to efficient cash use in funding operations and consistent access to capital markets[202]. Operational Focus and Strategy - Kroger's retail business is focused on enhancing customer experience through its four pillars: Fresh, Our Brands, Personalization, and Seamless[104]. - The company plans to maximize growth opportunities in its retail business while investing in associates and providing greater value for customers[106]. - Kroger's value creation model is designed to generate strong free cash flow and support long-term sustainable net earnings growth[107]. - The company is focused on retention by investing in associates through enhanced wages, benefits, and training opportunities[111]. Market and Sales Trends - Supermarket fuel sales decreased by 18.8$3,335 million compared to $4,105 million in the same period last year[145]. - The average retail fuel price decreased by 14.9$33,634 million, down from $33,957 million in the third quarter of 2023[145]. - Total sales, excluding fuel and Kroger Specialty Pharmacy, increased by 2.7$29,470 million, a 2.3% increase compared to $28,818 million in the third quarter of 2023, which saw a decrease of (0.6)$97,595 million, reflecting a 1.2% increase from $96,397 million in the same period of 2023, which had a 1.5$4 million in the third quarter of 2024, significantly lower than $29 million in the same quarter of 2023, and$66 million for the first three quarters of 2024, down from $131 million in the same period of 2023[158]. Other Notable Events - The proposed merger with Albertsons was terminated on December 11, 2024, leading to the automatic termination of related loan commitments[203]. - There has been no material change to the company's critical accounting estimates since the filing of its Annual Report on Form 10-K for the fiscal year ended February 3, 2024[207]. - As of November 9, 2024, the company had no forward-starting interest rate swap agreements or treasury lock agreements outstanding[209].