Kroger(US:KR)2025-12-12 21:03Financial Performance - Kroger reported Q3 2025 sales of $33.859 billion, a 0.7% increase from $33.634 billion in Q3 2024, with sales excluding fuel at $30.689 billion, up 1.3% from $30.299 billion[90]. - Adjusted net earnings attributable to Kroger for Q3 2025 were $697 million, a decrease of 3.1% compared to $719 million in Q3 2024, with adjusted net earnings per diluted share at $1.05, up 7.1% from $0.98[90]. - Kroger's operating profit for Q3 2025 was reported at a loss of $1.541 billion, a decline of 286.1% compared to a profit of $828 million in Q3 2024[90]. - Net earnings attributable to The Kroger Co. for Q3 2025 were $(1,320) million, a decrease from $618 million in Q3 2024[106]. - Adjusted net earnings attributable to The Kroger Co. for Q3 2025 were $697 million, down 3.1% from $719 million in Q3 2024[106]. - Operating profit for Q3 2025 was $(1.5) billion, while it was $644 million for the first three quarters of 2025, impacted by the $2.6 billion impairment[97]. - Total sales for the first three quarters of 2025 increased by 0.1% to $112,917 million compared to $112,815 million in the same period of 2024[113]. - Gross profit for the third quarter of 2025 was $7,735 million, up from $7,534 million in the same quarter of 2024[124]. eCommerce Growth - Kroger anticipates eCommerce sales to grow at a double-digit rate, outpacing other food at home sales, driven by investments in major store projects and enhanced eCommerce capabilities[87]. - eCommerce sales rose by 17% in Q3 2025 and 16% in the first three quarters of 2025 compared to the same periods in 2024, with growth led by strong demand for Delivery solutions[97]. - eCommerce sales grew by 17% in Q3 2025 compared to Q3 2024, driven by a 19% increase in Delivery solutions[110]. - A strategic review of eCommerce operations led to the closure of underperforming fulfillment facilities, resulting in a $2.6 billion impairment charge, with expectations of improved eCommerce profitability moving forward[102]. Shareholder Returns - The company expects to achieve total shareholder return within a target range of 8% to 11% over time[86]. - Share repurchases in Q3 2025 amounted to $1.404 billion, significantly higher than $9 million in Q3 2024[90]. - The company returned $2.3 billion to shareholders through share repurchases and dividends in the first three quarters of 2025[97]. - The company repurchased 14.0 million shares for $947 million at an average price of $67.47 per share in the first three quarters of 2025[161]. Debt and Liquidity - The company plans to maintain a net total debt to adjusted EBITDA ratio target range of 2.30 to 2.50 while continuing to grow dividends and return excess cash to shareholders[85]. - Total debt increased by $105 million to $18.0 billion as of November 8, 2025, due to a net increase in obligations under finance leases[158]. - As of November 8, 2025, the company held $4.0 billion in cash and temporary cash investments, providing operational flexibility[164]. - As of November 8, 2025, the company expects to meet its short-term and long-term liquidity needs through cash and temporary cash investments on hand, cash flows from operating activities, and other liquidity sources[165]. - The company operates with a working capital deficit due to efficient cash use in funding operations and consistent access to capital markets[165]. - Anticipated liquidity needs include working capital for operations, pension plan commitments, interest payments, scheduled principal payments of debt, and capital investments[165]. Operating Expenses and Margins - The FIFO gross margin, excluding rent, depreciation, and amortization, increased by 0.49 basis points in Q3 2025 compared to 0.51 basis points in Q3 2024[90]. - Gross margin rates improved to 22.8% in the first three quarters of 2025 from 22.1% in 2024, primarily due to the sale of the Kroger Specialty Pharmacy business and lower supply chain costs[122]. - OG&A expenses as a percentage of sales rose to 19.8% in the first three quarters of 2025 from 17.2% in 2024, driven by increased healthcare costs and the sale of the Kroger Specialty Pharmacy business[130]. - The LIFO charge was $44 million in Q3 2025, up from $4 million in Q3 2024, and $146 million for the first three quarters of 2025, compared to $66 million in the same period of 2024, due to higher expected product cost inflation[97]. Impairments and Charges - The company recorded a significant impairment charge of $2.6 billion related to fulfillment network in the third quarter of 2025[137]. - The company recognized store closure costs of $100 million related to the planned closing of approximately 60 stores, with a commitment to reinvest savings into customer experience[96]. Cash Flow - Cash flows from operations totaled $4.7 billion for the first three quarters of 2025, a 6% increase from the same period in 2024[97]. - Cash provided by operating activities was $4.658 billion for the first three quarters of 2025, compared to $4.390 billion in the same period of 2024[150]. - Cash used in investing activities increased to $(3.015) billion in the first three quarters of 2025 from $(2.402) billion in 2024, primarily due to decreased asset sale proceeds[152].