PresentationKazumi TamakiExecutive Officer and GM of Corporate Communications & Investor Relations It's time to begin the ESG briefing by AGC. My name is Tamaki, via IR, master of the ceremony today. Thank you for this opportunity. Let me introduce today's presenters. Representative Director, Executive Vice President, CTO, Hideyuki Kurata; General Manager of Sustainability Division, Corporate Planning and General Division, Yuki Ihara. They will give a presentation with regard to value creation model and the ...

Financial Performance - Kroger's identical sales without fuel increased by 34% in Q2 2025[5] - E-commerce sales grew by 16% compared to last year[5,6] - GAAP operating profit was $863 million[5] - Adjusted FIFO operating profit reached $1091 million[5] - GAAP EPS was $091[5] - Adjusted EPS grew by 12%[5] Guidance - The company updated its FY25 identical sales without fuel guidance to 27%-34%[10] - Operating profit guidance is $48 billion - $49 billion[10] - EPS guidance is $470 - $480[10] - Free cash flow guidance remains at $28 billion - $30 billion[10]

Financial Performance - GAAP Operating Profit was $1,322 million[5], while Adjusted FIFO Operating Profit reached $1,518 million[5] - GAAP EPS stood at $1.29[5], with Adjusted EPS showing a 4% growth[5] - Digital sales increased by 15% year-over-year, driven by strong delivery demand[6] Sales and Profitability - Identical Sales (excluding fuel) grew by 3.2%[5] - The company's Our Brands business accounts for approximately $37 billion in sales[14], and the eCommerce business generates around $14 billion[14] - Gross margin increased to 23% compared to 22% in the previous year[44] Guidance and Outlook - The company anticipates Identical Sales growth (excluding fuel) of 2.25% to 3.25% for the full year 2025[9] - The company projects Operating Profit to be in the range of $4.7 billion to $4.9 billion for fiscal year 2025[9] - Free Cash Flow is expected to be between $2.8 billion and $3.0 billion for the year[9]

Financial Data and Key Metrics Changes - Kroger achieved identical sales without fuel growth of 1.5% for the full year 2024, with digital sales growing 10% compared to last year [25][28] - Adjusted FIFO operating profit for 2024 was $4,700,000,000, with adjusted EPS at $4.47 per diluted share, reflecting a 2% decline when excluding the fifty-third week [28][29] - The FIFO gross margin rate excluding rent, depreciation, and amortization increased by 32 basis points for the full year, primarily due to the sale of Kroger Specialty Pharmacy and lower shrink [26][27] Business Line Data and Key Metrics Changes - Health and wellness was a strong driver of sales in 2024, led by growth in GLP-1s [26] - Alternative profit businesses generated $1,350,000,000 in operating profit, driven by a 17% increase in media [18] - Digital sales reached over $13,000,000,000 in 2024, with significant improvements in profitability noted in the fourth quarter [16][17] Market Data and Key Metrics Changes - Customers adjusted spending habits due to macroeconomic factors, with budget-conscious households reducing spending while less budget-conscious households remained resilient [12] - Inflation for 2024 was in line with expectations, with projections for 2025 inflation set at 1.5% to 2.5% [29][30] Company Strategy and Development Direction - Kroger aims to deliver total shareholder return of 8% to 11% over time, focusing on executing its go-to-market strategy and enhancing customer experience [9][10] - The company plans to significantly increase investment in major store projects, completing 30 major store projects in 2025 [34] - The board has formed a search committee for a new CEO, indicating a focus on leadership continuity and strategic execution [7][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate inflationary pressures and maintain low prices for customers [30] - The company is optimistic about future growth opportunities, particularly in digital sales and alternative profit businesses [19][38] - Management emphasized the importance of associate well-being and retention, which has reached record levels [31][32] Other Important Information - Kroger's net total debt to adjusted EBITDA ratio was 1.79, below the target range of 2.3 to 2.5, providing financial flexibility [33] - The company announced a new $7,500,000,000 share repurchase authorization, with an accelerated share repurchase program for $5,000,000,000 [35] Q&A Session Summary Question: Guidance for 2025 and CEO succession - Management indicated that operating profit growth is expected from both core and alternative profit businesses, with a focus on identifying the right leader for Kroger's growth [44][46][50] Question: Digital sales and profitability improvements - Management noted strong digital sales growth and improvements in profitability, with ongoing investments in technology and operational efficiency [55][56][58] Question: ID sales guidance and inflation impact - Management acknowledged that ID sales guidance reflects flat to slightly up volumes, with inflation expectations influencing the outlook [62][64] Question: Share repurchase and balance sheet strategy - Management confirmed plans for share repurchase and maintaining a leverage ratio that allows for flexibility in capital allocation [90][91] Question: Competitive pricing and inflation trends - Management highlighted the importance of competitive pricing and monitoring supplier price increases, with a strategy to keep prices low for customers [94][96]