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Kroger’s Q4 earnings beat expectations

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'We expect to continue our momentum in 2024'

Kroger’s Q4 earnings beat expectations

CINCINNATI—Kroger reported flat sales for the fourth quarter and fiscal year ended February 3, but profits beat expectations. The retailer reported a $736 million profit on sales of $37.1 billion for the three-month period.

Kroger noted that identical sales (excluding fuel decreased 0.8% in the quarter, while underlying identical sales without fuel increased 0.1%. The company’s fourth quarter results also included an operating Profit of $1,194 million; EPS of $1.01; an adjusted FIFO operating profit of $1,307 million and adjusted EPS of $1.34, which include a benefit of $187 million and $0.20, respectively, from the 53rd week in the 2023 fiscal year. Kroger said it also executed its go-to-market strategy to deliver value for customers. The company grew digital sales by more than 10%, excluding the 53rd week, and increased loyal households and customer visits.

“Kroger achieved strong 2023 results, in line with our long-term growth model and built upon three consecutive years of historic growth,” company Chairman and CEO Rodney McMullen said in a statement. “As customers manage macroeconomic pressures, we are lowering prices and offering even more ways to save with personalized promotions and rewards. Our unique seamless shopping experience provides customers the products they want, when and how they want them, with zero compromise on quality, convenience and selection.

“We respect and appreciate our associates who are delivering a full, fresh and friendly customer experience. Over the last five years, we’ve made historic investments in associate wages, benefits and career development opportunities, including significant investments to help stabilize associates’ future pension benefits.

“We are increasing customer visits and growing loyal households through the strength of our retail business, which positions Kroger for more ways to drive sustainable future growth. We expect to continue our momentum in 2024 by delivering value for customers, investing in associates and generating attractive and sustainable shareholder returns.”

For the full year, Kroger said total company sales were $150.0 billion in 2023 including $2.7 billion from the 53rd week, compared to $148.3 billion for the same period last year. Excluding fuel and the 53rd week, sales increased 1.1% compared to last year.

The gross margin was 22.2% of sales for 2023. The FIFO gross margin rate, excluding fuel and the 53rd week, increased 18 basis points compared to last year. This improvement in rate was primarily attributable to strong Our Brands performance, sourcing benefits, lower supply chain costs, and the effect of our terminated agreement with Express Scripts, partially offset by increased price investments and higher shrinkage.

Looking ahead to the 2024 fiscal year, Kroger said it expects:

  • Identical sales growth (excluding fuel) of 0.25% to 1.75%.
  • Adjusted FIFO operating profit of $4.6 million to $4.8 billion.
  • Adjusted net earnings per diluted share of $4.30 to $4.50.
  • Adjusted Free Cash Flow of $2.5 billion to $2.7 billion.
  • Capital expenditures of $3.4 billion to $3.6 billion.
  • An adjusted effective tax rate of 23%.

“Kroger’s 2023 results provide another proof point of the strength and resilience of our value creation model, which supported another year of strong free cash flow and net earnings growth,” interim chief financial officer Todd Foley said. “In 2024, we expect to grow revenue by delivering value for customers and enhancing our seamless shopping experience. We plan to balance investments in our business, including lowering prices and increasing associate wages, with productivity and cost savings initiatives, improvement on long-term initiatives in gross margin and growth in our alternative profit businesses.

“This strength in our model gives us confidence in our ability to deliver on our 2024 guidance and maintain our strong track record of delivering for our customers, investing in our associates and generating attractive and sustainable returns for shareholders.”


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