First Quarter Highlights Identical Sales without fuel increased 0.5% Operating Profit of $1,294 million; EPS of $1.29 Adjusted FIFO Operating Profit of $1,499 million and Adjusted EPS of $1.43 Executed its go-to-market strategy to deliver value for customers Grew digital sales more than 8%, with Delivery and Pickup combining for double-digit growth Increased total households, loyal households and customer visits CINCINNATI, June 20, 2024 /PRNewswire/ -- The Kroger Co. (NYSE:KR) today reported its first quarter 2024 results, reaffirmed guidance and updated investors on how Leading with Fresh and Accelerating with Digital continues to position Kroger for long-term sustainable growth. Comments from Chairman and CEO Rodney McMullen "Kroger is off to a solid start in 2024 led by better-than-expected performance of our grocery business.    Kroger is delivering exceptional value at a time when many customers need it more than ever, by providing affordable prices with personalized promotions. We appreciate our associates who are elevating the customer experience and improving store execution. Together, this is growing households and increasing customer visits. The long-term investments we have made to strengthen and diversify our model enables us to manage economic cycles and gives us the confidence to deliver on our full year outlook. By delivering value for customers and investing in our associates, Kroger remains well-positioned to generate attractive and sustainable returns for our shareholders."   First Quarter Financial Results 1Q24 ($ in millions; except EPS) 1Q23 ($ in millions; except EPS) ID Sales* (Table 4) 0.5 % 3.5 % Earnings Per Share $1.29 $1.32 Adjusted EPS (Table 6) $1.43 $1.51 Operating Profit $1,294 $1,470 Adjusted FIFO Operating Profit (Table 7) $1,499 $1,669 FIFO Gross Margin Rate* Decreased 7 basis points OG&A Rate* Increased 22 basis points * Without fuel and adjustment items, if applicable. Total company sales were $45.3 billion in the first quarter compared to $45.2 billion for the same period last year. Excluding fuel, sales increased 0.6% compared to the same period last year. Gross margin was 22.4% of sales for the first quarter. The FIFO gross margin rate, excluding fuel, decreased 7 basis points compared to the same period last year. The decrease in rate was primarily attributable to lower pharmacy margins and increased price investments, partially offset by favorable product mix reflecting Our Brands margin performance. The LIFO charge for the quarter was $41 million, compared to a LIFO charge of $99 million for the same period last year. The decreased charge for the quarter was due to lower inflation expectations for the current year compared to last year. The Operating, General & Administrative rate increased 22 basis points, excluding fuel and adjustment items, compared to the same period last year. This increase in rate was driven by planned investments in associate wages and increased incentive plan costs, partially offset by continued execution of cost savings initiatives. Capital Allocation Strategy Kroger expects to continue to generate strong free cash flow and remains committed to investing in the business to drive long-term sustainable net earnings growth, as well as maintaining its current investment grade debt rating. The Company expects to continue to pay its quarterly dividend and expects this to increase over time, subject to board approval. Kroger has paused its share repurchase program to prioritize de-leveraging following the proposed merger with Albertsons. Kroger's net total debt to adjusted EBITDA ratio is 1.25 compared to 1.34 a year ago (Table 5). The company's net total debt to adjusted EBITDA ratio target range is 2.30 to 2.50. Kroger's strong balance sheet provides ample opportunities for the Company to pursue growth and enhance shareholder value.   Full-Year 2024 Guidance* Reaffirmed Identical Sales without fuel of 0.25% – 1.75% Adjusted FIFO Operating Profit of $4.6 – $4.8 billion Adjusted net earnings per diluted share of $4.30 – $4.50 Adjusted Free Cash Flow of $2.5 – $2.7 billion** Capital expenditures of $3.4 – $3.6 billion Adjusted effective tax rate of 23%*** * Without adjusted items, if applicable. Kroger is unable to provide a full reconciliation of the GAAP and non-GAAP measures used in 2024 guidance without unreasonable effort because it is not possible to predict certain of our adjustment items with a reasonable degree of certainty. This information is dependent upon future events and may be outside of our control and its unavailability could have a significant impact on 2024 GAAP financial results.  ** Adjusted free cash flow excludes planned payments related to the restructuring of multi-employer pension plans, payments related to opioid settlements and merger-related expenses. *** The adjusted tax rate reflects typical tax adjustments and does not reflect changes to the rate from the completion of income tax audit examinations and changes in tax laws, which cannot be predicted. First Quarter 2024 Highlights Leading with Fresh   Introduced 346 new Our Brands items Achieved a new record for quarterly floral sales led by strong Valentine's Day and Mother's Day sales Launched a new brand, Field & Vine, which offers high quality and regionally grown berries Accelerating with Digital Increased delivery sales by 17% over last year led by Customer Fulfillment Centers Increased digitally engaged households by 9% compared to last year Expanded new Kroger Precision Marketing advertising capabilities on Meta's platforms Achieved a new record for quarterly pickup fill rate Associate Experience Awarded the 2024 Platinum Bell Seal for Workplace Mental Health by Mental Health America Recognized as one of the All-Time Top Corporations for Women Business Enterprises by the WBENC Named as a Best Workplace for Diverse Professionals by Mogul Live Our Purpose Featured on the 2024 Axios Harris Poll 100, an annual ranking of the most visible and trusted companies in America Sponsored the 2024 National STEM Festival through Kroger's Zero Hunger | Zero Waste Foundation Celebrated Earth Month with a contribution to the World Wildlife Fund and introduction of a new reusable bag campaign  About Kroger At The Kroger Co. (NYSE:KR), we are dedicated to our Purpose: to Feed the Human Spirit™. We are, across our family of companies nearly 420,000 associates who serve over eleven million customers daily through a seamless digital shopping experience and retail food stores under a variety of banner names, serving America through food inspiration and uplift, and creating #ZeroHungerZeroWaste communities by 2025. To learn more about us, visit our newsroom and investor relations site. Kroger's first quarter 2024 ended on May 25, 2024.  Note: Fuel sales have historically had a low gross margin rate and operating expense rate as compared to corresponding rates on non-fuel sales. As a result, Kroger discusses the changes in these rates excluding the effect of fuel. Please refer to the supplemental information presented in the tables for reconciliations of the non-GAAP financial measures used in this press release to the most comparable GAAP financial measure and related disclosure. As noted above, Kroger is unable to provide a full reconciliation of the GAAP and non-GAAP measures used in its guidance without unreasonable effort because it is not possible to predict certain of our adjustment items with a reasonable degree of certainty. This information is dependent upon future events and may be outside of our control and its unavailability could have a significant impact on GAAP financial results. This press release contains certain statements that constitute "forward-looking statements" about Kroger's financial position and the future performance of the company. These statements are based on management's assumptions and beliefs in light of the information currently available to it. Such statements are indicated by words or phrases such as "achieve," "committed," "confidence," "continue," "deliver," "expect," "future," "guidance," "model," "outlook," "strategy," "target," "trends," "well-positioned," and variations of such words and similar phrases. Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. These include the specific risk factors identified in "Risk Factors" in our annual report on Form 10-K for our last fiscal year and any subsequent filings, as well as the following: Kroger's ability to achieve sales, earnings, incremental FIFO operating profit, and adjusted free cash flow goals may be affected by: the risks relating to or arising from our proposed nationwide opioid litigation settlement, including our ability to finalize and effectuate the settlement, the scope and coverage of the ultimate settlement and the expected financial or other impacts that could result from the settlement; our proposed transaction with Albertsons, including, among other things, our ability to consummate the proposed transaction and related divestiture plan, including on the terms of the merger agreement and divestiture plan, on the anticipated timeline, with the required regulatory approvals, and/or resolution of pending litigation challenging the merger; labor negotiations; potential work stoppages; changes in the unemployment rate; pressures in the labor market; changes in government-funded benefit programs; changes in the types and numbers of businesses that compete with Kroger; pricing and promotional activities of existing and new competitors, and the aggressiveness of that competition; Kroger's response to these actions; the state of the economy, including interest rates, the inflationary, disinflationary and/or deflationary trends and such trends in certain commodities, products and/or operating costs; the geopolitical environment including wars and conflicts; unstable political situations and social unrest; changes in tariffs; the effect that fuel costs have on consumer spending; volatility of fuel margins; manufacturing commodity costs; supply constraints; diesel fuel costs related to Kroger's logistics operations; trends in consumer spending; the extent to which Kroger's customers exercise caution in their purchasing in response to economic conditions; the uncertainty of economic growth or recession; stock repurchases; changes in the regulatory environment in which Kroger operates; Kroger's ability to retain pharmacy sales from third party payors; consolidation in the healthcare industry, including pharmacy benefit managers; Kroger's ability to negotiate modifications to multi-employer pension plans; natural disasters or adverse weather conditions; the effect of public health crises or other significant catastrophic events; the potential costs and risks associated with potential cyber-attacks or data security breaches; the success of Kroger's future growth plans; the ability to execute our growth strategy and value creation model, including continued cost savings, growth of our alternative profit businesses, and our ability to better serve our customers and to generate customer loyalty and sustainable growth through our strategic pillars of fresh, our brands, personalization, and seamless; and the successful integration of merged companies and new partnerships. Our ability to achieve these goals may also be affected by our ability to manage the factors identified above. Our ability to execute our financial strategy may be affected by our ability to generate cash flow. Kroger's adjusted effective tax rate may differ from the expected rate due to changes in tax laws, the status of pending items with various taxing authorities, and the deductibility of certain expenses. Kroger assumes no obligation to update the information contained herein unless required by applicable law. Please refer to Kroger's reports and filings with the Securities and Exchange Commission for a further discussion of these risks and uncertainties. Note: Kroger's quarterly conference call with investors will broadcast live at 10 a.m. (ET) on June 20, 2024 at ir.kroger.com. An on-demand replay of the webcast will be available at approximately 1 p.m. (ET) on Thursday, June 20, 2024. 1st Quarter 2024 Tables Include: Consolidated Statements of Operations Consolidated Balance Sheets Consolidated Statements of Cash Flows Supplemental Sales Information Reconciliation of Net Total Debt and Net Earnings Attributable to The Kroger Co. to Adjusted EBITDA Net Earnings Per Diluted Share Excluding the Adjustment Items Operating Profit Excluding the Adjustment Items                        Table 1.THE KROGER CO.CONSOLIDATED STATEMENTS OF OPERATIONS(in millions, except per share amounts)(unaudited) FIRST QUARTER 2024 2023 SALES $     45,269 100.0 % $     45,165 100.0 % OPERATING EXPENSES MERCHANDISE COSTS, INCLUDING ADVERTISING, WAREHOUSING AND TRANSPORTATION (a), AND LIFO CHARGE (b) 35,124 77.6 35,080 77.7 OPERATING, GENERAL AND ADMINISTRATIVE (a) 7,604 16.8 7,393 16.4 RENT 269 0.6 265 0.6 DEPRECIATION AND AMORTIZATION 978 2.1 957 2.1 OPERATING PROFIT 1,294 2.9 1,470 3.3 OTHER INCOME (EXPENSE) INTEREST EXPENSE (123) (0.3) (153) (0.3) NON-SERVICE COMPONENT OF COMPANY-SPONSORED PENSION PLAN BENEFITS 4 - 9 - GAIN (LOSS) ON INVESTMENTS 16 - (78) (0.2) NET EARNINGS BEFORE INCOME TAX EXPENSE 1,191 2.6 1,248 2.8 INCOME TAX EXPENSE 235 0.5 286 0.6 NET EARNINGS INCLUDING NONCONTROLLING INTERESTS 956 2.1 962 2.1 NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS 9 - - - NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. $         947 2.1 % $         962 2.1 % NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER BASIC COMMON SHARE $        1.30 $        1.33 AVERAGE NUMBER  OF COMMON SHARES USED IN BASIC CALCULATION 721 717 NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE $        1.29 $        1.32 AVERAGE NUMBER OF COMMON SHARES USED IN DILUTED CALCULATION 727 724 DIVIDENDS DECLARED PER COMMON SHARE $        0.29 $        0.26 Note: Certain percentages may not sum due to rounding. Note: The Company defines First-In First-Out (FIFO) gross profit as sales minus merchandise costs, including advertising, warehousing and transportation, but excluding the Last-In First-Out (LIFO) charge. The Company defines FIFO gross margin as FIFO gross profit divided by sales. The Company defines FIFO operating profit as operating profit excluding the LIFO charge. The Company defines FIFO operating margin as FIFO operating profit divided by sales. The above FIFO financial metrics are important measures used by management to evaluate operational effectiveness.  Managementbelieves these FIFO financial metrics are useful to investors and analysts because they measure our day-to-day operational effectiveness. (a) Merchandise costs ("COGS") and operating, general and administrative expenses ("OG&A") exclude depreciation and amortizationexpense and rent expense which are included in separate expense lines. (b) LIFO charges of $41 and $99 were recorded in the first quarters of 2024 and 2023, respectively.