KR - Earnings call 4 2024 | The Kroger Co.

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Operator

Good morning, and welcome to the Kroger Co., Fourth Quarter and Full Year 2023 Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Rob Quast, Senior Director, Investor Relations. Please go ahead.

Rob Quast

Good morning. us Call. Fourth joining Year and for Earnings XXXX you for Quarter Kroger's Full Thank joined by Officer, am McMullen I today and Officer, Chief Interim Rodney Executive Chief Financial Todd Kroger's Foley. Chairman and

include a our no on are the ongoing After is I materially. update want have over effect Instructions] look A on can business believe basis caution [Operator will you discussions want The Before we many information. questions. we actual we I forward-looking contained such events an may to call We filings. to statements begin, statements. SEC now forward Rodney. that Kroger in your differ the of factors and to our that that that detailed remind obligation material today's discussion our will predictions, prepared you remarks, results to Company taking assumes to or turn

W. McMullen

and I'd our take for Good position. contributor Rob. you we leadership joining more thank to you, Todd Kroger CFO, is interim moment today. us been a years, he in Todd for serving Foley. morning, a Thank are and XX has this meaningful to like to everyone, than first excited welcome

guidance continue XXXX as our how XXXX quarter results of in I'd us to our full beyond. recap fourth start deliver on Before to provide and we our I allowed Todd model us as performance, of value-creation our our like our momentum and discussion well well how XXXX. will morning. an XXXX by begin, this financial outline the goals financial of for it positions topics Then and a cover to will sharing the strength our for year

conclude our open with will an before questions. for proposed I we merger on with Finally, it up Albertsons update

creation supports value which I'd optimism future. the Kroger's model, our for start with like to

investing in best-in-class food, returns people we our and take our associates, Kroger. of and we and vision, this know that generate by delivering We are a when for are that We vision customer attractive they when we shareholders. guided think think care our customers our experience achieve To our associates. sustainable

includes fresh, areas: and a will and go-to-market power grow build Kroger's brands, personalization focus loyalty. sales that that experience strategy seamless customer propels X

associates in by talented executing this To our Our attract, Kroger's outstanding delivering and we our power customer of associates. an team make and success develop investments holistic strategy retain teams, experience.

ever. and how creation made creates unique in in other By shareholders. and generating and personalized more model our ways than while value areas offers our alternative investments delivering traffic we retail experience, our us for sustainable shopping profit to experience Our enables business significant our accelerates growth generate a that balance and fresh as loyalty products businesses. We've to can growth demonstrating in opportunities are returns now this model such seamless investments customers' strengthen associates through

net to and increases return more and creates growth capital shareholders. flow, This business, jobs and in cash generates enables sustainable earnings career turn in excess capital grow supports the more associates opportunities to which us to for which investments

for new plans growth excited that building to a are we investment stores XXXX, capital our we long-term model. more that of way part As our support meaningful are will in announce

experience future. Restock we the that in years serving Kroger knew a key omnichannel launched we several When to customers ago, strong a our was

we'll our digital to continue remains as with to an pleased part growth invest we've it important in made the model. are We progress and there,

in the and the online. channel. strong believe network comes In shop and We we know many important, store through in-store profitable go-to-market still addition, digital customers that our ways we is growing store a most of both

a to way our there be shop So with it's customers to for in us. choose they important

our new we As TSR sales in part important growth be an expect of forward. to stores result, model a going

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customers their budgets. for stretch looking meet Kroger's executing prices to value us our needs. strategy lowering As a positioned commitment go-to-market result, customers' to well were and to our

more the customers' By serve increasing industry-leading delivering households right and through experience, our can brand's to deploy our fuel rewards to sciences customers personalization enhancing discounts, experience, fresh right grew our digital capabilities and time. more at data improving customers products, quality our including effectively loyal personalized even our offers. AI we By we our the and XXXX, digital saved loyalty and in offers

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fourth optimism give us quarter, XXXX. turn the helped promotions position effective and During for These positive. trends us our traffic well

of year. We last expect macro but to the consumer many sentiment customers as to in have pressures will manage improve our same still XXXX

Kroger lower will provide to and continue with exceptional prices value. customers

also expect without online, both experience, products and seamless where they on quality, compromising that selection, shopping a We great in-store we to can robust customers have know improve shopping want plans and customers the convenience. and get

the are raising full We metrics friendly fresh and our on investing growth. and bar for

only that great Mercado improving our Hispanic innovative and As our a which margins, in items of is offer with love at brands accelerate example year's This innovate growth. enables we brands, our our create inspired addition can portfolio evolving needs growing destination meet products at an value, line that how of our find can and customers Kroger. and categories Kroger sales customers' to brand's the to

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and Customers program, love we fresh-cut seasonal favorites. continue convenient our specialties will introducing the in-store and offering expand to regional fruit by

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while offering the time, the to return personalized loyalty. us right promotions savings right ensure allowing get enhancing promotional at get important on By customers we spend most the can our

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During to the XX% an digitally fourth increase households. quarter, this engaged in led

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map to in high as experience. Our continued customer achieved full fresh We we road in-stock rate these achieving the the in and improvement a a significant is metrics notably see pleased new progress XXXX, our all-time to year. friendly were strategy during on best-in-class the

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results again achieved strong profit. were where businesses generating XXXX, in in XXXX, profit billion with pleased $X.X delivered performance solid in results. our once Alternative business the portfolio's We operating media

to for those right made growth investments we ago power lead creating and media media Kroger first-party customers ahead, advertising, is years investment. evolving, data landscape use to XX that and our XX% content of the significant losing on return is to who The Looking year Precision in will more last built while Media the right ineffective opportunities than channels. are Retail connect in Marketing we've Systems clearly one third-party spending cookies the measuring ad business effectiveness to more fastest-growing digital U.S. is expect in including XXXX. the

space this in excel to a positioned advertising offering well experience. superior is KPM by brands

customer to from online. create enhanced business our growth first-party both measure spend can utilize next based in advertiser media relevant and program audiences the invested on in-store journey, To purchases, ad functionality. this step take in Our KPM and data loyalty effectiveness

ad on In for platform self-service access for and to insights it on properties audiences for new direct the offering platforms. introduced solution Kroger clients ad are own XXXX, and ad a gather The owned clients' makes platforms. responsible and on self-service KPM its data Kroger platform launched buying custom to ad existing activate buying advertising new easier new solutions campaigns more

XXXX, XXXX. Finance We to led which delivered relative year-over-year for expect Kroger results in profit. these operating enhancements catalysts will mixed be in key growth Personal flat

controls Our customer payments while we more process credit results fraud In landscape, business card an led allowed by reducing money increase quickly to fraud. experienced bad in delivered strong macroeconomic debt. challenging us which services implementing more to a that

and and in excited and momentum of Turning are in business. XXXX, the a our to area wellness. this delivered health performance better-than-expected we about wellness Health

areas non-pharmacy other patients more who find of Kroger loyal we customers. retail ecosystem, pharmacy are to than As our customers in are

on a few pharmacy going growth of deliver plan us. industry for significant retail to period a priorities. which by opportunity focusing presents The is key a transformation We through

First, an patient cultivating experience. exceptional

new technologies incorporating capacity and in are which our pharmacies. adds team's We simplifying our work,

to is checkout patients. staff Our for pharmacy capacity care provide and better faster this using

we retail are customers. new pharmacy operations. to our Next, with raising our attracting of customers familiar awareness are Kroger's not nonpharmacy patients by Many

are marketing awareness. convert working help adding in-store and We our sciences utilizing by to to build increasing customers and these our data engagement

campaigns can to and in like marketing our our Finally, live talk associates. customers accelerating momentum store, growth I'd help XXXX our healthier expanding in build and on providers, by a in lives. take By XXXX. grow working to we to improving we moment share vaccines with outreach about vaccines now plan

store consistent every choice, employer experience. this customer of respect At we they and take can firmly an all being associates day, experience. initiatives We is of core care appreciate believe in associates customers every We investing time. outstanding of that an and by operational delivering the our our for facilitate a do our year to

to taking Team consistency Investments we a key approach talk this and on benefit onboarding beyond to holistic that will as including technology development retention, associate are our strategy, as To is the career wage associates a enable support that well support later, investments experience, to opportunities. Todd in investments technology us includes strategy. process. in training, initial and which

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for Importantly, are skills the Kroger. their next associates role with developing

We efforts year. to strong this improvements in see pleased are retention to lead these

through Todd development In place guidance I'll XXXX, With to and turn job associates to we financial where opportunities, Todd? you focused and it over a training on enhancing career. XXXX. a for as for take that, solidifying will results a and Kroger discover come our remain further

Todd Foley

you Rodney, results model. morning, reflect demonstrate Good evolution and for XXXX and business of the warm our the everyone. the our Kroger's thank welcome. of strength Thanks,

earnings ways net are than ever more to more We generate a growth. business diverse with

Over our the has of at higher adjusted past long-term X growth years, significantly a than CAGR model. grown EPS XX%,

we flexibility also cash $X grow, And excess strengthening shareholders. flow. improved than return billion cash growth free opportunities sheet, and us giving for of the our XXXX, our As net flows. adjusted business to earnings producing reinvest cash balance we This more is to in are delivered in

year. and needed of traffic Kroger our termination is the discussed, well from headwinds performing benefits and profit Many and are cycling business. pharmacy SNAP this a faced of in the strength. driving Rodney entering we business model As XXXX, power with sales alternative from ESI and the accelerate the including our to our XXXX growth loss position in agreement of of is retail reduction of data

profit and alternative in expand Recent remain off. long and our to paying our investments to strategic term. We ability grow to pillars navigate are different positioned drive many businesses operating are well growth sustainable confident environments

$X.XX of from our delivered adjusted through results. full benefit XXrd walk year week. now Kroger $X.XX diluted share, per of EPS a I'll XXXX including the

is of diluted EPS year. above the week, X%, range the Excluding shared we end which the the guidance share beginning the at high adjusted of increased XXrd per

of margin have basis Scripts. and in achieved agreement sales and a primarily performance, our the higher would XX-week points, basis, identical Underlying adjusting growth led our rate, gross increased attributable strong of The by week, on chain the partially excluding growth lower Express effect after and X.X%. benefits, brands increased effect growth We without the sales agreement with terminated Digital fuel been with for shrink. grew terminated Scripts, X.X% FIFO investments price Express by Solutions. costs, our sourcing fuel, of XX XXrd Delivery supply XX% to offset XX%

improvements utilizing digital efficiency brands over improve to media, and enhancing many as technology product margin chain mix supply growth our through strategy to fresh the components, Our the of including profitability, initiatives. in including improve time in expansion

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initiatives fuel, and excluding Express the planned of the to our lower terminated adjustment growth attributable and XX items, by partially increased and of rate, OG&A incentive offset with agreement investments in in investments week execution points costs. initiatives basis effect associates, the The continued plan cost savings Scripts, XXrd strategic

adjusted billion FIFO billion $X adjusted $X.X XX-week operating Our basis. on was profit and an

chain strong generate cash through by our free flow million. The and an was supply reflected operating capital LIFO improvements Working $XXX to capital. full year management continued working our in consistent improvements adjusted charge teams. inventory results primarily Kroger for the effective sourcing led and

the In addition, working we experienced capital results the unfavorable XXXX. through in of fourth cycled quarter

in we As billion free of delivered XXXX. adjusted than flow cash $X a result, more

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compared an Our a net XX-week adjusted total X.XX to is year debt to ago. basis adjusted EBITDA ratio on X.XX

Turning quarter benefit a now our share $X.XX. including per Adjusted from XXrd for the results. to diluted quarter, fourth was EPS of the week $X.XX

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fourth improved in laser-focused was trends in period cycle the of quarter began to ESI our sales trends improved effect fifth in quarter volume XXXX. of the Our and our the growth unit quarter. we final the on of as The in remain and improvement units quarter consecutive teams sequential

The excluding increased partially supply higher FIFO performance, basis brands strong and investments gross and margin lower costs, benefits rate, by week, price fuel XX points, chain sourcing and shrink. increased the XXrd our reflecting offset

execution initiatives offset adjustment in stabilize and lower associates' XXrd contribute year. an to additional plan to by XX These rate, plans, partially and multiemployer helping The points excluding obligations. continued expenses were $XX pension costs. increased to was and contribution incentive OG&A increase associate and wages cost items of fuel, future to reduce future million last to basis adjustment decision The benefits the the savings compared planned investments to for attributable and self-insurance week

operating than $X.X performance in FIFO strong was gross margin. by driven adjusted Our profit billion, more our

This to quarter, was $XXX of charge compared our million LIFO in million lower-than-expected a year. credit inflation to This pharmacy $XX was a inventory. primarily last attributable of

and providing Fuel the way by customers Kroger's spend fuel loyalty strategy, yet Points rewards save fuel as gallons. on number for grow through us is Fuel rewards of lever who part of offering much and additional customer customers profitability. to important twice redeem to an an Xx groceries Fuel and another enhance

more strong versus on save was the last rewards fuel customers XX% engagement year reward year. Fuel throughout as

outpaced sales, average which The same price significantly year. fuel rewards was Our margin industry. quarter the compared this same lead helped engagement gallon $X.XX was retail cents in the the $X.XX in per the $X.XX our versus $X.XX and quarter quarter to this quarter year, gallon fuel fuel last last

we on a benefits average $XX In in an hour increased rate rate $XX associates. nearly brief now to I'd provide in. of update comprehensive XXXX, wages resulting nearly a of associate factored hourly with like at an

now benefits more wages sustainable $X.X that in will to keep communities the allow and continue associates Kroger years, Over the serve. invested our than X investments. investments products to to to are with billion us remains incremental wage last in supporting committed we comprehensive Kroger has affordable and

make in continued contemplated expect investments associated and model. to We are and XXXX, guidance fully those our XXXX long-term in growth

capital now Turning to financial and strategy allocation.

projects decisions, We invest with growth. net and to is continue our earnings in be our support to capital high-return allocation disciplined that priority

We also returning Board investment-grade shareholders. to to capital over subject rating dividends and remain growing our to our approval time, committed excess maintaining current

$X.X to is XXXX XXXX and in We our investments for expect between be with billion long-range which consistent model. capital $X.X billion.

investments sales focus is drive be investments. on expect and priorities aligned growth sales, the customer drive and and will enhancing Capital store shopping with to To strategic experience margins. our improve our increasing

XXXX, As in delivering higher-growth including have a relocations of on that stores, XX plan a and in earlier, with strong new projects, track geographies focus we storing investments on Rodney mentioned expansions completing major ROIC. record

XXXX To in center savings us element and improvements fund including to of chain, to to model supply will expanding Productivity improve the be investments capacity distribution key helping also network associates continue are utilizing investments an and data optimize and our and essential and cost efficiency. our enhance margins, experience. customer technology

opportunities into supply digital, including procurement. our are These and embedded of business chain, all operations, areas, in-store

the cost on without experience. utilizing initiatives and the and experience, simplification, customer focused productivity associate are Our to enhance saving technology impacting

improve operating digital results. AI-enabled lanes to routing efficient. like allow significant associates improve continue these, margins, forward, efforts a will to more which be technology testing remains new drive-thru total opportunity initiatives customer our company Through that pickup to Looking we're pickup store we lockers, and like

XXXX guidance. now Turning to

operating $X.X XXXX billion, X.XX%, last anticipate between $X.XX of earnings of year. We expect $X.XX without achieve and This EPS diluted of $X.XX. to similar LIFO per basis. FIFO X.XX% We billion to net Adjusting adjusted on of charge an fuel a to profit to and adjusted sales to to identical adjusted be compares $X.X share XX-week

line is inflation expect We consistent which the be model. financial in with long-range forecast to X%, around external our and with

seamless business, improvement in associate saving We plan enhancing and and in initiatives, for the by increased productivity margin long-term and profit growth in shopping customer gross initiatives to improved investing investments We prices and revenue our alternative with our experience. our businesses. to grow including wages on lower balance expect cost value in

earlier, engaged discussed loyal us rate, profits Rodney in households relatively we model. fuel, year-over-year As and in excluding gross rate, to growth our excluding grow basis. position remain and expect flywheel on margin digitally customers and fuel, flat to power OG&A well Overall, the adjusted FIFO a

In identical the half expect year. stronger lower combined second terms quarter, fuel inflation. in SNAP the first be This to with cadence, we reflects in quarterly of of the headwinds without sales

in lowest year be to the the inflation first expect but progresses. quarter it expect We to as increase do

As year. expect fuel range a the guidance range our second we guidance be the quarter of our middle end in in of in bottom below the result, our annual without for the the at of guidance of and near would end or quarter half first the to identical range slightly sales top the second of

is And expect X, line year X we Quarter down is in an to diluted double line relatively expected will last to Quarter X per our reflecting adjusted We adjusted last most expected be in challenging digits in basis. year-over-year, Quarter with be to with compared to quarter be earnings sales low last year. quarter growth. increase for double expect on net XX-week X year. share digits

more generated XXXX, historic momentum In top diluted Kroger the our model growth in call us to to net a from sustainable long-term the a the adjusted line turn on prior of Rodney. last environment. drive navigating back continue despite our to now the per is we positioned X with share delivered growth and growth, providing years. challenging well we've few I We're will future earnings diverse over and value ways years, business, operating our evolving model into growth. is creation multiple

W. McMullen

and XXXX, closing, Thanks, strong about XXXX Todd. beyond. optimistic in and delivered another performance I'm In Kroger

And in alternative well. in positioned Our retail which continue driving businesses. and by business visits, accelerate performing growth XXXX loyalty, digital well will increasing customer our profit it engagement is that momentum and building to is beyond,

benefits expect are year We store build quarter cycled to in resulting finish our with focused first sales consistent enhancing a to the the sales to drive the and execution in as on throughout momentum strong strategy year. we SNAP

merger Before we the questions, to update up Company. open I'd to provide like an with floor pending your Albertsons our on

FTC's were the attempt disappointed were we While environment. given political about recent our current to not we merger, surprised challenge the

Kroger the improved is in track the prices, its communities invested with experience, clear: record lowered in customer serve. Our we mergers and previous deepened associates, connections

actions is added know The happy character jobs keeps this its to clear in XXX,XXX of claim us. regardless future merger share and environment retail others secure talk will its company in is union than jobs willing more what we're this result a these shrank with union to elsewhere. jobs. for We as a national of commitments, with Kroger has the Kroger union in whomever

We investments are incremental XXXX top in billion dollars investments. millions of making $X.X wages of of investments on benefit in in including hundreds since historic

with Dollar matter restaurants. eat others they how how competitive. Amazon, and to than define industry, a groceries eat. us, The wide we behave their how better Stores, continues be run where anyone. Costco, They range our to we to and customers they our of to day, business retail at decisions with shop they the customers We accordingly. shop our competitors know make they every industry And know and No buy from about more

the past, decades will I have true future. X in the we This on of know you steps. I the shareholders in retail business, take care and next that in the and likely take customers our our is be care of this benefit. have associates, my true seen our questions Throughout when

separately. X has FTC what enjoin the states joined have we Washington and The also today. to sued merger. by several Here's know sued states, Colorado

is families. are litigation We cannot for we America's the to because the committed these this outcome close defending while believe merger best actions. and We the merger

dates in Hearing these not yet, expect are to mid- been proceed set but have the to late summer. we pending.

We combined look to Because merger we the benefits of remain this be questions on we excited are litigation, the forward morning. about of will in we taking not our our company, merger. the and future any explaining

and taking your With look that, I Todd questions. to forward

Operator

from [Operator Stanley. first today comes Instructions] Our Morgan Gutman Simeon question from

Simeon Gutman

question inflation the may low comp. high comp is the The My said guide gain, I end, the expectation, with on market I at a about of imply wouldn't. you first it little end X%. think share at guess bit

So you into I guess, think about little stronger did how market shouldn't investing share, bit why especially as look inflation? pricing, spread versus a you're that

W. McMullen

Great 'XX open add continue add? and incremental as both and tougher you fact, that in anything in expect to a question, stores as to I'll you the expect expect go our several did really improve we cycling past And and first Todd, start more prepared together. throughout want the to Todd to from want mentioned would from Simeon, would and the Todd that years. the 'XX that to we're be shared share market you market and all quarter quarter the it's those anything of stores SNAP we position, things than through add. in ESI I year, But year, comment we or and cycling as remarks, we in the

Todd Foley

on for last to is the I we Rodney. trajectory expectation what of quarters. frankly, some share And are X described improved that's a good build consistently our And actually, that. satisfied in we're trends. No, the seeing Rodney color, I our It's with think think volume

W. McMullen

tonnage Yes, great both to that's trends, and And improvements would we and a sequentially point. seen in continue. on that in expect dollars, we've

Simeon Gutman

of placed. in store, follow-up quick always A there's advertising. The been where grocery lot product product promotion, is on in on the a space support particular,

whole? the the looking channel you in shifts think still your Now which suppliers is advertising several dollar way on which at still those do your the years? they're plus in as that larger looking product basket we're next growing? how getting the they advertising consumer holistically, at over it, think about you it the shopping, the dollars Or getting or dollars the suppliers are support? And are Are more

W. McMullen

a are competing CPGs, And and have against Facebook to right good move If if even dollars we dollars channels. want other us coming media to can from And them because over. traditional channels. we and just doesn't or it those for that do to take and tell see our us you from really look earn we're media that you standpoint, everything other -- you media our Google spend money we with trade any channels

So that's something we've communicating X, day terms really been CPG aggressive it's since and of with important. in

support to more If actually trade at it's you to are several CPGs the support. quarters. really some trade And we look of and saw certain a trade tonnage are but around more pickup support, last in in starting focus have than they the growth trying on tonnage the growth for dollars what CPGs, not all.

Operator

from Jordan next Goldman comes Leah from question The Sachs.

Leah Jordan

those I'm if frequency you gaining that quarter. base that on inflection less where at then And more you are versus think comment across maybe are noted shift an a to curious trip positive home factor? much do are loyal How you in has that those seeing could little just a been trip. so? maybe to traffic a just where I versus the your you you're food had in more customer think

W. McMullen

Yes.

seeing growth, several as row. frequently terms a it's In well. loyal of to to we're where continued more starting in grow They us quarters shop with are the our household and

of both but? So one is food one away it's you of to from ask is biggest me away from opportunities? Seamless obviously them home them me, home. what's of of would One our really those food The -- be if together.

Our market share there is very low.

And making they telling us partnering recently and with chicken the like the some on incredible outside some work -- And our it deli really companies we doing of focused couple things and incredible that was did a one are reformulate -- it. our fried team we bakery work are customers a of and destination. really

look we frequency food shoppers. when coming we're think we growth a opportunity, really growth just and from really away our at and scratching is the loyal from surface, So home, but the think huge that's we

Operator

UBS. from next Michael The Lasser question comes from

Michael Lasser

get lot when would if Albertsons of a closes. merger you presumably, new Rodney, and stores the

organic what's the driving decision store to accelerate growth now? So

W. McMullen

to a and it great well, our bifurcation you kind we're we merger. because as population markets and there's at business of, of our Thanks, it, ROIC Yes. look growth weeks would run a we the business certain did good And job. a ties couple good I you Michael, ago -- storing, great run when On you finding continue opportunities really seeing growth. and have it, And like where it's just to capital. call without strong we're in we back

we comfortable the doing that merger. something feel it's with And without or

really So we strong cash to good, from it a perspective. well. to obviously, strong, And it's as fund both able be flow have

Todd Foley

Great Yes. we've what over the investments saw support the investments trying there, And our customers into years, more looking to digital for were they that space few do went our our capital if a in naturally, we you space, lot evolving Rodney. call, last to were what and we concentrated in of think as business. really help

balancing progress continue areas opportunities with And said, as with we've some of those because track record of been to higher-growth we in with markets have very that investments shoppers with and those where to making Rodney online we've in both investments engage investments good with both we us our and we're areas. a go those made But customers. see pleased best the into in-store those sure

Michael Lasser

in And of the don't degree that flexibility with have over expect your the how the follow-up you that is My that item you growth assumption for line course what is event much in the accelerate do wage overall question to managing year. XXXX? IDs

Todd Foley

of locked wages I One and appreciate to talk previous through No. when CBAs. Great investments, we about keep XX% bargained are in our of wage mind that. thing collectively in kind question,

going and radar that to everything in a and on have our are part our customer invest And our associates we model continue associates, we're to experience. wage unlock in are ones vital that's They benefits our part we the and other so built model. important do. to are the they our to mind, because through that into keep that the So of strategy,

in associates. increased -- hourly We've rate help over last X so average those So the seen years. support those and XX% that you've investments to or

next associates year. continue will we so -- in invest So to

of in argue do in part able model, improvements cost us our investing to to critical customers. would identifying associates savings those productivity is culture I help of initiatives our fund investments and what other part we and be our The to that's and even in our

continue part model, an XXXX. important that and think of I so we'll our through And that's

W. McMullen

a increased point, excess through the Todd's rate we've we -- really and the the And in hundreds would of we It's way process using can as the sales we've cost been saves, are is do teams again years. of things over in different way ourselves expectation same and host whole type that mentioned, energy. that's X how funded we doing, of thing growth less and it's Todd that, of have of that's And our we by our well. as that fund that change. last XX% over It's last average the same the commitment funded hourly XXXX

Operator

Katai question comes from Krisztina Deutsche from Bank. next The

Krisztina Katai

to you a Congrats mentioned Rodney, also great about you taking quarter. the personalization pricing for on consumer, new level. a of talked importance but the

is you're could just loyalty. talk higher versus take degree I own getting by if you the positioned And what prices, investing from media aided from especially dollars to So are business price-wise you're Kroger you what about using into was share, which how to is vendors. when wondering profits

W. McMullen

we from pricing. of Yes. and -- the in dollars, the it a productivity get It but loop. sales mentioned the some of those to as also increase that achieve, some growth earlier, But able did in some an also savings be of take you we both. if see And cost people would at call and a we're we I it's lower we mixture would investing would trade saves leverage things, would look

customers shops, market when somebody merchant, a promotion, promotional at we go as things more buy way at look look on you obviously, to the overall, and you when it. If of they are

and the include satisfied, when our So than look price value where some feel they to getting compromise many they people you experience, and we a mix and is of to customers our both rewards, exactly competitors, of get fresh and total in and we're like don't better of terms be, our value, like customer are, actually experience. the you and experience on at incredible have

than a us individually that matters able matters where gets the offers important with to for different it unusual what to doing each else. personalization, every get shops to household And would same offer, specific be going something us really actually of unique identify to and to being is be is everyone to what's that highly it me almost On somebody offers.

Krisztina Katai

And then quarter, just the FIFO came my margin, quick on gross fourth plan. probably in ahead think, question follow-up XX point in basis I of expansion

What talk you levels should about for of some great. how in that takes of overall, that be are main of the the about opportunities. puts we because talked view year keep could would think flat you I some the mind sort and you So

Todd Foley

it's Yes, is best we both brands. quality. that with and we're brand because from deliver penetration they strategies our product value margin to are to lot frankly, we for But improves customers we've same the current for lot brands A and but driving margin Krisztina. me around experience brands the through get to to the the about only expansion of where standpoint get looking been year been with a the mix not talking driving execute really we'll of Sure, of that that have driving our the environment Yes. they our margin our very the in continue with going made most margin worlds, progress a our get us, merchandising forward. expansion. they on that mix, fresh don't ones, where through and initiatives sacrifice of pleased in, value, that of

-- to operations that operating And win not our double enhancement, and things me. sourcing, talked the just that the -- are several also margin alluded continue or Rodney go opportunity. that us expansion, the as in some of logistics working then ones to this, margin we're forward. We'll momentum to a initiatives that us with of times, margin It's optimizing But same chain. supply partnership drive with that's and course, confidence and Those our help a business, those doing sourcing, gave XXXX, So in give in drive customer we've to we are about that all of improvement. vendors margin expansion. but

Operator

The next Guggenheim John comes Heinbockel from from question Partners.

John Heinbockel

on if about right, digital -- the of pretty sure profitable. talk profitability I'm but It's today? I $XX whatever look where you that where now over we brick-and-mortar it's sales? double the from are we X we? billion possible out you could or can the years, next Rodney, that not with profit easily know is, Is triple is, are where, are that it in dollar terms where

W. McMullen

and make told figure know, question. long out always is and how Job as to you you've a customer The that is the to everybody is it's sure we've we to followed us X -- Job John, profitable. we've great X been responsibility sure a lose time, customer because don't -- make digital our

that we but for tailwind And years, continue years. talking meaningful be to progress, meaningful would should say a I'm several with say it's several I us that years. to when X X make I

the shopping at look to you have get we are where there If pathway the in the same digital to business, a in-store margins is store.

of pieces. media inning store look If think in But of early of a the journey, and shed because we the will we're excited Net reaction we're that this Promoter we're Score. incredibly customer's baseball at very be you still you a other from about actually believe a a and game, if margin maturity -- our than better sheds,

on in and learning to the how that to ever profitability sheds early for those all to had the time, they've from tailwind score improve. we're repeat a a quarter, and long in still But we're and this something be make fact, our rates meaningful promoter standpoint highest contributor. And a had it the a continue game net that's going things

excited, long we but to have still go. So ways

John Heinbockel

of that in sort profit All right. of follow-up on Maybe terms buckets. a

alternative you the I but year. I'm not this is for you out? better? to going up idea $X there, Personal Finance, think not sure $XXX is do got to it said another cost to of be last $XXX goal this that think was grow you of coming do business be I'm the So proactive million maybe then year billion profit, year, what if sure. Or about million? can And

Todd Foley

If cost whatever you a whole host it's of reductions because at look or things.

$X around year would and seventh target again, for be this that. would internal Our billion be the

good a would you million $XXX look If point, all at be at number. this profit

work But the But that. obviously, to going consumer driver a we the right it that. lot to KPF, will of now, bit media really think, a there's but meaningful sentiment opportunity, think is we're better be a than hard we of make business, little improving.

neutral. bad tailwind becomes showing debt starts other up so that in things, and hopefully, that to So opposed a as

Operator

from comes Montani from Evercore ISI. Michael next Our question

Michael Montani

X wanted Just to ask guess. things, I

given leverage you could we to the recover? the I some do if you units needing And hours should had discuss to see about just then cross from be if sales wondering store thinking ID a follow-up. point start off, of First grow that And currents?

W. McMullen

at a having If this leverage you now, look margin. of won't point, at by lot be the forever, identicals, point because lower softness leverage driven low true in we're were right but things is that look if a you that

actually ESI was negative a on profitability. business something So was our that

having not profitability. improving supports it by that, So actually

every and to very be I number If units. to every the to look store AI -- feel we the generated to department of is generated able And our service business good use I provide and that continue you by mean support we'll customers. hours at has hours the great

doing always hours reduce is to out of that The many new it. to something takes you're figuring it helps other do us ways thing how

So continually think you and on picking able reduces example. is -- every shelf, an because about if pickup reduced order gets order, walk store we're every a the where as the time identify time to pick is to it individual an item what

So feel leverage all relative are of those to good on things really together, IDs. points we where we about

you to are. if forever. XXXX, we look not going at we about certainly, feel good But that's Now where last

Michael Montani

margins on there then in about similarly And how I could share start just that improve with the to guys can could And think up in guidance Is fuel you fuel? a follow to if business? pharmacy, have or CPG that you that side. then for the us

Todd Foley

Yes. Thanks for the question.

the we is outlook in flat for XXXX year-over-year. that be side, our think business fuel expect I to On

flat in bit to be for it in XXXX this year-over-year You XXXX, to recall years, driver. profit. one, operating for as -- profit guided X 'XX, expectation our was it but was And we're the behind prior is quite we last a a little

W. McMullen

margins we stable. margins, Pharmacy pretty view would probably

We reducing telling you when or service, because certain that to and continuing improve patients identify other in that we most continued invest time to we and they're to an wait in pull customers for we They're customers that aspects view locations. principal opportunity. close at are us look our ways of continue our markets, out and what in savings get competitors, as

to be doing reinvesting able that's we we're pharmacy, team, our with really we've the that of have always least find we at business know, XX business we'll our team we years, -- whole is wellness I our don't a and that. So in team and I a great our and pharmacy to have realize is continue the always the support that job And and of thing in customers health amazing patients. and X/X for, don't in do to business, even where to been about opportunity gain share see working

Todd Foley

that of a GLP. to a in of in and 'XX we So sales rate a rate, GLP, margins headwind same because pharmacy, But Rodney, the on saw relative to that's obviously that, little want point, rate specific to point Obviously, of bit the the 'XX. a relates bit to expect on to on those. add as your in in volume quite the

stores. excited it our in But those we're helps still it's high our because demand about traffic with customers and drive

on to of the top margin driver half sales on both our well, and that as that, year the we then helpful and business -- saw obviously in back side. and vaccine is sales other So of the the related the

couple other points what to Rodney out. a just So addition of in pointed

Operator

from from Wells Kelly Fargo. question next The comes Ed

Edward Kelly

volumes price, the I on had there. had probably that elasticity negative I I hoping this cohort. It But negative all the think share loss have low about a volumes issues dig little you've pressure, the of mean like looks income bit been And wanted mean, in to industry volumes. unit for here. in was outlook you obviously, could grocery. you has ask within I I

that. important trade 'XX? to And unit how because I And are then right, traffic are talk for you're Kroger maybe half in your think year? unit those volumes expectation I back mean driving in about back can't get of then positive. spend, evolving grocery. is the volumes probably your 'XX, positive particularly points volumes you lack back which of the Why know Can just I to the for projecting in

but some it. maybe -- support for just So

W. McMullen

ourselves accountable would unit And positive volumes for positive. expect holding ourselves volume. expect We -- unit to we be

and positive Todd -- mentioned units. in prepared sequential remarks, seen our we trends I in As we've

If of actually you increase as look questions, trade in saw one mentioned dollars we at dollars, the trade I earlier an support. on to

we to mainstream gain always on upscale important to wrong. short and much better one are things all Now and customer, continued the we've has -- that's of our customer. success remember answers with units and with been share that economists the And say always

buys a that customer perspective, somebody so of buys packs or of that because But units bigger items, are down on XX-pack a XX-pack something.

buying of stuff. they're under you goods at of customers lot units are the budget pressure, pack If smaller that and actually a look

continuing to a would as for overall, accountable ourselves getting question. positive well. trends We hold in So to units improve great it's and

Edward Kelly

to thoughts that go just if you it's back Is CapEx pretty you quickly. just Is then for debt there let's you target I of But about deal. X.X if Albertsons reason a the just failed the not that quick target leverage. close to that. to looking to know sort are things. if that current believe And related, agencies say on this any would X.X any would if don't follow-up there why environment, rating it's reason at it's be

Todd Foley

Yes. Thanks, Ed.

foremost, First we're and merger. the on closing on laser-focused

business TSR comment. drive does the and strong accelerate built our your thought now. but free that think it and very you a business, I look to think about -- But when the always to how I we balance the we as past. would targets future, about right flow, the sheet about in And have cash strong to TSR generate think in is So continue you model space. And our appreciating in

think that think about good it I good would and way a benchmark. to be a

that about been talked the rating, lot storing always be an have digital investing Our We've business. to continue will maintaining and investments we've growing made. and a priorities investment-grade and

growing And shareholders returning and to continue always a to dividend program. third, through We that. money do then a buyback

strategy any be So in standpoint. scenario, that priorities those I from our will financial a expect would

W. McMullen

growth. And cash continue to Yes. Thanks, we'll Ed. flow support to that use free

Operator

question Parikh Rupesh from The next from comes Oppenheimer.

Rupesh Parikh

promotional wanted guys thinking the backdrop. competitive curious just are just touch to you I how was I year. promotional on the this backdrop about

W. McMullen

We what directly up of was an it promotions more similar it's overall probably stay us, And would last similar. ad, be necessarily be done so our expect year. it but expect not would pretty customer, to a to pretty would and to shows more for in what to we

billion on me, at financially, doing mentioned coupons. And to customers And that And strained is one of it download over look to that a in budgets. ways ways are to our we year, remarks, people the of stretch or continue had would budget driver of billion a be that coupons, shared on X an customer a prior was increase and I that we their try times, prepared aggressively increase the a in downloading but downloading that to budget they're the digital of couple bigger X and coupons.

we overall, still So you if to But within a segments, look expect customer that on about budget the same. think be would strain. at we under

Rupesh Parikh

in question. you Rodney, positive behavior consumer you consumer any sentiment Great. follow-up And you seeing lately? just maybe comment that an then expect improving XXXX. Are made changes one in the

W. McMullen

Starbucks feeling things and The their tell -- and But engage of they're us ton stuff. nicer so like I pressure, aren't more people buy a better behavior is that. under and than work so wouldn't to in Murray's they say that they far. the continue wine changing Cheese

Operator

Bank next of America. from question Robert comes The from Ohmes

Robert Ohmes

situation than you and us wondering you reengage in Scripts. talk pharmacy time significant you a pharmacy the with Express ended Could outlook could for some there way thoughts of kind of I the you Rodney, a guys PBMs for the with multiyear sort do what player if happen an over more could maybe on up more some profitable to opportunity, had maybe become more see of give you about you opportunity was guys? the and been which in and

W. McMullen

costs. appropriate profit And it to that cover to to somebody our for those margin. scripts, else's they had delighted we're assuming conversations. the be [indiscernible] But those in always open margins would fill

over reaching will engage we're patients they everyone want to get keep that that have service customer great the and out opportunity not hopefully, or great customers and to -- the providing their experience. -- So else time, because their to and start customers getting

Robert Ohmes

question. And then previous a just you. Got on the follow-up quick

your been pressure. income have any the seeing there change that your customer in your with lower change market keep or where more that -- or ability Is been income in you think might had customer share lower lower I them? any to

W. McMullen

that a but better, have to still we we for our work but make and upscale satisfied slightly our us where half of we're lot half not profitable most full full of the do. It's with half customer, -- that mainstream And is one that and empty, customers is are. or the things

Operator

today Bania final from from Our comes question BMO. Kelly

Kelly Bania

$XXX this Just maybe 'XX, much or on Did wanted in is for how planning or you're the this EBIT on that. in business. profit help factors to that alternative in a go in at some bit you end making KPM us Can stage, particular. growth investments just a new what are back up go just us in more million off-property the property that XX% you that going are And just contribution back around that drive that XXXX? to can help dig understand to of you're little

W. McMullen

our get of then same I'll way help the them to on overall, I why as no we that should money will what the that reason products make CPG's we share spend specifics. you ROI sure the talk spend our our into share look at And a responsibility investment. be we broad Todd media great their when it's they sell. of -- media and that When get let we the see

to that. our good investment. to making people be KPM holds accountable that And return on do we team their And will transparent continue get sure and themselves a

that. terms we things, So is huge you for growth of let still the continued in and other specifics Todd, 'XX opportunity think relative I'll answer to

Todd Foley

I off. but good, I that's the Yes. that get we breakout think Rodney. I'll know see don't off, and in between property both the growth I on No, on both, Thanks, and into question. and appreciate

We Certainly, really us that their within around that are digital those built ecosystem, to loyal our gives increase our businesses. us driving both digital some in and stores. drive of more those ecosystem know with is opportunities And spend. growth customers own along KPM to engagement our

new out used so is that platform in thing it, I in clients really create has doing heard work place. is do custom our excited, their can KPM that loyalty programs put audiences I from they've other that The in think building the first-party that alluded and our earlier, always We've us you data they to campaigns. the that

their even this these think platform, them self-service off. drive access it and activate them campaigns to audiences opportunities for data insights, gives execute But easier new direct as for to I property their it they some and and more these on and makes

And so really for both I that new and think and tool excited about features functionality growth, the brings us and on off. has the that the it opportunity

W. McMullen

And all you for Kelly. today. thank questions Thanks, the

like we a always I'd associates have always, of share our comments listening with a are in, that associates As lot few listening each to quarter. and

and every for thank you for customers you other. each day do all First, our

Colorado. our a moment in to to like outstanding also X celebrate I'd of associates take

Island Chris Olympics X week, skiing during Gay the this from Just in Mountain. Copper market at medals event Special won Citi -- who Copper gold

the amazing taking to what as And year, Special at honored event just in meet and chance few and Last an was Jeff parents an Olympics inspiration. Gregory, his Year. the Aspen had meet Jeff. Male athlete, second a Chris Soopers. Jeff A I had an Congratulations, in Athlete Olympian place I King pleasure of and ago, months to month. is a Chris Jeff last

Thanks, for continue a We and you've done you. us communities are day. great accomplish customers uplifting and for today, all and joining do so everyone, and what and our you around to that proud all of you have those

Operator

call. you much today's concludes very This Thank attendance. your for

now may lines. disconnect your You

The Kroger Co. (KR) 7 Mar 242024 Q4 Earnings call transcript