Kroger Reports Strong Q2 2024 Results and Updates Full-Year Guidance

Kroger Co. recently announced its second-quarter 2024 results, reaffirming its guidance and sharing updates on its growth strategies. The company's focus on fresh products and digital acceleration has positioned it for long-term growth. Here’s a breakdown of Kroger’s key results and forward-looking plans.

Kroger’s Second Quarter 2024 Highlights

Growth in Sales and Profit

Kroger reported a solid 1.2% increase in identical sales without fuel. The company’s operating profit was $815 million, with an adjusted FIFO operating profit of $984 million. Earnings per share (EPS) stood at $0.64, while adjusted EPS reached $0.93. The company also generated strong free cash flow, contributing to its financial stability.

Digital Sales and Customer Growth

Kroger grew its digital sales by 11%, which was a key driver in expanding total households and increasing customer visits. The company executed its go-to-market strategy successfully, providing value for customers through affordable prices and personalized promotions.

Leading with Fresh and Accelerating Digital

Fresh Product Line Expansion

Kroger continued its focus on fresh products by introducing 223 new items in its "Our Brands" portfolio. Key additions include Smart Way™ products and seasonal favorites like Hatch Chiles and Harvest Apple from the Private Selection® line. These offerings are designed to meet customer demand for high-quality, affordable food.

Digital Growth and Boost Program

Kroger’s digital initiatives contributed significantly to its success, with a 14% increase in eCommerce households. Delivery sales also grew by 17%, driven by the company's Customer Fulfillment Centers. Additionally, Kroger’s "Boost Bonus Days" mega-sale provided exclusive deals for Boost by Kroger Plus members, further enhancing its digital offerings.

Financial Health and Capital Allocation Strategy

Cash Flow and Debt Management

Kroger’s net total debt to adjusted EBITDA ratio improved to 1.24 from 1.31 the previous year. The company expects to continue generating strong free cash flow, which will help support long-term growth. Kroger paused its share repurchase program to focus on debt reduction ahead of the proposed merger with Albertsons.

Dividend and Future Guidance

Kroger reaffirmed its commitment to paying a quarterly dividend, with plans to increase it over time. For full-year 2024, the company expects adjusted FIFO operating profit to range between $4.6 billion and $4.8 billion. Adjusted EPS is projected between $4.30 and $4.50, with free cash flow estimates at $2.5 billion to $2.7 billion.

Pending Merger with Albertsons

CEO Rodney McMullen’s Comments on the Merger

Kroger Chairman and CEO Rodney McMullen reiterated confidence in the company’s merger with Albertsons. McMullen emphasized the competitive nature of the food industry and stated that the merger would bring significant benefits, such as lower prices, secure jobs, and increased access to fresh food for customers nationwide.

Associate Experience and Community Impact

Recognition and Awards

Kroger continues to invest in its workforce, earning top scores in the Disability Equality Index® for the fifth consecutive year. The company also celebrated 67 female leaders named as Top Women in Grocery Honorees by Progressive Grocer. Additionally, Kroger won four Brandon Hall Group Excellence in Human Capital Management Awards®.

Zero Hunger | Zero Waste Mission

Kroger remains committed to its Zero Hunger | Zero Waste initiative. Over 14,000 students were recognized as Zero Heroes for their contributions to this mission. The company’s sixth annual Wellness Festival, promoting physical and mental health, was another highlight of its community efforts.

Outlook for the Second Half of 2024

Revised Sales Guidance

Based on strong sales momentum, Kroger raised the lower end of its full-year identical sales without fuel guidance. The new range is now 0.75% to 1.75%. Interim CFO Todd Foley expressed confidence in the company’s positive customer trends and projected continued growth in the second half of 2024.

Strategic Focus

Kroger’s long-term strategy focuses on consistently lowering prices, expanding digital offerings, and driving efficiencies. This approach is expected to fuel sustainable growth and generate returns for shareholders while benefiting customers and associates.

Conclusion

Kroger's second-quarter results demonstrate the company’s resilience and commitment to growth. With a focus on fresh products, digital innovation, and a pending merger with Albertsons, Kroger is poised for continued success in 2024 and beyond. The company’s ability to adapt to changing market conditions while maintaining customer loyalty underscores its strong position in the competitive grocery industry.

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