LEASES AND LEASE-FINANCED TRANSACTIONS

4 Months Ended

May 21, 2022

LEASES AND LEASE-FINANCED TRANSACTIONS

LEASES AND LEASE-FINANCED TRANSACTIONS

5. LEASES AND LEASE-FINANCED TRANSACTIONS

On May 17, 2018, the Company entered into a Partnership Framework Agreement with Ocado International Holdings Limited and Ocado Group plc (“Ocado”), which has since been amended. Under this agreement, Ocado will partner exclusively with the Company in the U.S., enhancing the Company’s digital and robotics capabilities in its distribution networks. In the first quarter of 2022, the Company opened two additional Kroger Delivery customer fulfillment centers in Dallas, Texas and Pleasant Prairie, Wisconsin, which brings the Company’s total Kroger Delivery customer fulfillment centers to five as of May 21, 2022. The Company determined the arrangement with Ocado contains a lease of the robotic equipment used to fulfill customer orders. As a result, the Company establishes a finance lease when each facility begins fulfilling orders to customers. The base term of each lease is 10 years with options to renew at the Company’s sole discretion. The Company elected to combine the lease and non-lease elements in the contract. As a result, the Company will account for all payments to Ocado as lease payments. During the first quarter of 2022, the Company recorded finance lease assets of $339 and finance lease liabilities of $313 related to the Company’s agreement with Ocado.