UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 5, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to         

Commission file number 1-303

The Kroger Co.

(Exact name of registrant as specified in its charter)

Ohio	31-0345740
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

1014 Vine Street, Cincinnati, Ohio 45202

(Address of principal executive offices)

(Zip Code)

(513) 762-4000

(Registrant’s telephone number, including area code)

Unchanged

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common, $1.00 Par Value	KR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No  ☒.

There were 715,821,875 shares of Common Stock ($1 par value) outstanding as of December 6, 2022.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

THE KROGER CO.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Third Quarter Ended				Three Quarters Ended
	November 5,		November 6,		November 5,		November 6,
(In millions, except per share amounts)	2022		2021		2022		2021
Sales	$	34,198	$	31,860	$	113,436	$	104,840
Operating expenses
Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below		26,890		24,959		89,234		81,820
Operating, general and administrative		5,587		5,177		18,001		17,692
Rent		195		197		642		648
Depreciation and amortization		685		659		2,259		2,168
Operating profit		841		868		3,300		2,512
Other income (expense)
Interest expense		(119)		(135)		(422)		(438)
Non-service component of company-sponsored pension plan costs		11		(77)		38		(44)
Loss on investments		(207)		(94)		(637)		(694)
Net earnings before income tax expense		526		562		2,279		1,336
Income tax expense		126		77		481		239
Net earnings including noncontrolling interests		400		485		1,798		1,097
Net income attributable to noncontrolling interests		2		2		5		7
Net earnings attributable to The Kroger Co.	$	398	$	483	$	1,793	$	1,090
Net earnings attributable to The Kroger Co. per basic common share	$	0.55	$	0.64	$	2.47	$	1.44
Average number of common shares used in basic calculation		716		742		719		747
Net earnings attributable to The Kroger Co. per diluted common share	$	0.55	$	0.64	$	2.44	$	1.43
Average number of common shares used in diluted calculation		724		752		728		757

The accompanying notes are an integral part of the Consolidated Financial Statements.

2

THE KROGER CO.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

	Third Quarter Ended				Three Quarters Ended
	November 5,		November 6,		November 5,		November 6,
(In millions)	2022		2021		2022		2021
Net earnings including noncontrolling interests	$	400	$	485	$	1,798	$	1,097
Other comprehensive income
Change in pension and other postretirement defined benefit plans, net of income tax(1)		13		132		12		134
Unrealized gains and losses on cash flow hedging activities, net of income tax(2)		37		—		37		—
Amortization of unrealized gains and losses on cash flow hedging activities, net of income tax(3)		2		2		6		5
Total other comprehensive income		52		134		55		139
Comprehensive income		452		619		1,853		1,236
Comprehensive income attributable to noncontrolling interests		2		2		5		7
Comprehensive income attributable to The Kroger Co.	$	450	$	617	$	1,848	$	1,229

(1) Amount is net of tax of $37 for the third quarter of 2021. Amount is net of tax of $39 for the first three quarters of 2021.

(2) Amount is net of tax of $11 for the third quarter and the first three quarters of 2022.

(3) Amount is net of tax of $1 for the first three quarters of 2022 and $4 for the first three quarters of 2021.

The accompanying notes are an integral part of the Consolidated Financial Statements.

3

THE KROGER CO.

CONSOLIDATED BALANCE SHEETS

(unaudited)

	November 5,		January 29,
(In millions, except par amounts)	2022		2022
ASSETS
Current assets
Cash and temporary cash investments	$	916	$	1,821
Store deposits in-transit		1,209		1,082
Receivables		2,019		1,828
FIFO inventory		10,628		8,353
LIFO reserve		(1,962)		(1,570)
Prepaid and other current assets		593		660
Total current assets		13,403		12,174
Property, plant and equipment, net		24,080		23,789
Operating lease assets		6,705		6,695
Intangibles, net		906		942
Goodwill		3,076		3,076
Other assets		1,817		2,410
Total Assets	$	49,987	$	49,086
LIABILITIES
Current liabilities
Current portion of long-term debt including obligations under finance leases	$	788	$	555
Current portion of operating lease liabilities		654		650
Trade accounts payable		8,219		7,117
Accrued salaries and wages		1,463		1,736
Other current liabilities		6,614		6,265
Total current liabilities		17,738		16,323
Long-term debt including obligations under finance leases		12,442		12,809
Noncurrent operating lease liabilities		6,370		6,426
Deferred income taxes		1,481		1,562
Pension and postretirement benefit obligations		407		478
Other long-term liabilities		1,620		2,059
Total Liabilities		40,058		39,657
Commitments and contingencies see Note 7
SHAREOWNERS’ EQUITY
Preferred shares, $100 par per share, 5 shares authorized and unissued		—		—
Common shares, $1 par per share, 2,000 shares authorized; 1,918 shares issued in 2022 and 2021		1,918		1,918
Additional paid-in capital		3,758		3,657
Accumulated other comprehensive loss		(412)		(467)
Accumulated earnings		25,338		24,066
Common shares in treasury, at cost, 1,202 shares in 2022 and 1,191 shares in 2021		(20,647)		(19,722)
Total Shareowners’ Equity - The Kroger Co.		9,955		9,452
Noncontrolling interests		(26)		(23)
Total Equity		9,929		9,429
Total Liabilities and Equity	$	49,987	$	49,086

The accompanying notes are an integral part of the Consolidated Financial Statements.

4

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Three Quarters Ended
	November 5,		November 6,
(In millions)	2022		2021
Cash Flows from Operating Activities:
Net earnings including noncontrolling interests	$	1,798	$	1,097
Adjustments to reconcile net earnings including noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization		2,259		2,168
Operating lease asset amortization		471		468
LIFO charge		392		177
Share-based employee compensation		145		159
Company-sponsored pension plans		(28)		56
Deferred income taxes		(93)		34
Gain on the sale of assets		(36)		(34)
Loss on investments		637		694
Other		82		106
Changes in operating assets and liabilities:
Store deposits in-transit		(127)		(44)
Receivables		(130)		(80)
Inventories		(2,267)		(673)
Prepaid and other current assets		99		371
Trade accounts payable		1,102		1,200
Accrued expenses		146		(40)
Income taxes receivable and payable		(69)		(54)
Operating lease liabilities		(533)		(532)
Other		(510)		(282)
Net cash provided by operating activities		3,338		4,791
Cash Flows from Investing Activities:
Payments for property and equipment, including payments for lease buyouts		(2,261)		(2,008)
Proceeds from sale of assets		71		139
Other		(2)		(90)
Net cash used by investing activities		(2,192)		(1,959)
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt		—		43
Payments on long-term debt including obligations under finance leases		(526)		(915)
Dividends paid		(494)		(433)
Financing fees paid		(62)		(5)
Proceeds from issuance of capital stock		127		118
Treasury stock purchases		(985)		(1,049)
Proceeds from financing arrangement		—		166
Other		(111)		(156)
Net cash used by financing activities		(2,051)		(2,231)
Net (decrease) increase in cash and temporary cash investments		(905)		601
Cash and temporary cash investments:
Beginning of year		1,821		1,687
End of period	$	916	$	2,288
Reconciliation of capital investments:
Payments for property and equipment, including payments for lease buyouts	$	(2,261)	$	(2,008)
Payments for lease buyouts		10		—
Changes in construction-in-progress payables		59		(144)
Total capital investments, excluding lease buyouts	$	(2,192)	$	(2,152)
Disclosure of cash flow information:
Cash paid during the year for interest	$	456	$	493
Cash paid during the year for income taxes	$	649	$	364

The accompanying notes are an integral part of the Consolidated Financial Statements.

5

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS’ EQUITY

(unaudited)

									Accumulated
				Additional					Other
	Common Stock			Paid-In		Treasury Stock			Comprehensive		Accumulated		Noncontrolling
(In millions, except per share amounts)	Shares	Amount		Capital		Shares	Amount		Loss		Earnings		Interest		Total
Balances at January 30, 2021	1,918	$	1,918	$	3,461	1,160	$	(18,191)	$	(630)	$	23,018	$	(26)	$	9,550
Issuance of common stock:
Stock options exercised	—		—		—	(2)		31		—		—		—		31
Restricted stock issued	—		—		(35)	(1)		17		—		—		—		(18)
Treasury stock activity:
Treasury stock purchases, at cost	—		—		—	10		(338)		—		—		—		(338)
Stock options exchanged	—		—		—	2		(64)		—		—		—		(64)
Share-based employee compensation	—		—		56	—		—		—		—		—		56
Other comprehensive income net of income tax of $2	—		—		—	—		—		3		—		—		3
Other	—		—		23	—		(23)		—		1		3		4
Cash dividends declared ($0.18 per common share)	—		—		—	—		—		—		(138)		—		(138)
Net earnings including noncontrolling interests	—		—		—	—		—		—		140		3		143
Balances at May 22, 2021	1,918	$	1,918	$	3,505	1,169	$	(18,568)	$	(627)	$	23,021	$	(20)	$	9,229
Issuance of common stock:
Stock options exercised	—		—		—	(2)		54		—		—		—		54
Restricted stock issued	—		—		(99)	(2)		56		—		—		—		(43)
Treasury stock activity:
Treasury stock purchases, at cost	—		—		—	8		(299)		—		—		—		(299)
Stock options exchanged	—		—		—	1		(50)		—		—		—		(50)
Share-based employee compensation	—		—		52	—		—		—		—		—		52
Other comprehensive income net of income tax of $4	—		—		—	—		—		2		—		—		2
Other	—		—		69	—		(69)		—		—		(2)		(2)
Cash dividends declared ($0.21 per common share)	—		—		—	—		—		—		(154)		—		(154)
Net earnings including noncontrolling interests	—		—		—	—		—		—		467		2		469
Balances at August 14, 2021	1,918	$	1,918	$	3,527	1,174	$	(18,876)	$	(625)	$	23,334	$	(20)	$	9,258
Issuance of common stock:
Stock options exercised	—		—		—	(1)		33		—		—		—		33
Restricted stock issued	—		—		(3)	—		—		—		—		—		(3)
Treasury stock activity:
Treasury stock purchases, at cost	—		—		—	6		(251)		—		—		—		(251)
Stock options exchanged	—		—		—	1		(47)		—		—		—		(47)
Share-based employee compensation	—		—		51	—		—		—		—		—		51
Other comprehensive income net of income tax of $37	—		—		—	—		—		134		—		—		134
Other	—		—		15	—		(15)		—		(1)		(10)		(11)
Cash dividends declared ($0.21 per common share)	—		—		—	—		—		—		(158)		—		(158)
Net earnings including noncontrolling interests	—		—		—	—		—		—		483		2		485
Balances at November 6, 2021	1,918	$	1,918	$	3,590	1,180	$	(19,156)	$	(491)	$	23,658	$	(28)	$	9,491
Issuance of common stock:
Stock options exercised	—		—		—	(2)		54		—		—		—		54
Restricted stock issued	—		—		—	—		—		—		—		—		—
Treasury stock activity:
Treasury stock purchases, at cost	—		—		—	11		(534)		—		—		—		(534)
Stock options exchanged	—		—		—	2		(64)		—		—		—		(64)
Share-based employee compensation	—		—		44	—		—		—		—		—		44
Other comprehensive income net of income tax of $8	—		—		—	—		—		24		—		—		24
Other	—		—		23	—		(22)		—		—		1		2
Cash dividends declared ($0.21 per common share)	—		—		—	—		—		—		(157)		—		(157)
Net earnings including noncontrolling interests	—		—		—	—		—		—		565		4		569
Balances at January 29, 2022	1,918	$	1,918	$	3,657	1,191	$	(19,722)	$	(467)	$	24,066	$	(