LEASES AND LEASE-FINANCED TRANSACTIONS

9 Months Ended

Nov. 05, 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 three quarters of 2022, the Company opened three additional Kroger Delivery customer fulfillment centers in Romulus, Michigan, Dallas, Texas and Pleasant Prairie, Wisconsin, which brings the Company’s total Kroger Delivery customer fulfillment centers to six as of November 5, 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 three quarters of 2022, the Company recorded finance lease assets of $429 and finance lease liabilities of $391 related to the Company’s agreement with Ocado.