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 August 12, 2023

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 719,315,778 shares of Common Stock ($1 par value) outstanding as of September 12, 2023.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

THE KROGER CO.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Second Quarter Ended				Two Quarters Ended
	August 12,		August 13,		August 12,		August 13,
(In millions, except per share amounts)	2023		2022		2023		2022
Sales	$	33,853	$	34,638	$	79,018	$	79,238
Operating expenses
Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below		26,475		27,392		61,555		62,343
Operating, general and administrative		6,935		5,417		14,328		12,414
Rent		206		191		470		448
Depreciation and amortization		716		684		1,674		1,574
Operating profit (loss)		(479)		954		991		2,459
Other income (expense)
Interest expense		(93)		(127)		(247)		(303)
Non-service component of company-sponsored pension plan benefits		8		11		17		26
Gain (loss) on investments		367		103		290		(429)
Net earnings (loss) before income tax expense		(197)		941		1,051		1,753
Income tax expense (benefit)		(18)		209		268		356
Net earnings (loss) including noncontrolling interests		(179)		732		783		1,397
Net income attributable to noncontrolling interests		1		1		1		3
Net earnings (loss) attributable to The Kroger Co.	$	(180)	$	731	$	782	$	1,394
Net earnings (loss) attributable to The Kroger Co. per basic common share	$	(0.25)	$	1.01	$	1.08	$	1.92
Average number of common shares used in basic calculation		719		716		718		720
Net earnings (loss) attributable to The Kroger Co. per diluted common share	$	(0.25)	$	1.00	$	1.07	$	1.89
Average number of common shares used in diluted calculation		719		725		725		730

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

2

THE KROGER CO.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

	Second Quarter Ended				Two Quarters Ended
	August 12,		August 13,		August 12,		August 13,
(In millions)	2023		2022		2023		2022
Net earnings (loss) including noncontrolling interests	$	(179)	$	732	$	783	$	1,397
Other comprehensive (loss) income
Change in pension and other postretirement defined benefit plans, net of income tax(1)		(3)		(1)		(7)		(1)
Unrealized gains and losses on cash flow hedging activities, net of income tax(2)		105		—		196		—
Amortization of unrealized gains and losses on cash flow hedging activities, net of income tax(3)		2		2		3		4
Total other comprehensive income		104		1		192		3
Comprehensive income (loss)		(75)		733		975		1,400
Comprehensive income attributable to noncontrolling interests		1		1		1		3
Comprehensive income (loss) attributable to The Kroger Co.	$	(76)	$	732	$	974	$	1,397

(1) Amount is net of tax of $(1) for the second quarter of 2023 and $1 for the second quarter of 2022. Amount is net of tax of $(2) for the first two quarters of 2023.

(2) Amount is net of tax of $33 for the second quarter of 2023 and $59 for the first two quarters of 2023.

(3) Amount is net of tax of $1 for the first two quarters of 2023 and 2022.

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

3

THE KROGER CO.

CONSOLIDATED BALANCE SHEETS

(unaudited)

	August 12,		January 28,
(In millions, except par amounts)	2023		2023
ASSETS
Current assets
Cash and temporary cash investments	$	2,420	$	1,015
Store deposits in-transit		1,141		1,127
Receivables		1,820		2,234
FIFO inventory		9,126		9,756
LIFO reserve		(2,298)		(2,196)
Prepaid and other current assets		642		734
Total current assets		12,851		12,670
Property, plant and equipment, net		24,894		24,726
Operating lease assets		6,697		6,662
Intangibles, net		885		899
Goodwill		2,916		2,916
Other assets		1,959		1,750
Total Assets	$	50,202	$	49,623
LIABILITIES
Current liabilities
Current portion of long-term debt including obligations under finance leases	$	716	$	1,310
Current portion of operating lease liabilities		669		662
Trade accounts payable		7,597		7,119
Accrued salaries and wages		1,182		1,746
Other current liabilities		6,373		6,401
Total current liabilities		16,537		17,238
Long-term debt including obligations under finance leases		12,075		12,068
Noncurrent operating lease liabilities		6,369		6,372
Deferred income taxes		1,452		1,672
Pension and postretirement benefit obligations		419		436
Other long-term liabilities		2,746		1,823
Total Liabilities		39,598		39,609
Commitments and contingencies see Note 6
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 2023 and 2022		1,918		1,918
Additional paid-in capital		3,840		3,805
Accumulated other comprehensive loss		(440)		(632)
Accumulated earnings		25,984		25,601
Common shares in treasury, at cost, 1,198 shares in 2023 and 1,202 shares in 2022		(20,676)		(20,650)
Total Shareowners’ Equity - The Kroger Co.		10,626		10,042
Noncontrolling interests		(22)		(28)
Total Equity		10,604		10,014
Total Liabilities and Equity	$	50,202	$	49,623

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

4

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Two Quarters Ended
	August 12,		August 13,
(In millions)	2023		2022
Cash Flows from Operating Activities:
Net earnings including noncontrolling interests	$	783	$	1,397
Adjustments to reconcile net earnings including noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization		1,674		1,574
Operating lease asset amortization		330		329
LIFO charge		102		240
Share-based employee compensation		92		103
Company-sponsored pension plans		(6)		(20)
Deferred income taxes		(278)		(40)
Gain on the sale of assets		(43)		(13)
(Gain) loss on investments		(290)		429
Other		84		66
Changes in operating assets and liabilities:
Store deposits in-transit		(14)		(5)
Receivables		227		(10)
Inventories		630		(774)
Prepaid and other current assets		68		115
Trade accounts payable		478		330
Accrued expenses		(434)		(407)
Income taxes receivable and payable		252		(41)
Operating lease liabilities		(378)		(373)
Other		1,087		(473)
Net cash provided by operating activities		4,364		2,427
Cash Flows from Investing Activities:
Payments for property and equipment, including payments for lease buyouts		(1,954)		(1,430)
Proceeds from sale of assets		89		37
Other		70		5
Net cash used by investing activities		(1,795)		(1,388)
Cash Flows from Financing Activities:
Payments on long-term debt including obligations under finance leases		(708)		(486)
Dividends paid		(376)		(307)
Proceeds from issuance of capital stock		36		119
Treasury stock purchases		(47)		(975)
Other		(69)		(109)
Net cash used by financing activities		(1,164)		(1,758)
Net increase (decrease) in cash and temporary cash investments		1,405		(719)
Cash and temporary cash investments:
Beginning of year		1,015		1,821
End of period	$	2,420	$	1,102
Reconciliation of capital investments:
Payments for property and equipment, including payments for lease buyouts	$	(1,954)	$	(1,430)
Payments for lease buyouts		—		10
Changes in construction-in-progress payables		183		(74)
Total capital investments, excluding lease buyouts	$	(1,771)	$	(1,494)
Disclosure of cash flow information:
Cash paid during the year for interest	$	308	$	379
Cash paid during the year for income taxes	$	290	$	432

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		Income (Loss)		Earnings		Interest		Total
Balances at January 29, 2022	1,918	$	1,918	$	3,657	1,191	$	(19,722)	$	(467)	$	24,066	$	(23)	$	9,429
Issuance of common stock:
Stock options exercised	—		—		—	(4)		113		—		—		—		113
Restricted stock issued	—		—		(77)	(2)		12		—		—		—		(65)
Treasury stock activity:
Treasury stock purchases, at cost	—		—		—	10		(520)		—		—		—		(520)
Stock options exchanged	—		—		—	3		(145)		—		—		—		(145)
Share-based employee compensation	—		—		57	—		—		—		—		—		57
Other comprehensive income net of tax of $-	—		—		—	—		—		2		—		—		2
Other	—		—		77	—		(77)		—		—		3		3
Cash dividends declared ($0.21 per common share)	—		—		—	—		—		—		(147)		—		(147)
Net earnings including noncontrolling interests	—		—		—	—		—		—		664		2		666
Balances at May 21, 2022	1,918	$	1,918	$	3,714	1,198	$	(20,339)	$	(465)	$	24,583	$	(18)	$	9,393
Issuance of common stock:
Stock options exercised	—		—		—	—		6		—		—		—		6
Restricted stock issued	—		—		(89)	(2)		47		—		—		—		(42)
Treasury stock activity:
Treasury stock purchases, at cost	—		—		—	6		(300)		—		—		—		(300)
Stock options exchanged	—		—		—	—		(10)		—		—		—		(10)
Share-based employee compensation	—		—		46	—		—		—		—		—		46
Other comprehensive income net of tax of $1	—		—		—	—		—		1		—		—		1
Other	—		—		45	—		(45)		—		—		(1)		(1)
Cash dividends declared ($0.26 per common share)	—		—		—	—		—		—		(186)		—		(186)
Net earnings including noncontrolling interests	—		—		—	—		—		—		731		1		732
Balances at August 13, 2022	1,918	$	1,918	$	3,716	1,202	$	(20,641)	$	(464)	$	25,128	$	(18)	$	9,639
Issuance of common stock:
Stock options exercised	—		—		—	—		8		—		—		—		8
Restricted stock issued	—		—		(4)	—		—		—		—		—		(4)
Treasury stock activity:
Treasury stock purchases, at cost	—		—		—	—		(1)		—		—		—		(1)
Stock options exchanged	—		—		—	—		(9)		—		—		—		(9)
Share-based employee compensation	—		—		42	—		—		—		—		—		42
Other comprehensive income net of tax of $11	—		—		—	—		—		52		—		—		52
Other	—		—		4	—		(4)		—		—		(10)		(10)
Cash dividends declared ($0.26 per common share)	—		—		—	—		—		—		(188)		—		(188)
Net earnings including noncontrolling interests	—		—		—	—		—		—		398		2		400
Balances at November 5, 2022	1,918	$	1,918	$	3,758	1,202	$	(20,647)	$	(412)	$	25,338	$	(26)	$	9,929
Issuance of common stock:
Stock options exercised	—		—		—	—		7		—		—		—		7
Restricted stock issued	—		—		(3)	—		3		—		—		—		—
Treasury stock activity:
Stock options exchanged	—		—		—	—		(8)		—		—		—		(8)
Share-based employee compensation	—		—		45	—		—		—		—		—		45
Other comprehensive loss net of tax of ($63)	—		—		—	—		—		(220)		—		—		(220)
Other	—		—		5	—		(5)		—		—		(2)		(2)
Cash dividends declared ($0.26 per common share)	—		—		—	—		—		—		(188)		—		(188)
Net earnings including noncontrolling interests	—		—		—	—		—		—		451		—		451
Balances at January 28, 2023	1,918	$	1,918	$	3,805	1,202	$	(20,650)	$	(632)	$	25,601	$	(28)	$	10,014

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

6

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS’ EQUITY

(unaudited)

	Accumulated
Additional