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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 4, 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

Graphic

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 719,423,447 shares of Common Stock ($1 par value) outstanding as of December 5, 2023.

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements.

THE KROGER CO.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

Third Quarter Ended

Three Quarters Ended

November 4,

November 5,

November 4,

November 5,

(In millions, except per share amounts)

    

2023

    

2022

    

2023

    

2022

 

Sales

$

33,957

$

34,198

$

112,975

$

113,436

Operating expenses

Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below

 

26,477

 

26,890

 

88,032

 

89,234

Operating, general and administrative

 

5,646

 

5,587

 

19,974

 

18,001

Rent

 

201

 

195

 

671

 

642

Depreciation and amortization

 

721

 

685

 

2,396

 

2,259

Operating profit

 

912

 

841

 

1,902

 

3,300

Other income (expense)

Interest expense

(94)

(119)

(341)

(422)

Non-service component of company-sponsored pension plan benefits

7

11

24

38

Gain (loss) on investments

26

(207)

317

(637)

Net earnings before income tax expense

 

851

 

526

 

1,902

 

2,279

Income tax expense

 

204

 

126

 

472

 

481

Net earnings including noncontrolling interests

 

647

 

400

 

1,430

 

1,798

Net income attributable to noncontrolling interests

 

1

 

2

 

2

 

5

Net earnings attributable to The Kroger Co.

$

646

$

398

$

1,428

$

1,793

Net earnings attributable to The Kroger Co. per basic common share

$

0.89

$

0.55

$

1.97

$

2.47

Average number of common shares used in basic calculation

 

719

 

716

 

718

 

719

Net earnings attributable to The Kroger Co. per diluted common share

$

0.88

$

0.55

$

1.95

$

2.44

Average number of common shares used in diluted calculation

 

725

 

724

 

725

 

728

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 4,

November 5,

November 4,

November 5,

(In millions)

    

2023

    

2022

    

2023

    

2022

 

Net earnings including noncontrolling interests

$

647

$

400

$

1,430

$

1,798

Other comprehensive (loss) income

Change in pension and other postretirement defined benefit plans, net of income tax(1)

(3)

13

(10)

12

Unrealized gains and losses on cash flow hedging activities, net of income tax(2)

 

121

 

37

 

317

 

37

Amortization of unrealized gains and losses on cash flow hedging activities, net of income tax(3)

1

2

4

6

Total other comprehensive income

 

119

 

52

 

311

55

Comprehensive income

 

766

 

452

 

1,741

 

1,853

Comprehensive income attributable to noncontrolling interests

 

1

 

2

 

2

 

5

Comprehensive income attributable to The Kroger Co.

$

765

$

450

$

1,739

$

1,848

(1)Amount is net of tax of $(1) for the third quarter of 2023 and $(3) for the first three quarters of 2023.
(2)Amount is net of tax of $36 for the third quarter of 2023 and $96 for the first three quarters of 2023. 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 third quarter of 2023 and $2 for the first three quarters of 2023. Amount is net of tax of $1 for the first three quarters of 2022.

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

3

THE KROGER CO.

CONSOLIDATED BALANCE SHEETS

(unaudited)

    

November 4,

    

January 28,

 

(In millions, except par amounts)

2023

2023

 

ASSETS 

Current assets 

Cash and temporary cash investments 

$

1,725

$

1,015

Store deposits in-transit 

 

1,197

 

1,127

Receivables 

 

1,938

 

2,234

FIFO inventory 

 

10,258

 

9,756

LIFO reserve 

 

(2,327)

 

(2,196)

Prepaid and other current assets 

648

734

Total current assets 

 

13,439

 

12,670

Property, plant and equipment, net 

 

24,882

 

24,726

Operating lease assets

6,752

6,662

Intangibles, net

 

890

 

899

Goodwill 

 

2,916

 

2,916

Other assets 

 

2,142

 

1,750

Total Assets 

$

51,021

$

49,623

LIABILITIES 

Current liabilities 

Current portion of long-term debt including obligations under finance leases

$

724

$

1,310

Current portion of operating lease liabilities

668

662

Trade accounts payable 

 

8,149

 

7,119

Accrued salaries and wages 

 

1,177

 

1,746

Other current liabilities 

 

6,067

 

6,401

Total current liabilities 

 

16,785

 

17,238

Long-term debt including obligations under finance leases

12,039

12,068

Noncurrent operating lease liabilities

6,408

6,372

Deferred income taxes 

 

1,506

 

1,672

Pension and postretirement benefit obligations

 

387

 

436

Other long-term liabilities 

 

2,705

 

1,823

Total Liabilities 

 

39,830

 

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 

 

3,871

 

3,805

Accumulated other comprehensive loss 

 

(321)

 

(632)

Accumulated earnings 

 

26,421

 

25,601

Common shares in treasury, at cost, 1,198 shares in 2023 and 1,202 shares in 2022

 

(20,680)

 

(20,650)

Total Shareowners’ Equity - The Kroger Co.

 

11,209

 

10,042

Noncontrolling interests 

 

(18)

 

(28)

Total Equity 

 

11,191

 

10,014

Total Liabilities and Equity 

$

51,021

$

49,623

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 4,

November 5,

(In millions)

    

2023

    

2022

 

Cash Flows from Operating Activities:

Net earnings including noncontrolling interests 

$

1,430

$

1,798

Adjustments to reconcile net earnings including noncontrolling interests to net cash provided by operating activities:

Depreciation and amortization

 

2,396

 

2,259

Operating lease asset amortization

472

471

LIFO charge

 

131

 

392

Share-based employee compensation

 

124

 

145

Company-sponsored pension plans

 

(8)

 

(28)

Deferred income taxes

 

(261)

 

(93)

Gain on the sale of assets

(45)

(36)

(Gain) loss on investments

(317)

637

Other

 

128

 

82

Changes in operating assets and liabilities:

Store deposits in-transit

 

(70)

 

(127)

Receivables

 

133

 

(130)

Inventories

 

(502)

 

(2,267)

Prepaid and other current assets

 

45

 

99

Trade accounts payable

 

1,030

 

1,102

Accrued expenses

 

(426)

 

146

Income taxes receivable and payable

 

148

(69)

Operating lease liabilities

(539)

(533)

Other

 

999

 

(510)

Net cash provided by operating activities

 

4,868

 

3,338

Cash Flows from Investing Activities:

Payments for property and equipment, including payments for lease buyouts

 

(2,907)

 

(2,261)

Proceeds from sale of assets

 

94

71

Other

 

68

 

(2)

Net cash used by investing activities

 

(2,745)

 

(2,192)

Cash Flows from Financing Activities:

Payments on long-term debt including obligations under finance leases

 

(755)

(526)

Dividends paid

(586)

(494)

Financing fees paid

(62)

Proceeds from issuance of capital stock

42

 

127

Treasury stock purchases

 

(54)

 

(985)

Other

(60)

 

(111)

Net cash used by financing activities

 

(1,413)

 

(2,051)

Net increase (decrease) in cash and temporary cash investments

 

710

 

(905)

Cash and temporary cash investments:

Beginning of year

 

1,015

 

1,821

End of period

$

1,725

$

916

Reconciliation of capital investments:

Payments for property and equipment, including payments for lease buyouts

$

(2,907)

$

(2,261)

Payments for lease buyouts

 

10

Changes in construction-in-progress payables

 

421

 

59

Total capital investments, excluding lease buyouts

$

(2,486)

$

(2,192)

Disclosure of cash flow information:

Cash paid during the year for interest

$

380

$

456

Cash paid during the year for income taxes

$

579

$

649

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)