In announcing fourth quarter financial results, Rodney McMullen, Kroger chairman and CEO, also defended the merger that the company is pursuing with Albertsons Cos., saying it will be good for households in the United States and for employees as well.
Kroger topped a MarketBeat analyst consensus estimate on earnings at $1.13 and was in line with a revenue estimate of $37.07 billion.
Identical Sales without fuel decreased by 0.8%, according to Kroger. Sales were $37.06 billion versus $34.82 billion in the year-earlier quarter.
Operating profit was $1.19 billion, while adjusted FIFO operating profit was $1.31 billion versus $826 million and $1.27 billion, respectively, in the year-prior period.
For the full fiscal year, company net earnings were $2.16 billion, or $2.96 per diluted share, versus $2.24 billion, or $3.06 per diluted share, in the year previous. Adjusted net earnings were $3.48 billion, or $4.76 per diluted share, versus $3.1 billion, or $4.23 per diluted share, in the year before.
Sales were $150.04 billion versus $148.26 billion in the year earlier. Operating profit was $3.1 billion, while adjusted FIFO operating profit was $4.99 billion versus $4.13 billion and $5.08 billion, respectively, in the year prior.
In a conference call, Rodney McMullen, Kroger chairman and CEO, said Kroger’s go-to-market strategy features four focus areas: fresh, power brands, seamless, and personalization, propelling a customer experience that will grow sales and build loyalty. However, he emphasized that value has been a key factor over the past year when macroeconomic factors and lesser governmental support pressured many households. As evidence, McMullen noted that Kroger customers clipped four billion coupons in 2023, a billion more coupons than they used in 2022. Although he said Kroger expects consumer sentiment to improve during 2024, the company would still focus on providing lower prices and value, including through private label products, while still following up on initiatives such as its in-house media business, digital operations, where Kroger saw an 18% fourth-quarter increase in households engaged, and customer experience enhancements, with delivery one focus.
In regards to the Albertsons merger process, McMullen said Kroger was disappointed in the United States Federal Trade Commission’s challenge to the transaction, noting that, in previous mergers, the company was able to lower prices, invested in workers, improved the customer experience and deepened connections with communities it serves. He went on to say that Kroger added more than 100,000 union jobs in the national retail environment as these union jobs shrank elsewhere. He asserted that Kroger has been making investments in wages, including $2.4 billion in incremental dollars since 2018, on top of hundreds of millions of dollars in benefit investments.
The retail industry, McMullen said, continues to become more competitive, and Kroger recognizes that its customers also shop at rivals such as Costco, Amazon and dollar stores, and they eat at restaurants.
Yet, Kroger faces challenges from the FTC and several states that have sued to enjoin the merger. In addition, Washington and Colorado have also sued separately. Kroger will defend the merger action and litigate as the combination with Albertsons is the best outcome for America’s families, he stated, but underscored that Kroger can’t close the merger while several legal actions are pending.
In announcing the financial results, McMullen said, “Kroger achieved strong 2023 results, in line with our long-term growth model and built upon three consecutive years of historic growth. As customers manage macroeconomic pressures, we are lowering prices and offering even more ways to save with personalized promotions and rewards. Our unique seamless shopping experience provides customers the products they want, when and how they want them, with zero compromise on quality, convenience and selection. We respect and appreciate our associates who are delivering a full, fresh and friendly customer experience. Over the last five years, we’ve made historic investments in associate wages, benefits and career development opportunities, including significant investments to help stabilize associates’ future pension benefits. We are increasing customer visits and growing loyal households through the strength of our retail business, which positions Kroger for more ways to drive sustainable future growth. We expect to continue our momentum in 2024 by delivering value for customers, investing in associates and generating attractive and sustainable shareholder returns.”
Kroger CFO Todd Foley added, “Kroger’s 2023 results provide another proof point of the strength and resilience of our value creation model, which supported another year of strong free cash flow and net earnings growth. In 2024, we expect to grow revenue by delivering value for customers and enhancing our seamless shopping experience. We plan to balance investments in our business, including lowering prices and increasing associate wages, with productivity and cost savings initiatives, improvement on long-term initiatives in gross margin and growth in our alternative profit businesses. This strength in our model gives us confidence in our ability to deliver on our 2024 guidance and maintain our strong track record of delivering for our customers, investing in our associates and generating attractive and sustainable returns for shareholders.”
