{"id":392609,"date":"2020-12-03T08:04:07","date_gmt":"2020-12-03T13:04:07","guid":{"rendered":"http:\/\/www.marketnewsdesk.com\/?p=392609"},"modified":"2020-12-03T08:04:07","modified_gmt":"2020-12-03T13:04:07","slug":"kroger-reports-third-quarter-2020-results-and-raises-full-year-2020-guidance","status":"publish","type":"post","link":"https:\/\/www.marketnewsdesk.com\/index.php\/kroger-reports-third-quarter-2020-results-and-raises-full-year-2020-guidance\/","title":{"rendered":"Kroger Reports Third Quarter 2020 Results and Raises Full-Year 2020 Guidance"},"content":{"rendered":"
\n

Third Quarter Highlights<\/h2>\n

– Identical Sales without fuel grew 10.9%<\/h2>\n

– Digital sales grew 108%<\/h2>\n

– EPS of $0.80; Adjusted EPS of $0.71, up 51% compared to prior year<\/h2>\n

– Operating Profit of $792 million; Adjusted FIFO Operating Profit of $871 million, up 33% compared to prior year<\/h2>\n

– Strong alternative profit business growth fueled by digital media revenue, up triple digits compared to prior year<\/h2>\n

– Continued investments to support and safeguard associates, customers and communities, nearly $1.3 billion since March<\/h2>\n

PR Newswire<\/p>\n<\/p><\/div>\n

\n

\n CINCINNATI<\/span>, Dec. 3, 2020<\/span> \/PRNewswire\/ —\u00a0The Kroger Co. (NYSE: KR) today reported its third quarter 2020 results, provided a Restock Kroger <\/i>progress update on the three-year transformation plan, and an update to its COVID-19 response.<\/p>\n

\n

\n
\n \"The
\n <\/a>\n <\/p>\n<\/p><\/div>\n

\n Comments from Chairman and CEO Rodney McMullen<\/span><\/b>\n <\/p>\n

“Our Kroger family of associates have been nothing short of incredible during the pandemic and they continue to inspire me every day. I am proud of our dedicated associates who continued to diligently execute our Restock Kroger<\/i> transformation while serving our customers when they need us most.<\/p>\n

We delivered strong results in the third quarter. Customers are at the center of everything we do and sales remain elevated as we continue to enhance our competitive moats \u2013 Fresh, Our Brands<\/i>, Data & Personalization and Seamless. We are executing against our strategy even during the pandemic and continue to grow market share.<\/p>\n

The strong underlying momentum in our core supermarket business and acceleration in the growth of our alternative profit business demonstrates we are successfully transforming our business model to deliver consistently strong and attractive total shareholder return in 2020 and beyond.”<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n\n
\n

\n
\n Financial Results<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n \n <\/td>\n\n

\n
\n 3Q20 (<\/b>
\n $ in millions; except EPS)<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n 3Q19 (<\/b>
\n $ in millions; except EPS)<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n
\n ID Sales* (Table 4)<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n 10.9%<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n 2.5%<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n
\n EPS<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $0.80<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $0.32<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n
\n Adjusted EPS (Table 6)<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $0.71<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $0.47<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n
\n Operating Profit<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $792<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $254<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n
\n Adjusted FIFO Operating Profit
(Table 7)<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $871<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $653<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n
\n FIFO Gross Margin Rate*<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n Decreased 2 basis points<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n
\n OG&A Rate*<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n Decreased 30 basis points<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n *without fuel and adjustment items, if applicable<\/span>\n <\/p>\n<\/td>\n<\/tr>\n<\/table><\/div>\n

Total company sales were $29.7 billion<\/span> in the third quarter, compared to $28.0 billion<\/span> for the same period last year. Excluding fuel and dispositions, sales grew 11.3%.<\/p>\n

Gross margin was 23.0% of sales for the third quarter. The FIFO gross margin rate, excluding fuel, decreased 2 basis points compared to the same period last year. This decrease was primarily driven by price investments and mix changes, offset by sourcing efficiencies, sales leverage and growth in alternative profit streams.<\/p>\n

The LIFO charge was $23 million<\/span> for both the third quarters of 2020 and 2019.<\/p>\n

The Operating, General & Administrative rate decreased 30 basis points, excluding fuel and adjustment items, due to sales leverage and execution of Restock Kroger<\/i> initiatives, partially offset by continued COVID-19 related investments to protect the health and safety of associates, customers and communities and increased incentive costs. <\/p>\n

Rent and depreciation, excluding fuel, decreased 27 basis points due to sales leverage.<\/p>\n

\n Capital Allocation Strategy<\/b>\n <\/p>\n

Kroger’s capital allocation strategy is to use its adjusted free cash flow to invest in the business and drive profitable growth while also maintaining its current investment grade debt rating and returning capital to shareholders. The company actively balances the use of its adjusted free cash flow to achieve these goals.<\/p>\n

Kroger’s net total debt to adjusted EBITDA ratio is 1.74, compared to 2.50 a year ago (Table 5). The company’s net total debt to adjusted EBITDA ratio target range is 2.30 to 2.50. Kroger held temporary cash investments of approximately $1.8 billion<\/span> as of the end of the quarter, reflecting improved operating performance and significant improvement in working capital.<\/p>\n

During the quarter, Kroger repurchased $304 million<\/span> of shares under its $1 billion<\/span> board authorization announced on September 11, 2020<\/span>. Year-to-date, Kroger has repurchased $989 million<\/span> of shares.<\/p>\n

Earlier this year, Kroger increased the dividend by 13 percent, marking the 14th<\/sup> consecutive year of dividend increases.<\/p>\n

\n Guidance Update<\/b>\n <\/p>\n

\n Comments from CFO Gary Millerchip<\/span><\/b>\n <\/p>\n

“As a result of our continued strong performance, market share growth and the expectation of sustained trends in food at home consumption for the remainder of our fiscal year, we are raising our full year 2020 guidance. For the full year 2020, we expect total identical sales without fuel to be around 14% and adjusted EPS growth of 50% to 53%.<\/p>\n

Our guidance contemplates continued investments in associates and customers plus ongoing COVID-19 related costs, balanced with continued execution of cost savings initiatives and growth in alternative profit businesses. <\/p>\n

Looking toward 2021, we believe that our performance will be stronger than we would have expected prior to the pandemic when viewed as a two-year stacked result for identical sales without fuel growth and as a compounded growth rate over 2020 and 2021 for adjusted earnings per share growth.”<\/p>\n

\n\n\n\n\n\n\n
\n

\n
\n Full Year 2020 Guidance<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n \n <\/td>\n\n

\n
\n IDS (%)<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n EPS
($)<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n Operating
Profit
($B)<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n Tax
Rate**<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n Cap
Ex<\/b>
\n <\/span>\n <\/p>\n

\n
\n ($B)<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n Adjusted<\/b>
\n <\/span>\n <\/p>\n

\n
\n FCF<\/b>
\n <\/span>\n <\/p>\n

\n
\n ($B)<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n Share
Repurchases<\/b>
\n <\/span>\n <\/p>\n

\n
\n ($B)<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n Adjusted*<\/sup><\/span>\n <\/p>\n<\/td>\n

\n

\n ~14.0%<\/span>\n <\/p>\n<\/td>\n

\n

\n $3.30<\/span>\n <\/p>\n

\n \u00a0–
$3.35<\/span>\n <\/p>\n<\/td>\n

\n

\n $4.0 –
$4.1<\/span>\n <\/p>\n<\/td>\n

\n

\n 23%<\/span>\n <\/p>\n<\/td>\n

\n

\n $2.8
–
$3.2<\/span>\n <\/p>\n<\/td>\n

\n

\n $2.8 –
$3.1<\/span>\n <\/p>\n<\/td>\n

\n

\n $1.1 – $1.3<\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n * Without adjusted items, if applicable; Identical sales is without fuel; Operating profit represents FIFO Operating Profit. Kroger is unable to provide a full reconciliation of the GAAP and non-GAAP measures used in 2020 guidance without unreasonable effort because it is not possible to predict certain of our adjustment items with a reasonable degree of certainty. This information is dependent upon future events and may be outside of our control and its unavailability could have a significant impact on 2020 GAAP financial results.<\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n ** This rate reflects typical tax adjustments and does not reflect changes to the rate from the completion of income tax audit examinations, which cannot be predicted.<\/span>\n <\/p>\n<\/td>\n<\/tr>\n<\/table><\/div>\n

\n Third Quarter 2020 Highlights<\/b>\n <\/p>\n

\n Associate Experience<\/b>\n <\/p>\n