{"id":450669,"date":"2021-03-04T08:18:32","date_gmt":"2021-03-04T13:18:32","guid":{"rendered":"http:\/\/www.marketnewsdesk.com\/?p=450669"},"modified":"2021-03-04T08:18:32","modified_gmt":"2021-03-04T13:18:32","slug":"kroger-delivers-strong-fourth-quarter-and-fiscal-year-2020-results","status":"publish","type":"post","link":"https:\/\/www.marketnewsdesk.com\/index.php\/kroger-delivers-strong-fourth-quarter-and-fiscal-year-2020-results\/","title":{"rendered":"Kroger Delivers Strong Fourth Quarter and Fiscal Year 2020 Results"},"content":{"rendered":"
\n

Issues 2021 Full Year Guidance<\/h2>\n

Fiscal Q4 Highlights<\/h2>\n

– Identical Sales without fuel grew 10.6%, digital sales grew 118%<\/h2>\n

– EPS of ($0.10); Adjusted EPS of $0.81<\/h2>\n

– Operating Loss of ($158 million); including a $989 million charge for UFCW pension commitments; Adjusted FIFO Operating Profit of $837 million<\/h2>\n

Fiscal 2020 Highlights<\/h2>\n

– Identical Sales without fuel grew 14.1%, digital sales grew 116%<\/h2>\n

– Record Our Brands sales of $26.2 billion, up 13.6%<\/h2>\n

– EPS of $3.27; Adjusted EPS of $3.47<\/h2>\n

– Operating Profit of $2.8 billion; Adjusted FIFO Operating Profit of $4.1 billion<\/h2>\n

– Committed $2.5 billion to support and safeguard associates, customers, and communities, which includes the UFCW pension commitments<\/h2>\n

– Cost savings exceeded $1 billion for third consecutive year<\/h2>\n

– Alternative profit contributed incremental $150 million of operating profit fueled by retail media<\/h2>\n

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

\n

\n CINCINNATI<\/span>, March 4, 2021<\/span> \/PRNewswire\/ — The Kroger Co. (NYSE: KR) today reported its fourth quarter and fiscal year 2020 results. <\/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

“I am incredibly humbled by the strength of our associates and what we continue to accomplish together. Our customers are at the center of everything we do and we will continue to serve them as we have since the beginning of the pandemic, through our leadership in food and as a health partner, providing COVID-19 testing and vaccines. <\/p>\n

“Kroger continued to grow market share during the quarter. Our ability to meet our customers’ evolving needs is a testament to our deep competitive moats, disciplined investments in our increasingly robust digital capabilities, as well as our associates’ relentless focus on our customers. We finished fiscal year 2020 with strong sales and earnings, as heightened demand for fresh, convenient food and meal solutions across modalities, including in store, pick up and home delivery, continued throughout the fourth quarter. <\/p>\n

“Supported by our strong performance and cash position, we were pleased to commit more than $2.5 billion<\/span> to safeguard the environment our associates and customers work and shop in and to reward associates, including nearly $1 billion<\/span> to better secure pensions.” <\/p>\n

\n Fourth Quarter Financial Results<\/b>\n <\/p>\n

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

\n
\n 4Q20 (<\/b>
\n $ in millions; except EPS)<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n 4Q19 <\/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 10.6%<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n 2.0%<\/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 ($0.10)<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $0.40<\/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 $0.81<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $0.57<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n
\n Operating (Loss) Profit**<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n ($158)<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $537<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n
\n Adjusted FIFO Operating\u00a0\u00a0
Profit (Table 7)<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $837<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $758<\/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 6 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 7 basis points<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n<\/table><\/div>\n

*without fuel and adjustment items, if applicable
** Includes a $989 million<\/span> pre-tax charge related to UFCW pension commitments and adjustment items, if applicable <\/p>\n

Total company sales were $30.7 billion<\/span> in the fourth quarter, compared to $28.9 billion<\/span> for the same period last year. Excluding fuel and dispositions, sales grew 10.7%.<\/p>\n

Gross margin was 22.9% of sales for the fourth quarter. The FIFO gross margin rate, excluding fuel, decreased 6 basis points compared to the same period last year, reflecting continued price investments offset by growth in alternative profit streams and sourcing benefits.<\/p>\n

The LIFO credit for the fourth quarter was $84 million<\/span>, compared to a LIFO charge of $36 million<\/span> for the same period last year. The LIFO credit was primarily driven by fourth quarter working capital improvements in pharmacy inventory and dairy deflation. <\/p>\n

The Operating, General & Administrative rate decreased 7 basis points, excluding fuel and adjustment items, which reflects sales leverage and execution of cost savings initiatives, 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 28 basis points due to sales leverage. <\/p>\n

As a result of the UFCW pension charge, the income tax rate was a benefit for the fourth quarter of 2020 of 30.8%. This compared to a rate of 18.3% for the same period last year which was lower than our effective rate due to an increase in tax deductions.<\/p>\n

\n Fiscal 2020 Financial Results<\/b>\n <\/p>\n

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

\n
\n 2020 (<\/b>
\n $ in billions; except EPS)<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n 2019 <\/b>
\n ($ in billions; 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 14.1%<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n 2.0%<\/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 $3.27<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $2.04<\/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 $3.47<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $2.19<\/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 $2.8<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $2.3<\/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 $4.1<\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n
\n $3.0<\/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 Increased 14 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 6 basis points<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n<\/table><\/div>\n

*without fuel and adjustment items, if applicable
** Includes a $989 million<\/span> pre-tax charge related to UFCW pension commitments and adjustment items, if applicable<\/p>\n

Total company sales were $132.5 billion<\/span> in 2020, compared to $122.3 billion<\/span> for the same period last year. Excluding fuel and dispositions, total sales grew 14.2%.<\/p>\n

Gross margin was 23.3% of sales for 2020. The FIFO gross margin rate, excluding fuel, increased 14 basis points compared to the same period last year. This increase was primarily driven by sales leverage, growth in alternative profit streams, and sourcing benefits, partially offset with continued price investments.<\/p>\n

The LIFO credit for 2020 was $7 million<\/span>, compared to a LIFO charge of $105 million<\/span> in 2019. The LIFO credit was primarily driven by fourth quarter working capital improvements in pharmacy inventory and dairy deflation.<\/p>\n

The Operating, General & Administrative rate decreased 6 basis points, excluding fuel and adjustment items, which reflects sales leverage and execution of cost savings initiatives, 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 31 basis points due to sales leverage.<\/p>\n

The income tax rate for 2020 was 23.2% compared to 23.7% for the same period last year.\u00a0The income tax rate is lower compared to 2019 due to the unfavorable impact of the Lucky’s Market impairment charge in 2019.<\/p>\n

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

Kroger reduced net total debt by $2.0 billion<\/span> over the last four quarters. Kroger’s net total debt to adjusted EBITDA ratio is 1.75, compared to 2.48 a year ago (Table 5). The company’s net total debt to adjusted EBITDA ratio target range is 2.30 to 2.50. <\/p>\n

In total, Kroger returned $1.9 billion<\/span> to shareholders in 2020. Kroger repurchased $1.32 billion<\/span> of shares in 2020 under its board authorizations. Kroger increased the dividend by 13 percent, from 64\u00a2 to 72\u00a2 per year, marking the 14th<\/sup> consecutive year of dividend increases, which resulted in a payout of $534 million<\/span>.<\/p>\n

\n 2021 Guidance <\/b>\n <\/p>\n

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

“As a result of strong execution of our strategy, enabled by continued investments in our customers and associates, we are accelerating the momentum in our business. Looking ahead to 2021, evaluating our performance using the two-year period of 2020 and 2021 more accurately measures this underlying momentum. We expect our two-year identical sales stack*** to be in the range of 9% to 11%. In addition, we expect our adjusted net earnings per diluted share and adjusted FIFO operating profit to have compounded annual growth rates of between 12% and 16% and 5.4% and 8.5%, respectively.\u00a0Over the two years, this would result in total shareholder return significantly above our previously communicated target of 8-11%. <\/p>\n

“Our 2021 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 our alternative profit businesses.<\/p>\n

“We remain committed to delivering strong and attractive total shareholder return over the long term and expect our 2021 operating profit guidance to represent a new, higher baseline from which we will deliver total shareholder return of 8-11%. We look forward to sharing more about our future growth plans at our upcoming investor day.”<\/p>\n

\n Full Year 2021 Guidance <\/b>\n <\/p>\n

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

\n

\n
\n Free Cash
Flow ($B)****<\/b>
\n <\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

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

\n

\n (3.0%) – (5.0%)<\/span>\n <\/p>\n<\/td>\n

\n

\n $2.75 – $2.95<\/span>\n <\/p>\n<\/td>\n

\n

\n $3.3 – $3.5<\/span>\n <\/p>\n<\/td>\n

\n

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

\n

\n $3.4 – $3.6<\/span>\n <\/p>\n<\/td>\n

\n

\n $1.6 – $1.8<\/span>\n <\/p>\n<\/td>\n<\/tr>\n

\n

\n
\n 2-Year Basis*** <\/b>
\n <\/span>\n <\/p>\n<\/td>\n

\n

\n 9.1% – 11.1%<\/span>\n <\/p>\n

\n (Stack)<\/span>\n <\/p>\n<\/td>\n

\n

\n 12% – 16%<\/span>\n <\/p>\n

\n (CAGR) <\/span>\n <\/p>\n<\/td>\n

\n

\n 5.4% – 8.5%
(CAGR)<\/span>\n <\/p>\n<\/td>\n

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

\n $2.9 – $3.0<\/span>\n <\/p>\n

\n (Average)<\/span>\n <\/p>\n<\/td>\n<\/tr>\n<\/table><\/div>\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 2021 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 2021 GAAP financial results.
** 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.
*** Identical sales, without fuel, guidance for 2-year basis represents the sum of actual 2020 identical sales and 2021 guidance. The 2-year basis guidance items denoted with CAGR represent the compounded annual growth rate utilizing 2019 as the base year. Average free cash flow is the average of actual 2020 free cash flow and 2021 guidance.
**** 2021 free cash flow guidance includes a $300M<\/span> payment of deferred payroll taxes. This excludes planned payments related to the restructuring of multi-employer pension plans.<\/p>\n

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

\n Customer Obsession <\/b>\n <\/p>\n