Kroger Company: Outlines Strategy And Reconfirms 2021 Guidance

Cincinnati / OH. (tkc) The Kroger Company hosted a virtual 2021 Investor Day to provide an update on the company’s strategic initiatives and plans to deliver strong and sustainable total shareholder return of 8 percent to 11 percent.

«Kroger continues to deliver for customers through our seamless ecosystem and relentless focus on freshness, value and convenience,» said Rodney McMullen, Kroger’s chairman and CEO. «Building upon the foundation established by our Restock Kroger transformation, and leveraging key learnings from operating during the pandemic, our strategy of Leading With Fresh and Accelerating With Digital is designed to convert our industry’s near-term tailwinds into long-term competitive advantages.

«Today, Kroger is uniquely positioned because of the strength of our assets and our competitive moats cultivated over several years of disciplined investment and focused execution. Our go-forward strategy builds on these strengths to drive share growth, increase profitability across digital, and deliver strong and sustainable total shareholder returns. Our talented and energized team is already delivering on our objectives, and we look forward to continuing to position Kroger to win in a post-Covid world.»

At the Investor Day event, Kroger’s leadership team discussed the three core elements of its strategy:

  • Grow sales and share by leading with fresh food;
  • Increase profitability by accelerating with digital, which is now a growth engine; and
  • Widen and deepen the competitive moats that will generate customer loyalty and market share gains – Seamless, Personalization, Fresh, and Our Brands.

Kroger’s leadership team outlined key growth opportunities that will drive the financial model forward including a clear path to deliver total shareholder return between 8 percent – 11 percent, through net earnings growth of 3 percent – 5 percent and strong and growing free cash flow to invest in growth initiatives and return cash to shareholders.

«Kroger is delivering on its value creation model, and over the period of 2019 to 2021, we expect to significantly exceed our total shareholder return target,» said Gary Millerchip, Kroger’s CFO. «The strength of our execution, combined with our strategic plans to continue to lead in fresh, accelerate digital, and grow alternative profit streams will enable us to achieve our 2021 guidance and deliver profitable growth beyond 2021.»

Reconfirmed Full Year 2021 Guidance

IDs (%) EPS (USD) Operating Profit (USD B) Tax Rate** Cap Ex (USD B) Free Cash Flow (USD B)****
Adjusted* (3.0%) to (5.0%) USD 2.75 to 2.95 USD 3.3 to 3.5 23% USD 3.4 to 3.6 USD 1.6 to 1.8
2-Year Basis*** 9.1% to 11.1% (Stack) 12% to 16% (CAGR) 5.4% to 8.5% (CAGR) USD 2.9 to 3.0 (Average)

* 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 USD 300 million payment of deferred payroll taxes. This excludes planned payments related to the restructuring of multi-employer pension plans.