Kroger reports Q4, full year 2023 results
Kroger today reported its fourth quarter and fiscal year 2023 results, provided 2024 guidance and updated investors on how Leading with Fresh and Accelerating with Digital continues to position Kroger for long-term sustainable growth.
"Kroger achieved strong 2023 results, in line with our long-term growth model and built upon three consecutive years of historic growth,” said Rodney McMullen, chairman and CEO of Kroger.
“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’s sales were $37.1 billion in the fourth quarter, including $2.7 billion from the 53rd week, compared to $34.8 billion for the same period last year. Excluding fuel and the 53rd week, sales decreased 0.5% compared to the same period last year.
The retailer’s gross margin was 22.7% of sales for the fourth quarter. The FIFO gross margin rate, excluding fuel and the 53rd week, increased 13 basis points compared to the same period last year. The improvement in rate was primarily attributable to strong Our Brands performance, sourcing benefits and lower supply chain costs, partially offset by increased price investments and higher shrink.
Kroger also reported that among its fourth quarter highlights, it executed its go-to-market strategy to deliver value for customers, it grew digital sales more than 10%, excluding the 53rd week and increased both loyal households and customer visits.
Kroger's identical sales without fuel would have grown 2.3% in fiscal 2023 if not for the reduction in pharmacy sales from the previously communicated termination of Kroger’s agreement with Express Scripts effective Dec. 31, 2022, the company said. In fiscal 2023, the terminated agreement had a positive effect on the FIFO Gross Margin Rate, excluding fuel, and a negative effect on the OG&A Rate, excluding fuel and adjustment items. The overall net effect on operating profit was slightly positive, Kroger said.
Kroger's total company sales were $150 billion in 2023 including $2.7 billion from the 53rd week, compared to $148.3 billion for the same period last year. Excluding fuel and the 53rd week, sales increased 1.1% compared to the same period last year.
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Kroger’s gross margin was 22.2% of sales for 2023. The FIFO gross margin rate, excluding fuel and the 53rd week, increased 18 basis points compared to the same period last year. This improvement in rate was primarily attributable to strong Our Brands performance, sourcing benefits, lower supply chain costs and the effect of Kroger’s terminated agreement with Express Scripts. The increase was partially offset by increased price investments and higher shrink, the company said.
For the full-year 2024, Kroger expects identical sales without fuel of 0.25% to 1.75%; adjusted FIFO operating profit of $4.6 to $4.8 billion; adjusted net earnings per diluted share of $4.30 to $4.50; and adjusted free cash flow of $2.5 to $2.7 billion.
Interim CFO Todd Foley said, "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.
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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."