Kroger reports growth in Q2 2023 and reaffirms guidance

Identical sales without fuel increased 1% with underlying growth of 2.6%. Digital sales grew 12% as total and loyal customer households increased
Kroger reports growth in Q2 2023 and reaffirms guidance

Kroger Co. reported its second quarter 2023 results, reaffirming 2023 guidance and updating investors on how “Leading with Fresh” and Accelerating with Digital” strategies continue to position this supermarket chain for long-term sustainable growth in the US.

Total company sales were $33.9 billion in the second quarter, compared to $34.6 billion for the same period last year. Excluding fuel, sales increased 1.1% compared to the same period last year.

The gross margin was 21.8% of sales for the second quarter. The FIFO gross margin rate, excluding fuel, increased 35 basis points compared to the same period last year. This improvement was primarily attributable to Kroger’s private label performance, lower supply chain costs, sourcing benefits, and the effect of the terminated agreement with Express Scripts, partially offset by higher shrink and increased promotional price investments.

The strength and diversity of Kroger’s business model is delivering consistent results in what remains a challenged environment. By investing in price and providing more personalized offers, we are helping customers stretch their budgets and manage the ongoing effects of reduced government benefits, inflation, and higher interest rates. Kroger is funding these investments by collaborating with vendors to deliver exceptional value, managing costs, and growing alternative profit businesses,” says Rodney McMullen, Chairman and CEO.

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Kroger expects to continue to generate strong free cash flow and remains committed to investing in the business to drive long-term sustainable net earnings growth, as well as maintaining its current investment-grade debt rating. Kroger has paused its share repurchase program to prioritize de-leveraging following the proposed merger with Albertsons.

Kroger’s net total debt to adjusted EBITDA ratio is 1.31, compared to 1.63 a year ago. The company’s net total debt to adjusted EBITDA ratio target range is 2.30 to 2.50.

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