The Kroger Co. (KR): history, ownership, mission, how it works & makes money

A Brief History of The Kroger Co.

Company Overview

The Kroger Co., founded in 1883, is one of the largest supermarket chains in the United States. As of 2024, Kroger operates over 2,700 stores across various formats, including supermarkets, multi-department stores, and convenience stores.

Financial Performance

For the second quarter of 2024, Kroger reported net earnings of $465 million, compared to a net loss of $179 million in the same period of 2023. Adjusted net earnings per diluted share were $0.64 for Q2 2024, reflecting a significant recovery from previous losses.

Stock Performance

As of August 17, 2024, Kroger's stock was trading at approximately $43.50 per share. The stock has shown resilience, recovering from lows earlier in the year and reflecting the company's improved financial metrics.

Debt Obligations

As of August 17, 2024, Kroger's total long-term debt, excluding obligations under finance leases, stood at $10.15 billion. The company has a mix of senior notes with interest rates ranging from 1.70% to 8.00%, maturing through 2049.

Dividends

Kroger declared cash dividends of $0.29 per common share for the second quarter of 2024, totaling approximately $210 million.

Key Financial Metrics

Market Presence

Kroger's extensive market presence includes a wide range of grocery items, pharmacy services, and fuel offerings. The company continues to invest in technology and e-commerce to enhance customer experience and operational efficiency.

Future Outlook

Looking ahead, Kroger aims to leverage its strong financial position to explore growth opportunities, including potential acquisitions and partnerships in the evolving retail landscape.

A Who Owns The Kroger Co. (KR)

Major Shareholders

As of 2024, The Kroger Co. (KR) has a diversified ownership structure comprising institutional investors, mutual funds, and individual shareholders. The largest shareholders include:

Institutional Ownership

Institutional ownership of Kroger is significant, representing approximately 26.6% of the total shares outstanding as of 2024. This portion includes investments from mutual funds and pension funds. The top institutional investors are:

Shareholder Voting Power

The voting power of shareholders is directly related to their ownership percentage. The top institutional shareholders, holding significant stakes, have considerable influence over corporate governance and strategic decisions at Kroger.

Recent Shareholder Actions

In the first half of 2024, Kroger repurchased approximately 2.1 million shares at an average price of $54.72 per share, totaling $116 million under its share repurchase program. This indicates a commitment to returning value to shareholders and managing share dilution.

Dividend Payments

Kroger has a history of returning capital to shareholders through dividends. In 2024, the company paid a total of $420 million in dividends during the first two quarters, reflecting a dividend per share of $0.29.

Conclusion on Shareholder Landscape

The ownership structure of The Kroger Co. is characterized by significant institutional investment and a commitment to shareholder returns through dividends and share repurchases. The diverse ownership base provides Kroger with stability and resources to navigate market challenges.

The Kroger Co. (KR) Mission Statement

Overview of Kroger's Mission Statement

The Kroger Co.'s mission statement emphasizes its commitment to providing customers with high-quality food and grocery products at competitive prices. Kroger aims to create a seamless shopping experience through various channels, including physical stores and digital platforms. The company focuses on customer satisfaction, innovation, and community involvement.

Key Elements of the Mission Statement

• Customer-centric approach: Kroger prioritizes the needs and preferences of its customers.
• Quality products: The company is dedicated to offering fresh and quality food items.
• Competitive pricing: Kroger strives to provide value through affordable pricing.
• Innovation: The mission incorporates a commitment to adopting new technologies and practices to enhance customer experience.
• Community engagement: Kroger actively participates in community initiatives and sustainability efforts.

Financial Performance Indicators

Kroger's financial performance reflects its operational effectiveness and adherence to its mission. Below are key financial metrics as of 2024:

Identical Sales Growth

Kroger reported identical sales growth, excluding fuel, highlighting its ability to attract and retain customers. The following figures illustrate this performance:

Digital Sales Growth

Kroger's investment in digital platforms has yielded significant growth in online sales:

Community Engagement Initiatives

Kroger's commitment to community involvement is reflected in its various initiatives:

• Food donations: Kroger has donated millions of meals through partnerships with local food banks.
• Sustainability efforts: The company is dedicated to reducing food waste and enhancing its supply chain sustainability.
• Health and wellness programs: Kroger promotes healthy living through various community health initiatives.

How The Kroger Co. (KR) Works

Overview of Operations

The Kroger Co. operates as one of the largest supermarket chains in the United States, offering a wide variety of grocery and pharmacy products. As of 2024, Kroger maintains a robust presence with over 2,800 stores across the country, serving millions of customers weekly.

Financial Performance

For the second quarter of 2024, Kroger reported total sales of $33.912 billion, reflecting a 0.2% increase compared to the same period in 2023. The breakdown of sales is as follows:

Profitability Metrics

Kroger reported an operating profit of $815 million for Q2 2024, representing 2.4% of sales, compared to a loss of $(479) million in Q2 2023. The operating profit for the first two quarters of 2024 was $2.1 billion, or 2.7% of sales, compared to $991 million, or 1.3% in the same period of 2023.

Gross Margin and Expenses

Kroger's gross margin rate for Q2 2024 was 22.56%, an increase from 21.79% in Q2 2023. The company attributed this increase to a favorable product mix, effective cost management, and a decrease in fuel sales, which typically have lower margins.

Operating, General and Administrative Expenses

OG&A expenses as a percentage of sales were 17.36% in Q2 2024, down from 20.49% in Q2 2023, primarily driven by cost-saving initiatives. For the first two quarters of 2024, OG&A expenses were 17.04% compared to 18.13% in the same period in 2023.

Net Earnings

Kroger reported net earnings attributable to the company of $466 million or $0.64 per diluted share for Q2 2024, compared to a net loss of $(180) million or $(0.25) per diluted share in Q2 2023. Adjusted net earnings for Q2 2024 were $681 million, representing a decrease of 2.6% from the previous year.

Cash Flow and Shareholder Returns

Kroger generated cash from operations of $3.5 billion in the first two quarters of 2024, down 21% from the previous year. The company returned $420 million to shareholders through dividend payments during the same period.

Digital Sales Growth

Digital sales increased by 11% in Q2 2024 and by 9% in the first two quarters of 2024 compared to the same periods in 2023, reflecting the growing demand for online grocery shopping.

Debt and Financial Position

Kroger's total debt, including both current and long-term obligations under finance leases, was $12.2 billion as of August 17, 2024, consistent with the fiscal year-end 2023 figure.

How The Kroger Co. (KR) Makes Money

Revenue Streams

The Kroger Co. generates revenue primarily through its supermarket sales, pharmacy services, and digital sales. For the second quarter of 2024, Kroger reported total sales of $33.912 billion, an increase of 0.2% from $33.853 billion in the second quarter of 2023. Excluding fuel, sales were $30.276 billion, representing a 1.3% increase compared to the previous year.

Gross Margin and Operating Profit

Kroger's gross margin rate was reported at 22.56% for the second quarter of 2024, an increase from 21.79% in the same quarter of the previous year. This increase was attributed to favorable product mix and effective cost management practices.

Operating profit for the second quarter of 2024 was $815 million, or 2.4% of sales, compared to a loss of $479 million in the same quarter of 2023. The operating profit also increased for the first two quarters of 2024, reaching $2.109 billion, which is a 112.8% increase compared to $991 million in 2023.

Digital Sales Growth

Kroger has seen substantial growth in its digital sales, which increased by 11% in the second quarter of 2024 compared to the same period in 2023. This growth was driven by the success of their Delivery and Pickup solutions, which grew by 17% year-over-year.

Pharmacy Services

Pharmacy services also contribute significantly to Kroger's revenue. While specific figures for pharmacy sales weren't detailed in the latest report, the overall health and wellness segment, which includes pharmacy, has been a key driver of customer traffic and revenue growth.

Cost Management and Operational Efficiency

Kroger focuses on managing its operating, general, and administrative (OG&A) expenses, which accounted for 17.36% of sales in Q2 2024, down from 20.49% in Q2 2023. This reduction is primarily due to cost-saving initiatives and improved store productivity.

Depreciation and amortization expenses increased as a percentage of sales, reflecting higher capital investments. The company recorded a LIFO charge of $21 million in Q2 2024, compared to $4 million in Q2 2023.

Shareholder Returns

Kroger returned $420 million to shareholders through dividends in the first two quarters of 2024, with dividends paid per common share amounting to $0.29, an increase of 11.5% compared to the previous year.