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Kroger to Update Investors on How Restock Kroger is Right Framework to Reposition Business and Create Shareholder Value at Investor Conference

November 5, 2019
The Kroger Co. Logo (PRNewsFoto/The Kroger Co.) (PRNewsFoto/The Kroger Co.)
The Kroger Co. Logo (PRNewsFoto/The Kroger Co.) (PRNewsFoto/The Kroger Co.)

CINCINNATI, Nov. 5, 2019 /PRNewswire/ -- The Kroger Co. (NYSE: KR) today will update investors on how the Restock Kroger framework is repositioning the company to create value for shareholders, customers and associates at its Investor Conference at the New York Stock Exchange.

Kroger also announced the company’s Board of Directors has approved a $1 billion share repurchase program, replacing the existing authorization that has approximately $546 million remaining.

“Restock Kroger sets Kroger up for a stronger future,” said Rodney McMullen, Kroger’s chairman and chief executive officer. “Momentum is returning to our core grocery business as a result of our customer obsession and renewed intensity around operational excellence, plus the asset-light, margin rich alternative profit streams that enrich our core supermarket business. We look forward to sharing how these come together at Kroger to create a path to consistently strong and attractive total shareholder return.”

Kroger reconfirmed its 2019 guidance on identical sales, adjusted operating profit, adjusted earnings per diluted share, and alternative profit streams. The company also set financial targets for 2020.

“As promised on our second quarter earnings call, Kroger is using our Investor Conference to provide an update on our future expectations to create value for shareholders, including early detailed guidance for 2020,” said Gary Millerchip, Kroger’s chief financial officer. “Kroger’s value creation model is strong and durable. We are pleased to see identical store sales momentum is building and we expect this trend to continue into 2020 and beyond. We are also delivering adjusted earnings per diluted share growth for our shareholders through the Restock Kroger timeframe, supported by a disciplined approach to returning cash to investors.”

“We are confident that Restock Kroger is the right strategic framework for business growth in 2019 and 2020, and to position Kroger for long-term growth in the future,” said McMullen. “We believe that the food industry is special and big enough for different models to coexist – and Kroger’s model will be one of them because, at Kroger, we are uniquely good at food. Kroger is food first and we believe that no matter who you are, where you’re from, how you shop or what you like to eat, everyone deserves to have fresh, affordable and easy-to-enjoy food that tastes amazing. Kroger’s ability to be America’s food partner is our competitive advantage.”

Financial Strategy

Kroger expects its financial model to deliver improving adjusted operating profit performance over time and continue to generate strong free cash flow. The company expects this to translate into a consistently strong and attractive total shareholder return through sustained net earnings growth and by returning cash to shareholders, via share repurchases and a growing dividend over time. Maintaining a strong investment grade balance sheet is a key component of Kroger’s financial model.

The company defines free cash flow as operating cash flow (before company-sponsored pension contributions), less capital expenditures, and excluding the cash tax effect of the sale of strategic assets.

Kroger reduced net total debt by $1.3 billion over the last four quarters. Kroger’s net total debt to adjusted EBITDA ratio is 2.46, compared to 2.59 a year ago. The company’s net total debt to adjusted EBITDA ratio target range is 2.30 to 2.50.

Earlier this year, Kroger increased the dividend by 14 percent, from 56¢ to 64¢ per year, marking the 13th consecutive year of dividend increases. The company’s quarterly dividend has grown at a double-digit compound annual growth rate since it was reinstated in 2006. The company continues to expect, subject to board approval, an increasing dividend over time.

2019 Guidance


IDS (%)

EPS ($)

Operating Profit
($B)

Tax Rate

Range**

Adjusted*

2.0% -
2.25%

$2.15 -
$2.25

$2.9 - $3.0

22.5% -
23.0%

*

Without adjusted items, if applicable; operating profit represents FIFO Operating Profit

**

These rates reflect typical tax adjustments and do not reflect changes to the rate from the completion of income tax audit examinations, which cannot be predicted.

The company expects capital investments, excluding mergers, acquisitions and purchases of leased facilities to range between $3.0 and $3.2 billion in 2019.

2020 Guidance

In 2020, Kroger expects:

Beyond 2020

Kroger is targeting total shareholder return of between 8% and 11% beyond 2020. This will be driven by 3% – 5% growth from improved earnings, and growth in the company’s free cash flow payout rate through a combination of share repurchases and dividends. This range excludes any potential change in our price-to-earnings multiple, and the optionality for additional growth beyond 2020 created through strategic partnerships.

At The Kroger Co. (NYSE: KR), we are dedicated to our Purpose: to Feed the Human Spirit®. We are nearly half a million associates who serve over 11 million customers daily through a seamless digital shopping experience and 2,759 retail food stores under a variety of banner names, serving America through food inspiration and uplift, and creating #ZeroHungerZeroWaste communities by 2025. To learn more about us, visit our newsroom and investor relations site.

This press release includes forward-looking non-GAAP financial measures, which management believes to be useful to investors and analysts. Kroger is unable to provide a full reconciliation of the non-GAAP measures used in our 2019 and 2020 guidance, including adjusted net earnings per diluted share to net earnings per diluted share, adjusted FIFO operating profit to operating profit, and adjusted tax rate to tax rate, without unreasonable effort because it is not possible to predict with a reasonable degree of certainty the information necessary to calculate such measures on a GAAP basis. It is not possible to estimate with a reasonable degree of certainty certain of our adjustment items because such information is dependent on future events that may be outside of our control. The unavailable information could have a significant impact on 2019 and 2020 GAAP financial results.

This press release contains certain statements that constitute “forward-looking statements” about the future performance of the company. These statements are based on management’s assumptions and beliefs in light of the information currently available to it. The remarks contain certain forward-looking statements about the future performance of the Company. These statements are based on management’s assumptions and beliefs in light of the information currently available to it. Such statements are indicated by words or phrases such as “build,” “confident,” “continue,” “create,” “deliver,” “drive,” “expect,” “future,” “guidance,” “strategy,” “target,” “trend,” and “will.” Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. These include the specific risk factors identified in “Risk Factors” and “Outlook” in our annual report on Form 10-K for our last fiscal year and any subsequent filings, as well as the following:

Kroger assumes no obligation to update the information contained herein. Please refer to Kroger’s reports and filings with the Securities and Exchange Commission for a further discussion of these risks and uncertainties.

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SOURCE The Kroger Co.