CINCINNATI, April 1, 2020 /PRNewswire/ -- The Kroger Co. (NYSE: KR) today filed its annual report on Form 10-K and announced business updates in response to the impact from the novel coronavirus (COVID-19).
"Kroger's most urgent priority is to provide a safe environment for associates and customers, with open stores, comprehensive digital solutions and an efficiently-operating supply chain, so that our communities have access to fresh, affordable food and essentials," said Rodney McMullen, Kroger's chairman and CEO. "We are so proud of our dedicated associates who are on the front lines serving our customers when they need us most. A huge thank you to all of our associates, whose efforts are nothing short of heroic."
After experiencing strong sales in February, the COVID-19 pandemic triggered a significantly greater lift in sales across both physical retail stores and digital channels in March. Customers shop with Kroger in times of uncertainty because it is a brand they trust. In addition, Kroger has made significant investments for several years to enhance the seamless ecosystem for customers. As customers look for more digital solutions during the pandemic, Kroger is well-positioned to support them with pick-up, delivery and ship to home solutions. To advance operations and support the accelerated sales growth, the Kroger family of companies is making investments in its workforce, associate and customer safety, and the supply chain.
Kroger leadership is closely monitoring the impact of the pandemic on food retail across global markets. From early observations, Kroger is seeing trends similar to other markets affected by the pandemic. The Kroger family of companies started to see a significant shift in customer behavior during the last few days of February as shoppers started stocking up. Sales sharply accelerated in March with identical retail supermarket sales without fuel up approximately 30 percent. This was driven by dramatically heightened demand in the middle of the month as customers were stockpiling, which then tapered, but remained higher than normal in the final week, as customers adjusted to the new dining, work and travel restrictions. The demand has been broad based across grocery and fresh departments. It is too early to speculate what will emerge as the "new normal" in food consumption at home or what the impact on sales will be in future periods.
The Kroger family of companies is investing in special pay above regular wages for frontline hourly associates, providing expanded paid sick leave, and hiring a record number of new associates. It likewise is investing in safety protocols throughout its operations, including more frequent and rigorous cleaning and sanitization procedures in stores, distribution centers and manufacturing facilities. Kroger is also investing in its supply chain to expand capacity where possible. These investments are supporting associates, customers and communities through the pandemic, and will help the company emerge stronger as a result.
"We are seeing strong sales and are at the same time investing in our business to support our customers and associates through the current uncertainty," said Gary Millerchip, Kroger's chief financial officer.
As a result of recent trends, Kroger expects first quarter identical sales excluding fuel and adjusted EPS to be better than the annual growth rate provided in guidance for full year 2020.
Looking towards the rest of the year, Kroger expects volatility in sales throughout the year as the impact of COVID-19 on the consumer evolves, and anticipates the following to have an impact on full-year results:
In light of all these factors, Kroger leadership believes maintaining current guidance is prudent at this time and is therefore reconfirming guidance for full year 2020.
Kroger's financial model has proven to be resilient throughout the economic cycle. Kroger continues to generate strong free cash flow and maintain strong liquidity. As a precautionary measure to reduce reliance on the commercial paper market and preserve financial flexibility in response to the coronavirus pandemic, Kroger proactively borrowed $1 billion under its revolving credit facility on March 18, 2020. Cash and temporary cash investments were approximately $2.3 billion and there were no commercial paper borrowings outstanding immediately following the draw down. To maintain financial flexibility, Kroger has decided to pause additional share repurchases during the fiscal first quarter. Kroger had already repurchased $355 million shares during the quarter under its $1 billion board authorization announced November 5, 2019, leaving $245 million remaining under the authorization. Kroger remains committed to maintaining a net total debt to adjusted EBITDA ratio target range between 2.30 to 2.50.
Additional Details of Associate Investments
The Kroger family of companies is protecting the health and safety of its associates and customers by:
The Kroger family of companies is supporting associates in a variety of ways, including:
Kroger and its affiliates are supporting communities in a variety of ways, including:
$3.0 - $3.1
* 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 2020 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 2020 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.
At The Kroger Co. (NYSE: KR), we are Fresh for Everyone™ and dedicated to our Purpose: To Feed the Human Spirit®. We are, across our family of companies, nearly half a million associates who serve over 11 million customers daily through a seamless shopping experience under a variety of banner names. We are committed to creating #ZeroHungerZeroWaste communities by 2025. To learn more about us, visit our newsroom and investor relations site.
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. Such statements are indicated by words or phrases such as "believe," "commit," "continue," "expect," "future," "guidance," "strategy," "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" 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.