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Third Quarter Highlights:
· Identical Sales without fuel increased 3.1%; two-year stack increased 14.0%
· Digital Sales two-year stack grew 103%
· EPS of $0.64; Adjusted EPS of $0.78
· Operating Profit of $868 million; Adjusted FIFO Operating Profit of $974 million
· Alternative profit business delivered record third quarter operating profit
The Kroger Co. (NYSE: KR) today reported its third quarter 2021 results and will update investors on how key initiatives are positioning the company for long-term sustainable growth.
Comments from Chairman and CEO Rodney McMullen
“Kroger’s strategy to lead with fresh and accelerate with digital continues to connect with our customers. Our agility, and the commitment from our amazing associates, is allowing us to navigate current labor and supply chain conditions and provide the freshest food at affordable prices across our store and digital ecosystem.
“Our focus on execution, combined with our continued discipline in balancing investments in our associates and customers with exceptional cost management, and growth in our alternative profit business allowed us to exceed internal expectations and deliver strong sales and earnings growth.
“Across all aspects of our business, we are innovating and executing with speed against the key initiatives that are transforming our business. Kroger is in a position of strength. We are committed to delivering for our associates, customers, and communities, and we remain confident in our ability to deliver total shareholder returns of 8% to 11% over time.”
Total company sales were $31.9 billion in the third quarter, compared to $29.7 billion for the same period last year. Excluding fuel, sales increased 2.9% compared to the same period last year.
Gross margin was 21.66% of sales for the third quarter. The FIFO gross margin rate, excluding fuel, decreased 41 basis points compared to the same period last year. This decrease primarily related to higher supply chain costs and continued price investments partially offset by sourcing benefits.
The LIFO charge for the third quarter was $93 million, compared to $23 million for the same period last year. This increase was primarily attributable to higher inflation across several categories, including grocery and meat.
The Operating, General & Administrative rate decreased 49 basis points, excluding fuel and adjustment items, which reflects sales leverage and the execution of cost savings initiatives.
Kroger recorded a nonrecurring benefit of $47 million, or $0.07 per diluted share, primarily due to the favorable outcome of income tax audit examinations covering multiple years. This amount is excluded from the company’s adjusted net earnings per diluted share result for the third quarter. The income tax rate for the third quarter was 13.8%, compared to 24.2% for the same period last year.