The Kroger Co. (KR) 9 Sep 222022 Q2 Earnings call transcript

Good morning, and welcome to The Kroger Co.

Second Quarter 2022 Earnings Conference Call. My name is Alex, I'll be coordinating the call today. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference call over to Rob Quast, Director, Investor Relations. ahead. go Please

Financial you XXXX Thank Kroger's us Kroger's and for and Good call. for I quarter Chief McMullen; Rodney earnings Executive by Gary am second Millerchip. Chief morning. Officer, joining Officer, joined Chairman today

In to topics can, we begin, we caution A today's to information. of question, discussions Company you our we over yourself may if or materially. is to necessary. we we that such that many discussion prepared order Kroger statements the The forward-looking assumes from Before of you business our to will question contained ongoing a filings. and remind as you We turn results actual differ remarks, in follow-up that questions. to include forward one events to statements. range call that a broad as one have obligation material no detailed the and now cover update want many Rodney. SEC of that limit our I on believe please want you will After are look an predictions, ask your factors can to effect I on taking basis abbreviated

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for and to we are Our them. looking save ways for are customers there

high all-time offers with $X an savings. hit totaling almost engagement in coupon digital billion downloaded, digital XXX quarter, the During million

than Our fuel this households rewards And program engaged with continues up to quarter more were fuel our last fuel program rates resonate our compared to significantly. year. customers XXX,XXX incremental as redemption reward also with rewards

see eating cooking scratch and We from continue often. less out customers more to

of the to what they meeting need assortment products terms. broad on Our their is customers buy for want

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are in our improving supply We also chain. productivity

cost chain During capacity. the quarter, technology the more such our and across we reduced process trucking efficiencies, movement fuel through headwinds maximizing controlling product value as and

back While half are cautiously improving, year. and are in continue some will remain we challenging, this of supplier in-stocks categories optimistic the the

Brands. high-quality identical year. by Convenience family to last that need This Home quarter led priority a providing incredible out during meals Home with saw our by brands. engagement eating the Our budget-friendly was Kroger alternative to in and a Our Chef and at as is increase restaurants. XX.X% growth We to Chef Turning sales compared Brands of remains meeting

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XX products product of Cheese to Magazine recognition for continue by rooted retailer. Brands' Cheese Store Editors’ providing Murray's American recently, recognition. any is crave. XXXX Our Society with were five recognized at they strategy experiences best awards with This awards focused on for varieties world-class specifically new So, earn the products. in customer Competition. regarded memorable quality, customers won these highly that also products, Picks met Most And healthier Brands meal food We needs the most

launched expect the by Way our strategy brands. our customers budget. this ways quarter, product their budgets, for new and items. and roll our SKUs to launched fresh to XX end help products priced dairy brands brand, Farm We needs lines; a opening and of our newest out for are consolidated for look the into XXX to We brands continue portfolio legacy competitively year. customers of a price the additional two: nonperishable stretch we Smart Heritage with and for These As on we our point meet

on sales Early our encouraged in our is Now our enrollment by line quarter, results. the and and I as delivery overall in growth, increase focused nationwide, it's moving including results already to Boost positive second spend adding members remain before, we We mentioned household digital. achieved with and an among projections. internal that strong are members. promising new expectations We showing in led introduced membership

customer quarter, the a automated powered in Romulus, we platform new Michigan. fulfillment by During smart Ocado's opened center

Additionally, to we more expand spoke facilities new during Austin, Oklahoma Kroger four and our San through geographies network excited in in spoke and to This City customers to XX. Birmingham, total are quarter Delivery CFC the the Antonio. brings count

to invest We pickup remains also demand strong. continue in business, where our

shortened capacity During the wait improve customer and quarter, our experience. we to times increased

and technology process in which helped cost lower to invested efficiencies, also We serve. our implemented

love are customers they our Our seamless us telling experience.

delivery, store, We continue customers and pickup which loyalty. building to effortlessly between shift is see

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the dedication associate associates. results, experience. our to are continue proud fuel to and to to passion and Our as continue Kroger's more in and strong improve invest teams attract people apply talented work saw We Kroger associate we at this consistently we quarter

on Our improved making progress retention. rolled current guidelines planning are We've career onboarding we and implemented associates, out tools.

In to associate wellness, addition, a unique service to coaching associates. part recently our financial of as financial This hourly tool we our associates. benefit commitment for new planning assistance free introduced offers

exciting service outstanding January divisions three of tool to XXXX. is to associates' We recognized. an always and see the work creating expanding are forward launching to the by our commitment across environment look pilot Company in It the

Inclusion, year, Equity the perfect Index. XXXX consecutive named third earning score a was Disability Place for a the For Disability Kroger on Work Best to

for Additionally, capital come and culture firm, teams training which our equity our Kroger in member the the a creating Group, and a Each team and in leading career. management promote associates human ways where a discover honored Brandon our for Hall diversity, involved inclusion. programs is job

every day. life Our purpose to team see Kroger's is One strategy. purpose our inspires bring important the our comprehensive we way human spirit ESG through to

people to Our planet. is positive and change aim achieve our lasting for

Nurturing published strong dozens progress governance commitments. sustainability, entire ESG called report, and against social Values, impact Shared outlines the Kroger XXXX goals Our of and environmental newly family

within ESG We operationalize continued to working our business. and integrate

our is Zero free | moonshot Zero waste, more hunger Hunger Nowhere much And so also achieving still to This celebrate. plan. of Waste. to from much while evident anniversary through impact Hunger so our food the and the Zero have work we much of Waste achieve of social we -- a goal | month than more marks launch world fifth this Zero to do have

Waste five very cross-functionally years, food included $X our XXX foundation. donated in operationalizing you fight our achieved to in billion giving share food bank which million A I'm the surplus ever, Hunger nearly strong system to strongest Zero involved. recovery our to ESG. another time billion took of quarter. food meals which | huge for the our need, our execution donated teams delivered insecurity, of to change past and food neighbors to all and to Kroger partners team And working value In the achieve point Over support yet $XX thank X.X proof Zero Zero food XXX% important to grants the million all proud second store of from our congratulations is rescue, Zero | this pounds first teams of in Waste and It milestone. Hunger of summary,

for you financials. communities. execute to deliver on We our our and our shareholders. our second turn customers value continue And take delight digital. business We leading delivering Gary? accelerating well, Gary fresh that, our With over associates, strategy with quarter our it focused customers, I'll we that strengthen to remain on to do when and model of and for with through

team Kroger laser-focused which Rodney, March. on you, is Thank The at executing we everyone. our Investor outlined strategy, good and our Day in go-to-market morning,

provided proven significant on growth in a I'll environments, quarter. fuel and year-over-year performance and quarter We operating business of we additional strong and another now be our as X.X% quarter provide second momentum Our throughout delivered sales of saw model the has this our achieved second proof point balanced economic identical resilient build of without to color results. variety growth.

was value inflation our Our is competitive believe clear way growing with of mind driven XX.X%. front strong by our for quarter, These quarter fuel, the sales to fuel disciplined Adjusted EPS increase the of a combination our our Brands for same profitability. year by sales We were quality remains and increased advantage expectations. as ahead the compared provided of many management of customers. internal identical XX% led innovation, of of unmatched and an last brands and margin the $X.XX results

is market accelerating loyalty growth. and critical to seamless customer ecosystem deeper Our building share digital

During grew the solutions, led X%, quarter, XX%. delivery by by which digital in grew strength sales

Kroger Kroger digital existing including expansion growth in the of and trip Boost the initiatives, Delivery customer Now. and in missions, value to proposition We membership geographies, Solutions investments our the network in invest of expansion Meal customer Delivery continue and including new Kroger via

to our a XX.X% rate, product impressive quarter of the strong core The to inflation last cycle as results quarter. the the As momentum for we year. also effectively given gross these reflected digital us and second initiatives, will same vaccine a manage vacations continue contributed revenue sourcing keeping our increased of compared especially Kroger year fuel, manage we higher half number our the the result which excluding X year. practices in ability of grew ago, while of margin in administered basis of their of budgets to second from This business. the COVID-XX impact last Health Gross was positive points helping the expect to result prices period FIFO sales This sales meaningfully our pharmacy through margin year. cost customers allowed profitability is competitive.

Our environment. doing current inflationary navigating the is outstanding team job an

a We savings sourcing enterprise delivering are of sustainable experiencing significant journey for customers. and the that in is and Kroger multiyear our benefits

to of maximize charge to our in value our has us LIFO Due we most. competitors. and year. prior enabling the price customers relative reach they our heightened is to strategy of promotional to in inflation, compared recorded for continued key value effectiveness ways investments our loyalty of $XXX $XX and position million cost million a deliver product enabled the to levels this to Together, pricing quarter the Kroger improve for personalized drive Our

points, adjustment the higher We same at year-over-year sales investments will associates, which incentive the in period continued offset to Kroger's on by in by This driven fuel second of last half in excluding to the investments increase heightened moderate cycle was levels cost items last year compared remain expect basis and OG&A costs quarter rate third execution began and basis inflation various inflation, year. plan of initiatives, and leverage XX expansion margin savings. higher strategic a the but partly increased year. as the in start we

are We on remove costs without the cost deliver continue our of our $X and customer business from to savings. billion to to opportunities in consecutive year experience, identify affecting track fifth

costs an was a it included of covering margin catch-up accrual during projected our the rate As growth. half the moment in full I drive ago, year-over-year for mentioned initiatives that as for OG&A and would strategic higher the will increase the in first our year, incentive as in year. of the investments rate to unusual as future expansion quarter the well improvements of achieve second expect We in year number a the half OG&A

increase Turning now Marketing continues to its CPG Precision alternative relevance partners. with to profits. Kroger our

second we KPM. and $X.XX our times also KPF quarter, on fuel an products credit customers Kroger program, Fuel fuel performance reinvestment rewards. model business and offers off part in card experienced even our an as includes which of providing environment, ways introductory with strong per saw the our This delivered current During and in gallon featuring the with CPGs X are card an to important brand exceptional quarter. returns the of remains spend services promotionally in their gift connecting marketing Finance rates well Personal save. increase more

second fuel key customers with rewards the differentiator high. since their to The are market. when our mentioned $X.XX start stretch is helped average pandemic help fuel the program in retail to to Rodney this of quarter, at during the this dollars, quarter As fuel a was Customers price earlier, highest quarter sales especially the ensure and our $X.XX rate the year. same gallon compared our prices last outpace program rewards fuel the engage

higher that business fully Our gallon in quarter and the strategically in number fuel allowed is our in cents fuel compared in us the fuel model within quarter great of The a profit $X.XX expansion XXXX. strength to our as charge higher was the per of same margin reinvest LIFO to offset example flexibility results of the margin exists $X.XX initiatives. a

in our job and serving our are Our continuing and We're and wages are Kroger financial an remains to committed ensure hourly to associates in sustainably our choice. in investing continue fully executing customers, also associates of an model. wages. contemplated outstanding our employer invest to to do strategy investments long-term growing hourly These we

Lake we the second we negotiations second pharmacists. ratified for covering the plan meat, South California associates Chicago, new Bend Shreveport, Vegas XX,XXX clerks quarter, the UFCW and meat Southern and Las half, Charles, In more Wayne, contract Memphis, to and for associates. Indianapolis, Toledo, Houston, During than agreements labor with clerks Columbus, and Fort Southern in California complete

to free generate our cash and liquidity. financial strategy to Kroger Turning now continues flow. strong

years, helped to ratio higher were and inventory X.X. range of the which is Underlying capital result a As initiatives working to improve to performance total working to our higher capital and net our debt offset operating function compared of levels. now product EBITDA to inflation recent also balances returning pre-pandemic a of improvements quarter, X.XX cost during adjusted over our target X.X in-stocks

growth. support continue strategy to go-to-market We to many capital our and prioritize future drive that see opportunities investments

to this constraints. we we billion quarter, As and to to delayed now we $X.X XX%, our a updated XXXX. XXth XXXX guidance billion investments in being today, has for expect cash free annual quarterly to Earlier dividend due reinstated initiatives plans range generate consecutive quarterly dividend our XX% flow. by supply rate been our our dividend grown have reflecting between as The confidence growth and capital of $X.X for in various this at increases. our be continue raised compounded since ability And our the marks long-range in year strong

of FIFO XX% $XXX We year raise representing repurchased Earlier guidance. diluted new sales billion a a million $XXX of of full execution strategy strength. from our confidence on from operating I'd a program. our the food-at-home growth in with XXXX. adjusted Kroger $X.XX, adjusted the we earnings year which outlook to approximately share million operating identical share our to for $XXX in now color year-to-date, building to year. X% the and of million fuel of $X.X billion billion to is to $X.X again today, of sustained gives Directors of X% profit second Board authorized expect team's of the are The year-over-year position share without and go-to-market full XXXX. outlook now of and over During combined us shares repurchased have strategy business, like the additional $X.XX our we also includes repurchase to go-to-market the trends of remainder quarter, shares. consistent our of $X of headwind right half X.X%, In net closing, per LIFO This have momentum

back Looking confident time. Rodney. over in deliver now total remain forward, X% it to of I'll shareholder ability we turn attractive returns XX% our to and sustainable to And

Thanks, Gary. successfully environment another The team Kroger results. strong quarter in with operating dynamic navigated a

reflects into resonating with them. to our high this the our is inflation, with value model. built deal balance continue As And customers we've our proposition

We value associates, their help them and customers offer reinvest fresh, they to in manage our consistently in strong invest our while need budgets we generate ability the the and to have affordable demonstrated business food results. continue to

the us confidence build momentum delivering continue our plan right stakeholders. value the and in gives performance for Our place that all on have to we

Alex, for So, turn we'll with over it questions. that,

question for today Instructions] first [Operator John of comes from Guggenheim. Our Heinbockel

know start want Did is still saw break you per a can that a into and with traffic the versus to And big basket? a you items out I get maybe that right, Is ticket, AUR in drag? had improvement I within drag. little nonfood IDs, been better -- ticket? And at that all? quick then

growth let coming and some the of trends Gary improving and to our of household stores. total our people the details. in in that continued improvement The household is on start I'll drive of part add more biggest loyal

any additional to into provide? often see headwinds more people well. store insights products the smaller to Gary, some you with continue We want and the continue frequent. would from We more as average transaction come as size nonfood

covered think it, most Rodney. of you I

market. and to seeing, up for as shoppers compared that's we're most our we're and number at loyal John, Rodney customer our starting to trends, and we're basket, grow the we that trips trips overall very well continuing And loyal first overall for that mentioned, also definitely Rodney within seeing into look number of as well. that our As win customers, the most with to most seeing as what loyal our store increase mentioned, the certainly growing seeing shopper we're holding

would points are key think call I they I that So the out.

other consistent be it's John, only well. that is might The pretty thing as helpful across country the insight, Yes.

in the then, follow-up quick we've is seen inflation. one nonfuel Real of the or seen gross right? best while Your the we've despite best -- a

that a lot I'm mix from? maybe bought forward benefiting -- there's of versus that that curious So is mix get? role hard if Or of is product you're to still

Yes.

If one the our of have you is job that teams procurement. a look, on things done nice

fresh continue other piece to value-added The to additional mix. any as customers would mix. mentioned, don't products know I be, to on Gary, help lot we a continue well. The of departments as comments? you continue see And add

so Yes, relationships to much I and It's benefits. up buying the be at our with think you product how managing and drivers forward partners sourcing not John, really supply biggest as with how we but designer with disciplined, picked the look well. we're continuing the

would because to a versus in costs quarter efficient. well to how a supply were naturally, was was have gross chain couple making areas headwind more last to not offset headwind the quarter together to the operating operation that on we're that really And sure been was to the applied really and challenge pressure supply supply and It tailwind the this this chain fuel of it in we sourcing that chains flat sourcing One chain optimum quarters, approach levels of last costs our make supply a say, our wasn't quarter. that, and fuel year-over-year. whereas at that across really specifically essentially margin, offset in efficiency I is the improving team working the the would

from question BMO. Kelly next Our Bania comes from

ask to guidance Just updated -- wanted good the morning.

help you fuel us could understand is If how impacting that.

plan prior was $XX for your think million headwind. a I

I that’s million just for sounds about think you $XXX like the talked be LIFO, about higher to year. which going

puts how the and of those to takes back IEs as and about impacts the relates kind half? higher think to the it core trying that of flow-through Just

Gary, ahead. go

expecting on that back of what we've Yes, in the that think consistent the second the I points. customer many the in less you've EPS will question. managing performance year. are many absolutely. our levers called and picked sales the out to be grow manage of optically would Thanks the key in half. business of We the The been for actually would the we loyalty in grow half be Yes, make and growth key meaningful elements margin look pulling

really the First something very changed headwind year been of which about and kind in don't of million, our in $XXX a obviously, difficult $X.XX isn't fuel, great on as feels mentioned, to the the team so all, -- we to we our the of want $XXX for EPS impact half we best year, you translates total does lead, a about when managing back of charge potential to for haven't LIFO in It rely view. well, is about predict, job whole don't that the pricing. year. the upside of fuel the conditions, it On we million fuel on

reward what which we Our strategy drives program, feel. our really

the as the assuming, million normalized year. sort a back year, profit headwind CPG back $X.XX we the fuel to then more if we're $X.XX $XX to of of in to rates half be half So that from million but $XX of would return levels, of last cycle

range there's today much not line Were built those for the would fuel in very two, essentially $X.XX of the of in for So, X% we to about our EPS and with X% LIFO. TSR. have then sort our growth be that EPS in it headwinds

we profitability our So, still back as the LIFO of the year fuel. improve and half in expect we exclude to of do business underlying the supermarket

Yes.

year organization still we've the been a well. be the year do Just get control, of little bit And that's a part second And but to will we half of the billion as the the prepared out. strong, incredibly cost be and Obviously, of of Gary of one a a that. able $X has in that this profit year fifth continue as couple alternative these cost in things. an in additional to of stronger over first strong important the half remarks, expect mentioned his little to row

very follow-up a Okay. just And helpful. That's with digital.

of So X%. growth

in I brings think it half. flat first the about that

Just you are how is the here Ocado pace just within I how sales. But on that? us goal ramp with you how to just of of that today? about your ramping really, expectation could you in wondering XX% Ocado? -- growth if about delivery help compares that terms understand doubling digital this see and how And feel your sales, do in

Yes.

go look, the always of you in-store back ecosystem I pickup, wanting find pickup to people strategy. is we're important is think thing of sure versus come If we majority that thing is overall seamless our far, store a that we customers what customers make Ocado -- engaging the that that that is and part us digital between one into by is, stores. can have on where in stop easily delivery. the that And and delivery, with we the capture shopping And

how the the overall on of introduced seamless we really Boost, customer. that the we're the do loyalty have do we focused look at we with all you that's across -- system, reasons engagements when So how and total one is

And that If that to don't still world-class you as you on Gary, and Net strong. with that obviously else incredibly our in work have from business we us pleased plenty proud there. to to be is the customer our those to but open spoke -- continue them engage look the I'm want And anything we add at with -- and to Promoter Score do. continues super sheds the thing overall, teams I results, know, more of the the question? frequently the I'm of

Thanks, Yes. Rodney.

a the say, saw Just we pleased would couple that the Kelly, with quarter. things. progress of in Overall, we're I

new prepared starting we've my you some customer see by on initiatives markets, fulfillment are to Boost for mention Boost existing the of some As about up ramp new whether heard launch and customers to that sign powered in digital. that of key completely the Boost and in traction in, centers up both the XX% continues of Ocado and we it's certainly that to investing we're are me comments, see been as

good missions business the as can then driver Kroger floral. trip with mentioned, be that So of XX I and smaller our things Delivery in stages solutions, we're it's products convenience where meal like of with And some that's a digital minutes, really delivered, the infancy and partnership of also early still those now sushi baskets, Instacart, within the well. whether

we're a year. developments in the good of prepared the activities back comments and why that in in lot of half saw really shared expect which on, those focused we continue we'd momentum coming we momentum my and So exciting also to areas through, that the some is

that decisions likely them. look only make And customers the market make go back taking will overall customer that other think we're want to the the channels sure between they're out building would I comment mentioned Rodney I because the a is shop. they and ultimately, to seamless and is are we year like are in digital the is during what his to seeing a where ecosystem figure step making certainly this of growth to for comments choosing the prepared customer we're and moving Kroger what we we of how through. sort And is back shop is is focus how we've loyalty sort of the year making on But certainly thought as whichever winning ecosystem choose we customers' seamless we around store overall channel through to market for our that half they year, works delivery, growing. at digital shop the the overall, the really the have assess and assumptions certain taken market will think or back really sure we to this whatever of pickup and a or look step grow the

Research. Our from Hanus next from Spencer question Wolfe comes

today? with the to price some been change bit as a front? comfortable peers you for increases are noticed any how your price gaps minute. wanted your on that through talk Could talk about a about just pass to have have I of rational ability And you're you you in more where trending

Yes, satisfied if continue you with be overall, the to look and we inflation pass-through.

when at As any engaging customer Gary and look incremental at well. you feel good. can. the do and helps XXX,XXX mentioned, to a in everything we in from rewards, as record we When those I increases look total And value very way had and we're doing minimize way in that can I the both it mentioned, you fuel customers as we rewards households proposition, fuel redemption we

data appreciate promotional really our up to and just million that they we personalized are customers probably that we the items our part offers focused household values on price we're price and very the overall, We driving as the as each much downloaded to well ability price to the using feedback allow good to the know, all for gaps individually to customer very feel get impact the a we -- basis. about we everyday on something we feel is as about gap. on ongoing we from is comfortable great good different and stock our customers very fact coupons the our most. multiple with make can. apply So are And that competitors offer minimize XXX the doing an balance pieces on of feel them. that's promotional we well. you use of what's sure track And approach And with gaps. And discounts that had And I as customers as on

EBITDA any view geographies for seeing the we'll a helpful. new are from you as when are profitability existing And these to it. facilities located think back sheds, the there? that then to Got go to your updated breakeven of on about get the That's minute. And in Ocado What just versus markets? we

Yes, the Gary part part your and I'll that second of Spencer. question, first answer the answer let of

customers I among ramp NPS the ramp of and a in scores the to would outstanding, mentioned Ocado them. We as engage or even be programs, the the whatever And causing new sheds with to to world-class continue best them to be assign more want as And up for our that's network. as us you Boost positive are some membership our with across before, membership markets or well. loyal

In terms financial of I'll Gary, let... the side,

about Ocado Thanks, view think Spencer, if CFCs previously Yes. how Sure. dramatically by I changed around shared anything that Rodney. we the say, over maturing wouldn't our in we there's time. powered

margin value the also with is the line growth that connection offering, I the that expected much you seeing we And what that Scores and we're seeing we're Promoter that think, originally profile, and we're we've mentioned, customer think the about have pleased very what with if customer certainly like, when been we sales have in Net with gross Rodney and we envisaged. trends. as of

the the for one to to is of is maturity big it journey X-year building us as know, key I a you X- with things facilities As scale. think you're building to and

that, And figuring like of in what of still some model. you until that the we're understand efficiency out so the there customer at that kind looks some are density scale, operational elements of

we to to But building facilities, that what with X-year work would So journey I'd only there's consistent but still in know, overall journey capacity. And call first of that get picture. new months nothing as really two the to full previously. out, on continue really shared we're you say a we I XX in generally,

question comes from UBS. Our next Michael Lasser of

stack your And was looks it the in Was in your kind expecting of second by a basis-point geometric There first rate X% you're acceleration about that driven that the quarter? the to X-year high implies IDs on acceleration in basis. the all half to X-year of that like to run from second XX your year an stack. geometric go inflation the same guidance back

would back in contribution that the the inflation year? So from expecting you're lower half imply also the of that

to ago. Part Michael, cycle is it, we're inflation a of higher starting year

as we expect So to high. it's inflation really inflation -- be not do on

back driven year. were the the it's as we we cycling And where year ago. very recall, by aggressively of half ramped the you get up in later of would inflation last a as in year, So really

expect progress. don't quite high stay to and as just to the We inflation continue strong be We business it was. expect as continue strong to to the make

been The out. of you yes, working just question, -- and to kind you're part able of in may have your first Gary,

the think tend say it second to that market. you're progress think we we Michael, that I relative quarter, in at not in at to accelerate Yes. able look specifically we that QX our I would the X-year about view. we growth But compared to to were our the believe way describing overall,

market felt everything to QX. you that trajectory QX to how was we and to moving win from could from versus customers So see, were we able the change

positive X% will think half but mentioned, start that half the first back with of will saw it inflation remain because we the year, we So will QX. business the expecting momentum half about as of in year. continue the levels, that it, feel in we compared And of Rodney very in momentum are the we while believe in last to at out back we heightened higher cycling, inflation call to taper year the the last

of we even year a than perfect of we none starting inflation see say cost us little QX in less this to inflation QX, cycling to year. saw to if from and bit would ball. hard in data rate it the X% look year. that growth last it's predict, growth are you're grow, our But higher would be So had at continue to if QX QX the from really inflation does to you And crystal about the that prior

the key of And leveling forward-looking signs little to things be commodities a futures somewhat. some show some of that data may are bit of starting the on off

we the change plenty So last the the the in of shocks data tapering think forecast points guidance it inflation to very of obviously, rate slightly appropriate right XX back quickly. and that that it's now, in year. to that the been can there's can seems months provide we half see But that

it to like does in going the as half Kroger's managing pretty Was along are My along due community? seem by of its back sizable margin, little that evidenced FIFO to is some follow-up was And announcing to been passed they're faster than ability in quarter. nimble question a increases investments the getting retailers you're this pass increases price the that gross make your vendor consumable from the of some year. price price

the quarters? your over this next couple view that does margin of the to gross how of sustain So FIFO performance ability influence

that of would Well, the advance in you -- guidance in increases. obviously, cost our all for as been balance well CPGs, everything of the would have reflected know you most -- asked We year.

I what at looking balancing pricing, better cost a where what that you're the competitors. you to you you're other along the on weekly that's the spreads, something in individualized that it's rewards incredibly for addition that household that's see. a always customers market are there's for fuel And customer shops are through the actual pieces. Kroger, than never basis, your worse -- our important increase and rewards to with other pass And Obviously, valuable think remember that So our each customers. getting to thing personalized on or you are would at

at have look value I So really think you the to total proposition.

innovation add, trying more of managing we're margin, of perspective manage I a a and of quarter. the Yes. lots to gross just as do that there's work we we manage Brands to to think, of Michael, from growing think moving streams through and every Our be we're we adding growing parts long in And things profit not more it of manage. well. tailwinds Maybe I new number like alternative fresh mix the to sourcing, improvements that much would products. The it -- Rodney, course, how the model Obviously, term and

where of the sort overall, we months rolling look XX it about So of through we're from think customer. our that's the the basis at be. still XX of we I investment. what gross our But again, shared it's environment. XX investing we if in ability the that And you manage model the expect to beginning feel probably to our of points And perspective, at very good year evolving margin, in to

are plan shared. on So we that we we delivering, the believe,

Stanley. Our comes Simeon next from question Gutman from Morgan

looks trade changes all to across from of question your you throughout there picked quarter. of mentioned June that business consumer. we're like some brewing diagnose on the consumer My down It the the And was is up some seeing.

somewhere you stronger to we the or movement it Did when with level, off trading getting and either talk down in back about fall level seeing or now, is So, this…? it leveling you're a gasoline prices to private stabilizing? brands inside would heard of it is

at behavior, with us they're more you us. If the telling store so they're grocery look of behavior modifying than outside customer

initially the with product. movement a Our fall it do of Brands, bit we love to Now, little always in customers they find what is money, save to the but

we're continued the trend. one it's of is move part Brands that's -- a different customers of that something customers Our as in is customers And reasons is things But current value, just been trend, part the can why of driven been So so product. of a product. still fresh, see well. the are between in those overall it healthy, by we The acceleration of the just our quality long-term but the not engaging proud aspects of types growth that's of offering

needs wants well. customer agile be, as be to very to be going we're and and going we're So us there how forever the to

inflation. level is quantifying It follow-up we're like Abbreviated the what is. sounds not absolute

the going to moderation we're in You know a half. all see second

running in half Is line for actually half the up, of actually get moderate? And place seeing and cut home. where be we're elasticity, same you're in say so does year? the it behave back then in terms CPI quickly food volume that just go units it and in of actually you're for anyway? to respond the Let's with more back that going Could in

a change. from Yes. mean think it wouldn't see, what that I we we dramatic to be expect I

customer in we're mentioned, plans in be able through of through we offers would our now half with year, of we to inflation promotional I that us monitoring of we change nothing apps. very of Our flattening there's to see the through back that change to As dramatic but that we've think portfolio some And strong a I we using the of sort feel offer the going we cause to perspective, the back would expect pricing right the believe out of there's half to data to I of our from there as adapt level portfolio And got to very earlier how be of be to and we it customers combination the to in adapt Rodney's fuel that products rewards, and closely ties behavior. have, back the Brands the and comment, the probably think believe a year. inflation that

comes next Chase. of Goldman Our JPMorgan Kenneth from question

bigger than any you was surprisingly were Home broader the soy quarter? the typically there your shift brands of this milk might departments curious, you usual suspect strong were see others maybe Were guess was and I Chef. were or other I where in -- this kind I healthy. share the environment? assume But where there mentioned would categories

brand, even look selection, you I solid like to the the products, as but It's great share. unique well. And Yes. surprise, at banner it's strong brand lot to continued growth Ken. wouldn't new gain which really of and a broad-based. say private But if banner it's continues there be And a a question, has the

very was it So broad-based the across whole store. really

Got thank and OG&A you quarter, you it. on few this higher for, for then called a And reasons that. the out

initiatives -- And don't them accrual the then process. it's us But big recognize catch-up. was I just margin light in a I that you or sense think may ongoing expansion on we the came was? there ongoing should new there give that in, unique of OG&A necessarily Can process where any how of launched? I initiatives, you be an is that One just catch-up anything a about onetime were heard heard have? yet, more we think Is that of about the that haven't

Ken. Thanks, Yes.

materially OG&A The our about I the there's think would probably what what overall, our you year calculation performance, the be for year. the the quarter. on incentive mentioned, first based on pieces calculate we improved if I three which of think for plan the would that one you the is half say true-up impacted during was

And first have we for the catch to quarters in the year. two so up

growth some come Secondly, as back I'll and particular, mentioned, second. in as initiatives in 'XX to look beyond you we we will accelerate believe and that strategic we invested a in into that

sort X year. would strong timing we or were items were cycling be, in last X third particularly that The of were QX

caused the add of probably to for is but but things do repeat QX, together in year, kind the we meaningfully rate of those increase digital in that our would the why in And you out want we flat when overall fairly to remove just will really don't about the what we that achieved wouldn't of rate year rest the we It's an OG&A all I which So rest in down expect improvement. improvement you breaking the maybe the in that. is guided have say sort typically three to three we wouldn't I QX take view to get of would for see into be the which number, the think those rates. those better of we three factors, when because would it. than But during and how quarter, from them likely OG&A together would the

initiatives, before. the for year drive where opportunity business We think to and is to more just the model regards we seen continue profitable last beyond year half made I for new is As changing would example model performance there forecast improve opportunities the not of the more but believe made quarter, XXXX. continue think to able we in to for accelerate. the areas as in wellness health we It's also the and there's we're pleased vaccines to X or shrink that, we and you've and I strategic really continues as that an our be on in only are as be XXXX of we and shrink the new look capabilities it we customer progress of some margin and and then to what our how course, well. X with during earlier, where And wellness mentioned And to in at shrink that the identified health space investments but us second helps as we this some investing growth, gross an in in look evolve. to out cycle for

comes question from from Moskow Credit next Our Suisse. Robert

a of lower I providing a just on before, And you're quick consolidating make little little price it then anything smart to just to sub-brands shop? or brands really color points in consumer had wonder Is points, of new it initiative. could than opening follow-up. give terms your like to the easier a I several price the you if more

great value is The making sub-brands, the it money. consolidating for are items Those to majority shop. easier just always the

brand Way be other items terms there of just absolute of would that number SKUs. The introduced the Smart under thing incremental in the

for sub-brands customers and a combination easier items consolidating of some it's to shop. new So several it really making and introducing

on then And Okay. follow-up a CapEx.

volume companies. it project because this usually expected pricing to of to among be you not And than I lower because guidance is the year so goods first consumer had delays. You're seems imagine what CapEx the But all it high. -- is less

an correlation a here lower for between couple the any there your CapEx and be of is cycle might environment volume plans inflationary So next in like years? what

changes the say, wouldn't view Rob, ahead our us. opportunity really of I it of

in you the investments As and and really strategic obviously plan clear our that our out we chain, still across growth continue across supply we both in we've the Investor where know, Day model portfolio laid will store to confident digital. at outlined we make sense a invest and feel in March, believe the

read those some the But It's I excited any have we the challenges, far it of costs So market other. made. we're be would or that look less more more in in look plan into in when less the wouldn't it sense plans. just former to in the at that confidence of we when point the than adjust supply short-term short our and in far view to schedule, that it term, some more the at balance made so that camp you the

Citigroup. Paul Our next from question Lejuez comes from

the but was Hey bit the margin for Brandon a fuel per be it question. could cents you wondering help were very [ph] on little on gallon headwind in strong sounds is This Cheatham quarter, I like in Paul. to the expect taking everyone. us Thanks our second if fuel a half. for you

you're external second market help expecting kind or that us, much internal initiatives half? Thanks. fuel guess not driven by to in how forces of the was you can So margin I of repeat the

flows a managing job know, call. give margins. P&L then we rewards price, I metrics to sure value gross make goal did the that back not supermarket we margin, our we're very that through to Sure. -- fuel significant Yes. our shared we as fuel is and program that probably Overall, on in think via on share fuel And you fantastic the we our team our our -- competitive customers that through

go were wherever customers. been would team engagement our promoted drove changing which market, the in last sourcing and think with the great of it been But is work just the some lot has So overall, volatility in fuel I industry. market prices by in seen do certainly we they through how quarter the and across have as of capturing value and fuel a to with also

as program. great for optimizing the we clear reward look the around sourcing product we're So a strategy effectively, we forward, customer, really have delivering value we making sure believe the

that point unusual is these levels view and it's for sort prudent Our think profitability. fuel at some to normalize, of we don't high of predict margins extremely us

rate that. margins the that say wouldn't of perfect of year, be course, fuel back at the year. how year. would of So rest would greater for We the out there insight forecasting prudent we is think happen I what back our into be really the year. of of normal will be to half the for on outcome rest to would a that we the think about then, That's turns not impact but of significantly the us it we have fuel If think the we in what margins it to prudent to them thought more beginning it's bring

the quick the a drove that in wondering you how in That's of follow-up. And I just Got And ID slightly assume, was break I helpful. out price by units? quarter. much sales that it. if offset quarter? much inflation, could declined was how

Yes.

than mentioned of was inflation. we color QX I that than our think just we the last from we comment, cost be was that to this the higher maybe saw the increase increase in a would saw bit QX, on to higher sales growth one

to were the we improve So our market, overall in compared trajectory versus the growth. QX we able market believe trajectory, to overall, we're our how pleased to the QX with compared And performed.

the Thanks, Brandon, question. for

is think is the earlier for I household overall mentioned growth thing I always growth important is loyal which other that The we and had future. important well, as household that

Alex, question. for we more one have time

Thank you.

question from from Rupesh Parikh comes Oppenheimer. final Our

prior follow-up the So to question. maybe just a

your and perspective quarter share? just at but of It just peers gap any narrowed sounds quarter, the year? then market on any you're this looking for this that versus like Just how the the on may have balance thoughts performance

our think the as and Yes. The balance and the continue fresh year, to of to well. really look the proud the of experience and and on you it us accelerate, And narrow gap value the quarter narrowed progress seamless to focus has to we customer where well. the for for at as if expect continues customer would that teams make reward the overall continues for And during it's are. and we overall continued to

one then And on well. as Okay, CapEx great. question, just follow-up

believe this your So a be pretty the headwinds you year, there? spend could below is CapEx sustained given prior just lower plan. of we in just of significantly CapEx Do out period some

model we I feel around achieve like earnings growing at capital drive clear very to good our mentioned allow the we've or X% at around to Rupesh, earlier, think, long-term growth And X% TSR that we I plans expenditure our very and shared TSR got, -- us that we to think, plans have about the X% believe our I XX%. some to we've sustained will growth. overall that

on for time we being scale morning in prospects the making think made being labor some just forecast are and their -- there, around the But if challenges timing there in about and we look the as of change this plans think of supplies in the that and I we products excited business the materials CapEx our the adjusting that return just raw growth. would deliberate getting I the investing the materially, our pricing for originally So about term executed at certain then latest of we'd are and short us, envisaged. we're announcements don't sure less

more some it's short-term of just headwinds think I a for of the of function us.

today. always And comments to I few know, Thank for joining a share with you, listening like associates as us you as directly our everyone, well.

of half of achieved that the everything in this year. proud so everyone's are We

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you free Your supporting concludes creating food hunger again most. to Thanks communities efforts it provide who everyone commitment healthy for from That to and your need and joining our waste. our us the second for quarter neighbors to directly Thank earnings today. call.

joining QX you concludes the Thank for today. earnings call. This us

your You may line. now disconnect