The Kroger Co. (KR) 30 Nov 232024 Q3 Earnings call transcript

Good morning, and welcome to the Kroger Co.

Third Quarter Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Rob Quast, Senior Director, Investor Relations. Please go ahead.

morning. Good joining Third for Call. XXXX for us you Quarter Kroger's Earnings Thank am Chairman Chief McMullen; Millerchip. Kroger's today Financial Chief Gary I by Rodney and joined Executive Officer, Officer, and

discussions to caution is contained may of to to on basis that questions. the believe our a detailed we an Kroger results such and that look you The want can We your on predictions you I are many events begin, forward-looking material statements. update factors we we Instructions] to forward After obligation our that business our Before discussion in Company have today's actual effect will information. prepared no statements differ filings. remarks, include [Operator taking SEC want A ongoing assumes that remind or materially.

the I Rodney. over call will to now turn

Thank everyone, you, for today. thank joining us you Rob. morning, and Good

like we the year. strong model discussion I earnings generating this free morning. our the begin, our a retail growth will financial Then for is Before cash the and cover outline by remainder current I'd and moment value results Gary to and creation topics of the Kroger's guidance environment begin of to will supporting take flow. covering strength how

on Finally, questions. open with it will our up with I an Albertsons conclude update for merger proposed before we

and growth. of performance to per diluted turning fuel earnings model business our in supported diversity in highlight our as continued a profit and strong businesses Now third operating net strength quarter. results Kroger's our quarter share the adjusted challenged environment, alternative third growth

our with long-term rewards. customers on personalized maintaining tightens, commitment by promotions consumer we prices, spending As focused value and providing are to lower exceptional

households loyalty, future growth. growing sustainable for positioning are Kroger increasing and We

including higher are many pressuring SNAP. fewer economic interest benefits, government factors including Customers are reduced savings managing and rates, spending, their that

decelerating, broad quarters is impacts customers X significant to the and adjusting are of from inflation still inflation. Although consecutive

to convenience households products, quality, buying drive items mix more quarter, Brand Kroger profitable. again as attractive more more our fresh and once the value these larger During packs, are households continues of and engagement. Our grew higher-income premium By

seen customers we've significant are are customers our looking our more budget-conscious and spending As quarters, for pressure. over value, recent under actively

strong. We are our the Customers the recognizing and but across items ways displays price with from especially purchasing making offer a displays staples value these all great in-store budget-conscious value at are with has households points. everyday more value, more customers looking additional including for these We've been low the units, from support not with offers. engagement these buying trips customers to seen also response But to store. entire only

To customers more our manage commitment only help for customers. are we value to our their deliver exceptional deepening budget,

on an save Our way personalized to critical promotions increasingly items for are to that matter them. most customers

year. right of person, unmatched last applying memorable for the breadth price less balance and To the a to analytics able group depth example, are ensure to a strike than than promotions. which created data We XX for a bundle enjoy of that customers a Thanksgiving, meal represents served we were $X purchase per lower Kroger's between to

broad and long for experience, of delivering Kroger XXth our achieved fresh our low even we've to sustainable our a a of quarter history Through of household by shopping loyal positioning have future omnichannel providing We prices. value total consecutive unique at faster, households growth assortment customers foods increased growth.

our details more with delivering is for Starting our provide about customers. Now go-to-market Seamless. I'll strategy how

including our delivered sales pickup in tailwinds momentum, a with strong business growth are driving delivery households our double-digit and digital and visits. Our both in businesses. quarter Multiple growth third both

to online Our fulfillment. delivering quarter. focused success of our stores To on new X/X X-hour best-in-class our service the the pickup become are choice, available more of than retailer contributed food in we in also

during pickup, resulted the increasing improved scores. teams customer in net key wait improved in times metrics quarter. rates This reducing experience Our fill promoter and

customer continue we to centers increase rapidly growth, households. again where delivery Our fulfillment our led

delivery doorstep on-time enjoy Our of to directly customers value. their convenience with zero freshness, the delivery refrigerated quality compromise and on

ensure personalized promotional deploy dollars for households and last resulted us savings elevated our demand are personalization. meeting we Digital to to even and have enables capabilities in customer Turning personalization an year, capabilities more Investments offers compared our to effectively. more in Xx increased us model have increasing alternative in profit loyalty accelerate increase XX%. businesses. and as growth and to loyal, our in incredibly they driving Digitally nearly engaged by significant are redemptions, valuable more engaged digitally with this are households more our quarter spend

Marketing, with third model our growth profit creating in earnings in The more margin having alternative how navigate gives the Starting portfolio. the diversified and about quarter strong traffic engagement ecosystem environment the profit profit us elevated quarter balanced this the and our Now our strength across confidence stream. alternative Growth in a to data remained and of higher ahead. businesses supported with I'd Precision share in a growth businesses. Seamless to is our business effect, flywheel like to growth needed drive Kroger digital the ability

KPM. sixth celebrated anniversary of we Recently, the

features KPM today, in and By buying platforms, ad company. in first expects and waste important more new direct buying its by growth to platforms iteration enhance meet measurement This solutions to activating the audiences. to to are These self-service we accelerate help journey launched step where has KPM they providing media Kroger already expand become reduce to KPM's made quarter, transparent access This and an advertisers tools. innovative clients will offering allowing future. are other impressive advertisers trusted the more custom most to

and and exceeded Kroger our sales expectations Health drive helped strong a profit growth. that had quarter internal

decisions our with we commitment shareholders. customers the long-term that Express to are in best and making decision interest of reflects Scripts our to agreement believe our Our terminate

capacity number done have of more patient impact our growing will devote teams vaccinations. utilizing Our Gary and patients excellent job provide on care, an the time later. more including to our retaining of pharmacists' to this financial extra

drugs pharmacies. our GLP-X growth see rapid in retail quarter, we in the During continued to

Kroger's drugs health are to well customers' While buying our us positions the food-as-medicine of these impacts long-term wellness on goals. philosophy unknown, and support habits customer

Our are support services, all do which tools rating proprietary holistically. health to app, healthy professional care to OptUp, approach comprehensive living dietitians, so and designed like includes nutrition and our

While insights, by pharmacy on laws. data we is from ourselves protected operations customer data in and separate is and data loyalty our the our privacy pride patient

We are data to using committed our in customers' manner appropriate jeopardizing an trust. not while

eating For seen have any customer not in macro now, we major shifts behaviors. or spending habits

committed offering and Food trends needs. that meet customers' constantly are our evolving, are to we products

adopt healthy to food habits services positioned we looking without or and options. of these health the well with customers care For provide important are help drugs, healthier to

associates And our the bring and by the to to purpose Kroger, support connected feel our I'm human We many know customers they to our our life associates impressed ways is At feed other. so connected purpose, day to this and every spirit. Kroger. they are when each the ways

participation hundreds of physical, purpose. and Our living more vision nation's and and one important events, annual see Kroger share It and for support one emotional to and level of our XXX thousands Kroger festival than showcasing health health example to largest mental better Wellness visitors our the the of this joined of families. mission. in Sponsors was experiences This for offerings. Festival is food wonderful of celebrities is just wellness and

affordable, progress Since I our highlighted ESG XXX and billion Kroger to waste, Kroger's to XXXX, nearly so to their launched Also fresh donated am meals families, footprint. fight has Hunger hungry Zero our journey, than insecurity our partners. healthy ] efforts especially X X.X billion which more of our this incredible | food surplus significant milestones. food feed Zero | quarter, reduce Zero to of and teams reach including released million these we report, and more to on food our access than across Hunger Waste bank waste, proud [ Waste to food Zero annual in food we to expand and pounds

special Our our and make growth. force our outstanding success in customer associates the even long-standing benefits are advance associate through to experience this helping tools to customers. the our their driving and holidays more training by an facilitate invest delivering We behind wages commitment for career and

make Feed approximately this associates with to of a XX% participants is our career. helped hourly. being discover almost ways Your come continuing alone, benefit, and has a where lifetime place for associates we Kroger up a provides benefit these This the and one job of year $XX,XXX education X,XXX Future, important

focus improvements which development strong retention, experience. includes customer contributing consistent more is in Our to a associate on continuity and

turn Gary over I'll to through results. Gary? to that, it financial our you take With

recent Thank diversify associates our food-at-home across years challenged will margin model. initiatives, growth. value you, to quarter Kroger Rodney, our value and profit adjusted over spending and made demonstrate and while third we to this quarter tightening consumer initiatives per possible results good Kroger's wellness. health morning, our share a wages our strategic the growth delivering also was strengthen our investing of customers, everyone. support alternative are disinflation. for earnings higher for made performances greater businesses characterized The navigate achieved environment fuel, have strong by providing and and allowing We business our teams that in future This investments of by expansion resilience creation X% and

earnings agreement prior X.X%. more sales the of results year-to-date now been positive us XXXX, terminated effect achieve adjusting adjusted to keep decreased have our with X Similar to the and growth slightly building agreement Our share on on Scripts. years. I'll Scripts negative quarters and Identical over track X%, of per without positive. detail results the quarter. X on our effect provide gross third the on terminated record Express rate, effect would on net Express Underlying profit growth in fuel overall a had a rate, for our year, items. on excluding fuel FIFO adjustment was effect the The operating the margin with excluding fuel, positive first OG&A

the As we of Scripts of cycle begin Express new at the impact year. a calendar to the will reminder, start

without to identical sales fuel. back Turning

the a As Rodney growth Seamless growing loyalty is building our ecosystem highlight customer fueling profit of Digital earlier, a were alternative critical XX%. our sales component and quarter, strategy, in shared our businesses.

disinflation. quarter. sales lower to by continue ended affected industry-wide overall points than quarter second basis the low XXX X single Our the Inflation approximately in digits, be

we and inflation this trend with improved slower shown has units fourth X to would have end have the we quarter of the decelerated, improvement continue of units straight sequentially the quarter, We the Towards remaining at year-end. Encouragingly, a saw positive inflation decline for expect quarters. in as at pace. inflation signs

at rate the However, have we unit have improved pace would not and expected. inflation lagged have the growth rates decline of

and are compared last and of the margin we team, XX% points of the sales, to a margin increased growth continue basis to same quarter X rate, laser-focused Gross expect the was returning gross year. to fuel, volumes on improvement As in year. FIFO for excluding our balance unit

promotions was fund these improvements. Shrink successfully the were to continuing increased long-term theft value chain plan, customers, for in including execute sourcing supply Our continued able headwind quarter, the we deliver in margin margin investments rise optimization, Brands to to greater crime. quarter, our and primarily gross During retail we improvement the pricing organized by investments to and a due and efficiencies during industry-wide and to

in initiatives We customers to stores. are in mitigate protect shrink investing and our and our associates

ahead, gross we in outcome similar Looking expect a drive influenced will fourth in gross would rate that the quarter quarter. same margin factors these X for margin

X, charge we charge of quarter last was growth million for $XXX million inflation of year. to a LIFO a year. to double-digit recorded to last During digits compared due quarter compared low $XX single to This same returning reduction experienced the

OG&A agreement and points, and Scripts. excluding investments fuel of increased terminated The items. was benefits with planned and increase rate driven OG&A the our wages by in effect XX associate basis Express adjustment in Kroger's rate

we a initiatives expected to quarter, costs. strategic execution the of cost made Investments drive and and lower by that offset are were initiatives saving in the beyond. in to plan incentive of XXXX During growth also partially decision number invest

ability affect and in in deliver confident costs our do effectively continue the manage customer savings eliminating that are by not We experience. to waste to areas

is sixth our to is to cost of We Health In important in remain across and year. Kroger incremental billion be $X relatively quarter, last component would we flat and model growth expect compared opportunities the track our in the value consecutive to OG&A profitable year on rate continue our delivering fourth business cost creation of savings. an identify saving XXXX. deliver to

on internal During the margins from goal team margin drugs. for number the rate with associated exceeded GLP-X administered, quarter, vaccines our the impact higher helped in these vaccinations and negative growth offset the profit of the

strategy and another and As in is part potential see area this about shared our the we in rewards way our customers we also momentum and excited significant business. Fuel health is a profitable loyalty. our that future of wellness increase earlier, Rodney growth through key of for value deliver for and are program

in expectations ahead did Our results fuel quarter. team delivering outstanding of an the that job third were

our fuel serve. labor And per investments price by sales margin has substantial average that investments cents sustainable in rewards relations. versus time, $X.XX quarter saved to in retail for over industry. committed the of compared communities provide last year. led Our more We more the keep to continue update was than associates versus our associates, made to fuel XX%. will, XX% $X.XX same customers wage years comprehensive affordable and brief gallon $X.XX which a supporting raising us this purchased was gallon like benefits per to Kroger now to allow last year. I'd in fuel average X hourly the wages that we this with quarter at remain the last the on products to The year, $X.XX our outpacing last

in Fry's Food XX,XXX total stores Roundy's, Drug, the associates. quarter, During new more than Meat we X agreements labor in for ratified UFCW covering and and Dallas the third with

now in for all have were We that XXXX. agreements negotiation ratified scheduled

and flow disciplined free Kroger to capital, TSR to continues cash results strategy operating our the growth that model. through cash free liquidity prioritizing return deploying generate and to opportunities support approach and consistent flow. strong Turning a highest

early net to EBITDA the target to close to which debt adjusted of ratio third to total positions leverage within quickly to debt our adjusted quarter, us the strategy and remains our our range net range with total execute in proposed EBITDA of X.X, X.X. below was Albertsons well merger This financing target XXXX At X.X return end then the well post-merger. Kroger's to ratio

be additional the impact color full wrap our economic $X.X the Today, to our billion. fuel range outlook $X disinflation. to range of now the up to and year without to provide FIFO quarter, adjusted food-at-home profit a me updated on reflect We within of and comments I operating near-term X.X% the year the my year. for be expect on let of remainder we As to guidance pressures sales full identical net billion in of X%

XXXX. effect our which sales of identical guidance sales in our approximately without the basis is reflects reminder, XXX a reported As Express fuel by reducing points Scripts,

us midpoint range. sales sales guidance Our our trends the latest on would put updated to track annual of achieve

for to Importantly, to results a effect than our exit sales overall we quarter the with trend Scripts start January. as the stronger expect of would cycle quarter in X Express we

alternative we confidence to of expect wellness, expected forward, well seeing share end for to profit We per combined our are returns and and to gives are year navigate adjusted shareholders. our lower attractive the with to believe sustainable full earnings fuel, we charge, in health committed to positioned businesses, net raise between Kroger EPS strength adjusted diluted guidance And lower looking range. LIFO near-term $X.XX headwinds, the the now and remains our and us be $X.XX. delivering We a

the I'll Rodney. now turn back call to

Gary. Thanks,

Albertsons me floor the our open your provide questions, we on an let merger Before pending with to update Companies.

the As second the compliance of with certified XXXX, November substantial request FTC. by XX, Kroger issued

step in This of We our transaction. with merger the to Albertsons proposed us cooperatively early in with work XXXX. FTC the continue keeps track review close its to on

meets agreements confident C&S all our commitments of a will transaction will criteria bargaining no necessary will the set and fulfilled the divestiture buyer original including have existing ensure and in merger. the we close employed to Grocers. we will well-qualified C&S that Frontline plan collective comprehensive remain are Wholesale is announced the continue. as associates complete stores the result who all agreement, out merger with a We

both made We Albertsons have stakeholders. to Kroger a compelling case and

and commitment access stores Our customers to with by affordable assure fresh our increasing day extends measurable wages by lowering for beginning open America to and by food. communities associates creates and to X, keeping trust merger with and has Albertsons proposed benefits benefits deepens prices meaningful on our our

integration well. In are planning, we terms of progressing

to and made stronger retail toward Our food another able significant each integration our closing, is future. In and other operators an be strengths the at exciting compete even from effectively results. Kroger to closing. which solid in see more of provide customers against It teams quarter even ensure larger experience have first how delivered with learn nonunion the organizations both customers to progress of for associates and complementary goal, to we'll continuity is

are our committed in investments and through generate sustainable We attractive ability to lower our continuing challenged prices and a for in to more demonstrating to balancing remain our customers returns for our and manage associates environment while our shareholders.

I and taking forward Gary your to that, look questions. With

Instructions] [Operator goes Our first Dean of question Rosenblum to Bernstein.

you know this relative ecosystem, digital was ], My as question increasing regarding the understand XX% alternative increase? -- were says you you the think revenues. is up mix But operating profit the a quarter really actual of about Scripts about of debate on stores, it's help terms profit of to I how [ mean, a digital the X from sales growing it us gross -- us contribution the I online in total of help and comp. can which continues about including Express share. sales. profit terms digital Can that impact understand think in whole to operating that to digital

would believe, digital think not change, currently, change look do we multiple time, you will and profitable that stores. overall be by things, the will as We If ecosystem. as that over

If a cost progress continue you make on look on pickup, the at significant to to pickup. serve customer we reducing

as at look of to a them make our where to would the sheds, store. continue on sheds the you profitability our be get to progress shed we the If same

don't one that's time, well, us And with obviously, at And us if customer, incremental with And So media you you customer. back, also, and as spend progress. of meaningful engaged the if kind profitability, making what we the making is more is that we look progress. that in-store. step through pickup, then make include delivery we when you just over view they're we is when sure lose job find will

expectations we that profitable it have you every time look will be. it if over initially, not is So but as

Yes, Rodney, to Can points. just hear couple me, you data a of add, maybe okay? specific Dean,

please. Yes,

sort think that parity towards the mix, order. around certainly digital profitability starting improving as of lowering that sort stage to CFCs, overall early would much X improving of on on to Dean, and into in customer the the we're X% areas, journey Dean XX%. And of sort a launching pickup and that our our about percent a on of -- profitability revenue the third-party achieve business more providers cost the transaction centers sort double-digit we journey the see through very of or on media talked We've and our talked, then around facilities. some and before of then fulfillment start progress profitability. And being about pass-through sort profitability Rodney of the in bucket digital X I CFCs, Ocado. store terms we that sort towards our before towards we're total pickup north by heading will of about of a digital the be incremental see Ocado pass-through the delivery to peak, prior starting talked delivery areas, to getting which of we in per also we ago made is and good powered really sales now business a investment to couple fill tailwinds of that sort we then rate through journey that things of of mentioned of to improving and all mid-single-digit and business being in the having those years pass-through rate around still those rate We've where scale

days of the has either that to great. a the follow-up as suggest the more expect to the whether on or that might XX. extend certifying or That make now extend decision would completion now FTC is have question to that some substantial period. second My is, XX FTC to November for you likely request That's you FTC the time sort decision? Do decision an we right sense mentioned any

early Dean, all as you we great to look prepared we have XXXX, it's a comments, along. as close question. our if And expect in in you --

parties, have dates. other to a interested still of relationship it's continue and We in terms with early FTC the cooperative too and specific

Morgan Stanley. to The Gutman goes next Simeon of question

that on your your XXXX, for expectation Michael us to the of still what inflation. we return inflation happen which margins This expand for is. or Maybe you would a starting modest event a or And deflation, outlook deflation in for Simeon. to in can backdrop on more is need to kind see there or deflation the Kessler with And what question in even either current is the backdrop? hold scenario see that in

Yes, the question. thanks for

from outlook lot in As we you in sources. look market, provide some we'll at we're when see know, we sure the get and to more data as you earnings are of likes our March. to the probably our of certainly points same both of USDA many at internally for And I'm a externally. that sources all data continuing, other looking and XXXX the we're specific top And published X are quarter details the

think I right were the the watch we of XXXX need think next talk view of now, get towards the would recognize crystal typical and the our evaluate how to, year. specifically in inflation case, our certainly that food-at-home that views. But we And look year we'll as tend low would with certainly have to color watching. outlook the seeing to overall, data we're for data food-at-home of when and March provide we We point and for would more if being ball perfect we'll scenarios we're we that the And the next be can different model more to those most single-digit but year to there our out. about don't range. adapt play see we a earnings are that course, we'll continue

only accordingly. X out been you able there's where if over inflationary And results in environments, the in last been it's actual XX XX whether it's me as deflation been to create know, just been years always there's that and negative, the where strong manage maintain you deflationary, last a And look all or business year. we've one of of things Gary reminds the of, you years, and

to fuel you then about which talk any And the if And the supermarket business, is had profitability. core and guess, great. there interplay, higher-than-expected quick that? what Can drove a that there's on I between Okay, happened business business, follow-up dynamics what any come stronger to and separately earn the and being kind manage a able little of in to balancing this is of it P&L? just you're the in Or QX? profitability managed

it, the fuel super at We mentioned with amount the look team of Gary proud we the leveraging we're that and had issued, partnership businesses increase to our were but Yes. of in both all fuel divisions. significant the of so really rewards a support each other.

that a The and the has sure fuel the on standpoint is efficiency other on thing deliveries, team an done from ingredients nice making all well. job on procurement as

each So and really of leverage out. they've really proud good what of that about both we business support but it where really sides the to business feel done, is other turned

goes Montani Evercore ISI. of question to Michael next The

of to support on you One I the Is that still Wanted dollar could year. promotions backdrop? fund into for heard for cost-out the vendor of follow-up And fronts. look what into just should then on would having 'XX? the the just growth. dollar quarter? to fourth And growth there in a you And potential overall kind X next terms do ask of then guess OG&A we yourselves? uptick if was underlying competitive what And see question discuss $X versus billion was you all that could amount fair in we've be, secondly,

can. he the Gary OG&A. Yes. or the add Gary backdrop ask I'll to And competitive I'll and let and then answer answer promotions, about anything, if wants

market competitive feels for the very similar look than long has from been what time. a overall, you at standpoint, it a If

promotional not amount with their promotional. And If so at CPGs satisfied you One they're X I CPG is activity, tonnage are look support. increasing is the their think things on increasing funding the being driving of there's that.

everyone thing supply a is year place the other that is for constraints and real getting in X to been back normal. years have chain would The ago ago

is on beginning supply. have adequate CPG where promote could not or happened that again, us something then to a for the thing worst So for to feel are people comfortable and have promoting

reflected pre-COVID. comfortable kind you will getting shopping pre-COVID, if it at when people behaviors it really they which And of back what there even Thanksgiving, and getting and last was go really buy to there you So is go if at it's look to really it more look it. back minute, products be was during --

but right questions, that's seeing now Gary the great we're what and both OG&A. So really on

Thanks, Rodney. Yes.

that quarter. OG&A, I'll and step points third couple I talked well about take maybe just in in So the mention a as just a of back

at will associates have make impact help wages we third for we have with expected the were into and increasing growth continued hourly were investments in XXXX up would lower additional As in ESI we some very things the rates they beyond that and and of and in the little our would third we that to quarter that of real savings. in also as terms rate. investments plan quarter expected. The be been The going in line believe looked quarter a we differences it, also set to stores supply but some the network were much what did OG&A a in make average the strategic revenue cost decisions bit our during and chain the

fourth the continue, fourth look outside we the that be flat to of continue during to actually So in average hourly of the expect trends and Express quarter, we a rate be will quarter. that, will Scripts believe at as factor. we'd relatively But course, OG&A

prepared see into initiatives this will a from in that benefit a leveraging of cost rate continued areas digital see sort sight continued as good by my line we in improving serve of savings of at year have we tailwind we've number launched both still remarks, run efficiency, still And the to As mentioned technology driving next we improvement that look I of business. a and year. in and to XXXX, cost

remain can continue to find X% target and to see we X% we that our associates. confident continue invest sight to make to line that to that we of So we customers good sort of sure a our in improvements productivity to would in continue invest

The next question Partners. of John Guggenheim to Heinbockel goes

seem on -- reactive think XX% -- I about talk it kind don't you the think reactive Rodney, of want it promotional start on versus is reactive, I with, know the can XX% then I your if you don't So end, you say, side, to And about would out proactive on know, proactive, would right? And you that. where what you how to basket, you that possibly market yours where how respond on can Is is stealth. and the business, run disadvantage and loyalty others a more to what's respond would those based see without be the to you in remotely program you that right, a at going can you see even that there?

question. would the the reactive. majority, versus be would By say almost majority for far, John, all proactive and I Thanks, be when

our week check will of there'll adjustments single are and all discounts Now be But prices far, on majority that. by the every proactive. based teams our

your aspects significant at those coupons what And allow mailings, there's shopper, individual that things some in the we and to that stretch continue loyal ad. go download see that you that terms also of the some mentioned in grow is more. to there's the customer households offers things And will those, can increase getting A of Kroger that you've reason of direct and believe our in to why household one even become is budget those of once you're to an loyal is lot you of you offers. It's those. which personalized and look a

us, rewards price full promotional equation and and are offer So overall our rewards us the less just from within merchant. little the look that is gets really of offer shopper rewards with we because basket to -- competitor. market the so mailings, But reason we cents our a at and different between the that look It's go it biggest at way. loyal than loyal when you our shop when But us. why value other customer you you are shoppers that's when fuel a we is important to obviously,

Rodney, the reward I is as digitally program combination navigate years to way the it can does a through it dollars thing too, sort to reasons it's confidence impact the how customer second peanut one maybe would dynamic one value and more and I in spread in to in create different a think being able post-COVID, personalize that we in add have I we than would environment to And John's I think, it to our the of that XX part John, rather be, additional while the ago that give maybe of question, different now do really engaging most ability directions. the go the across to why channel to a and customers X, the target think way butter most market. able we're that compared also it's having the of value

shopping what it to trying us heard word to item and make on. we not us for give any opposed -- been customers discounted to that's and as would have followed that money loyal You've that just long a is use is somebody really you a you've value to do sure making to the cherry-pickers time are us we're

When fair, a out. positive volume as follow-up, largely if negative. to you I is a then X% more that is sounds Is budget-conscious returns single-digit? at negativity so that don't And driven, than is looked ago, or low that broke maybe because think territory? like customers, I it's driven it quarters you Is couple know volume a little that solely And the cohort? negative negative, right? of by that know slightly is that -- you if do that but

Yes.

you would be negative. slightly volume If look,

quarters a full largely the look, that's budget. trend driven for driven be trends a or half That that we And and would being -- value empty, by obviously by If standpoint. the have customers our a shopper you is half row improved X in the on customer. half empty from

or driven meaningfully that profitability shopper. The is full the Some XX%. to grow the better customer's and with of impact SNAP from of of -- are that the customer down continuing about customers that that's part than loyal, value is is we're it's Part because inflation.

The goes next question Bank. of to Krisztina Deutsche Katai

So just level Rodney, right? I why be we under wanted question The wouldn't ask XXXX? if Because competition, about to competitive pressure. and the we're thinking on grocery it, a the you more consumer sector sector as into head remains of conceptual

is under pressure. raising to CPGs are end low increased the lag. continue their volumes of Some support,

And case inflation? question a no positioned is to relative that the to normal Kroger that deflationary be backdrop just the of year So case? of low food-at-home in base why secondly, is a one, conceptually, single-digit wouldn't potentially even how inflation

Yes.

be always our or XX and of can look And that going customer. we prices that at that we this lowering at, in assume to years to will reductions hard makes years fun X cost look wage to assume or you we you things fund continue the the XX over one a invest is lot years, continue so fundamental If it's increases industry of for business every year, more more the the changes We if really be competitive. model worked competitive. business identify process last to that and

XXXX, a what any lot see at value felt doesn't XX of environment the year years year. at we'll look would is XX that or early like a have better we customers, last that they experience the when give you detail year the guidance, get obviously, we next us, things or every when but And more we than we to right years. every X different for and important look for don't when now, customer we the go years better So have positive get is customers one a And and compromise. think the for into

plus the cheese So engaged will an long smile a home, of friendly last -- they with their amazing with time they've something in amazing that fresh at associates, they Murray. little everything extra and product that get basket with a get bit piece support when or

compromise So -- a from and standpoint. to not pricing have

very that overall, with of we offer. customers feel appreciate positioned what good look So you in really how we terms we're the when

as that get start thing look into that helpful we secondly, look January periods Scripts we then to is, we add, cycling year. one as when impact through of of for the next just too, market, available those and the dollars we're seen of year in I the And were part year. the we've the SNAP too. things we around trend at a to are bit know, we've course, XXXX, those last seen flow as that specific reduced SNAP the the of we're that to we'll think reduced would Express this of of I early amount X QX our of to X One that markets you or a say. What earlier many different in middle year, markets, states, should of and those or sort happen starts certainly the a it Kroger in where Rodney, growth where Krisztina, in Maybe, see XXXX, one dollars, in things the they markets couple create of cycling

towards think cycle in for bit across as were industry starts specifically start industry, impact more of an some, the we of operate markets So industry I the we think, in, for originally impact tailwind to those which you the we there's that the next as might than thinking dollars, year's a growth -- that SNAP had well. and the do they to perhaps create

next Ed Kelly of Fargo. to Wells goes The question

the Gary, I gross wanted to ask you margin. about

QX think the be that margin, said flattish. I you to you gross expect

you when educate And you on a If is the trend just in you visibility out, for believe that flattish context, confirm you your shrink. 'XX would within could then on do and little then just about us stand it's that. I'm that, you that bit where the accounts, case continue? curious base peaked? maybe looking shrink that have do And And

Ed. Thanks, Sure.

in I comments yes, prepared similar look initiatives way we've sort in right I that part first with the saw would margin my we've the the that the progress we pleased QX. of that of as -- to as break we that we part expect to that question, well. the of that you're that So essentially very earlier year in down QX been The said seen the improvement equally plan would is

Brands, chain sourcing, in promotion, gross wellness, rate. What margin to And invest during profits. in partly gross alternative All quarter of health to areas advertising and pricing course, to the those strong we also earlier. with see increase to So a balance we in continue well. those benefits, benefits Express did and is from gross tailwinds year third and from tailwind mentioned we this continue supply generate margin more is Rodney benefits strong Our our as did in the costs Scripts margin increased we quarter as did and

be of continue have saw streams say would to beyond the pattern to I a we been we we as of differences to the as drive bigger continue these base double-digit improvement quarter-over-quarter a what those lot expect to terms and So into similar around what are for about off and drive And still potential would we course, quarter. I'd mentioned a believe tailwinds we grow that well. Our growth. on we to areas certainly fourth in see where the look of continues XXXX, think as at profit sourcing, a pace Brands that alternative path a we multiyear

as it what perspective, set somewhat I in future. From still a maybe we to those a dramatic rate in have big-box general it still would the merchandise than is headwind, see of probably making headwind have probably second but a somewhat. would we're sustained think the the because have that a still us some dramatically shrink it I retailers, have was that's prepared mentioned quarter So up shrink basis. in we to would while group would balancing sure And we the impacted actually for be been ourselves comments. our peer on year-over-year quarter, eased of but we're less gross for as business would confidence than than less our the of margin in some not levers. headwind impacted, a it's a it's lot growth impacted third I say That would the less doing business continued have

and but because So the would it's the still trend factors in headwind to we of something through work continue I organized retail a offset, least earlier. are decelerate, of growth terms today seeing that it crime be still crime we have mentioned year-over-year to and but at

important is warehouse have of Gary that in a mentioned. teams improvements manage shrink a job slight fresh the trend our as actually teams leveraging can done a because trend by -- fresh the departments, teams on partnering actually, lot a I processes store as of fresh changing lot And technology great departments thing it improving I departments. well. And is on with other think big you and our our our And processes The of technology. is, and is that our remember think to shrink of using in chunk

next The Northcoast Research. to question Chuck Cerankosky goes of

delivery economy's effect volumes to order fees or Rodney, I'm And be spend business. delivery your also bit digital could volumes. little customers' how membership any on willingness economy a impacting about you fees, digital inflation thinking and on the talk money the and about on particularly might

If -- you Chuck. over look at thanks,

a they've you overall that fact overall. stabilizing is you but departments, endure look on But stabilization the some fresh returned you a at the inflation. had of lot -- last at know that. to some if the at to look And if at side, appreciate over you X process the the definitely customer years, see wouldn't If has normal. they you of inflation that also actually from look back look standpoint, if of they And it's

the are So deflationary. next when if where for you look that to significantly cycling get next be And eggs at example, like point we we'll year. all we're early happy year an eggs, or

or feel to behavior, save fascinating, to at they where customer look lot want save. a work they you it's of to need do If save customers like

and membership I business size, to at that And up strongly. continues some like if in So you that, to and you brands. in of delivery was look pack things if double Brands it digits at grow moving look fees fact, always But fees changes. versus a national the Our what strain lot time politician, look remind a they're and they're behavior lot and doing customers the on a that's I at budget, XX%. sure I'm that, under you part of of them, drove to of and if any a talk

focused like If affected continuing packs, that. buy behavior price them and nicer customer's not you continuing hasn't they're because still things very still are strong, to buy as look Cheese, is Murray's Starbucks, at customers that big much, to on as that wines, inflation

of membership and So part our that that's the why are sure upscale, so behavior not we seeing more mainstream on I'm reason program customers we're change. the over-index with

particular for Okay. exiting ghost reason real just you're that? And quick, business. Any kitchen the

that we'll it. enough. it we'll and of of for version lot it. used kitchen, continue is from next few on wasn't huge just We growth but ghost a focus loved Appreciate food it test great the opportunity We The question. different customers to to a us on think things, Yes, home away it. and move the still it

it's So move things of one you on. those where

So thanks, Chuck.

of to Parikh goes Oppenheimer. question The next Rupesh

quarter you growth. seeing the to more versus any surprise are pickup? just Just color another guys on in digital And you anything of what delivery back front? Kroger's digital of going terms performance, Did double-digit

let from it's and of start finish. see to our call but strong. year-on-year a terms it surprise, very wouldn't I'll a great NPS Gary and I Yes, pickup that standpoint standpoint the scores, a both in delivery is

strong. be shed If at to the repeat our business, delivery rate you look continues

So is really it the really customers that appreciate white-glove experience.

it don't to to what see by I'll sound you... I it's So surprised we like want make nice but we're Gary, thought let it play out.

well, you said Yes, Rodney. it I think

I I think us see continue in about to it we've that digital to and seeing growth everything I believe the continue opportunity we And that to that will think engagement mentioned talk is I said the we only growth. continued profitability. And script thing comment deeper Rupesh, are belief earlier, we add, is for was company. in before, improvement customer a gives would in we a engine but the drive didn't an thing the be

more that So technology revenue efficiency driving all helping lowering and cost we're growth the growth. continuing to it's media well to as profitable fill and see through as

So that's think the only piece I that would reinforce. I

question next The to JPMorgan. of goes Goldman Kenneth

that about did you're I'll and not now, next know a single-digit about year. of to year. in take you sort I a next numbers on normal here hopefully ask give position I shot really inflation low having talk wouldn't but

of that and is fuel lapping right surely imagine you bit a won't little you I disappointing, maybe that challenging healthy a You expecting. you margins assume be you'll expected now But highlighted some your growth also or productivity amount will recur. unit mentioned

you next initial those trying at next to a sense get a headwinds? to headwinds are that that some want drivers you earnings if offset to other of theoretically just sluggish just units, tailwinds sense get I'm better about think all sense. than to to kind and makes their for to growth comps maybe year, have So do tough, your into if find how algo are least of fuel to year, I get have algo

Yes. Thanks, Ken.

lot color, more As when we'll share you expect, March. to a might you we get definitely mentioned, as

step think we model the diverse bigger and we company. that believe as built think a few more the back, picture over as a we've, I last certainly ecosystem about taking just years, a

Groups, the the continue course, fuel this But Express drives with important impact we've So streams. an of continuing grow it profit year sort grow part alternative health of food-at-home been -- know, to and you our even of of the to continuing grow wellness and to as flywheel. is -- business,

the do we to do how continuing drive customers traffic of continue to as there's et we taking we It's we're out about margin improvement and at supply we'll to think at our because beyond driving as think believe mean, we a in a more we meetings. the be businesses. our initiatives grow associates, -- the of time previous XXXX chain, ecosystem, be the value it certainly So strength we alternative new focusing creates a do business look so around journey generate way cetera. profit we've to streams, invest continue that we're shareholders points would can it's the building of alternative sourcing, drive opportunity you've to think on. about profit for that we I that strategy And it that as over in I flywheel as different the Kroger. think so for can some where I and cost continue don't for talked areas investor raised more

you sort But able we of really be sort -- time we And to still we pattern you at we food-at-home growth, would So our sales on growth built base is perspective, areas believe base for well model seeing certain I certainly, that our at is X% model think in drive where be that framework. sales growth. up X% more our have cost to from productive. that and normalize that to our time to over within weren't inflation cost period of to to is were see X% sustained of a because our a think of typical food-at-home and growth if the look period in will X% look in set

thing Thanks, our to Seamless comment make as add that to if expect we progress as mentioned well, would you would look Gary's business, other continue Ken. I is I at earlier. The to only

The of UBS. Michael next goes Lasser question to

to sort food there to volumes center backdrop inflation against across raise given talk -- would prices given volume? you're in further prices Why a that you partners, providing the As your telling could where of willing are promotions? necessitate is And the their of P&L quarter, provide into into you CPG you not to a vendors third go desire next go more the that you they limitation that and running assortment is they these year, support. that this your back and processed be up? the expectation continue to of fund that about typical your support what the to that rolling sign you the part for are to promotions And that, more to bit prices try as are down, used drive of

Michael. Thanks,

are wrong. economics, short CPGs statements all have in the their over of approach. say terms they you overall, at look that you And all If board are in

our them willing are there to the money. the incredible And because Our give a tonnage. for of if is the be and we are, And value. high rate is Brands, when what to find Brands up Some incredibly -- CPGs tries will very give for stay customer a value quality Our they customer will repeat

quarter, funding to was expect quarter some third the in aggressive And as in the more that done by CPGs in CPGs of than the in really look funding, of I second terms it earlier, and the you us. continue. were promotions If quarter mentioned and would

more worrying tonnage what's We too. CPGs think growth, I part are seeing and that's about willingness, their driving that of

Michael. So thanks, question, I the appreciate and

question last Kelly Our BMO. of to goes Bania

and comment growth. go more talk to to wanted about a little a about back more profit diverse alternative bit building the I ecosystem

I at coming I the $XXX around to ballpark. profit. double-digit to that's the rate think growing comment you was into million more maybe a can double And mean years grow to wanted the years? there many million business comment this digits, to which on incremental think year-over-year But how give is if still in opportunity continue right that that, would that just $XXX

I I profit the And our a 'XX next just Yes. since growth that's digital continued is all and for we're that of to all But supporting our driven to contributor media in will the give still don't going think want things. we by year. on know Gary which process. started One growth would we're meaningful growth. profit business, expect on the And through business X be getting we really is our specifics that.

world, and one Walmart is and we media your you being a transparency If and and the in other of give look And the competitors think think data Amazon the things lot to is in people that so able helpful is and are Metas others. then good incredibly of that we Googles important players. to and Google relative Meta

we wide of specifics, profit variance the the So opportunity within the get there want grow to have there. company. look long-term at alternative some know other performance some either. And I we business a we if don't And see the of those, to businesses, you that of continue to

company by well. own of taking within and that is growth just part So that our driven as best-in-class growing

few for you've as everyone, a I'd for all associates start, memorable so holidays do to the of and customers. To will share some say -- with to for moments to a to season So the thank hard Kelly, our following I'd the make question. And I work all as always, thanks, And it be for that appreciate the holiday comments customers memorable questions. take what in. to rest equally huge our like the you for like the done you the listening make

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concludes This all now you. call. you today's Thank Thank joining. for

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