2019 Fact Book Kroger at a Glance KROGER FACT BOOK 2019 2 Pick up and Delivery Available to 97% of Custom- Ers
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2019 Fact Book Kroger At A Glance KROGER FACT BOOK 2019 2 Pick up and Delivery available to 97% of Custom- ers PICK UP AND DELIVERY 2,270 AVAILABLE TO PHARMACIES $122B AND ALMOST TOTAL 2019 SALES 262 MILLION 97% PRESCRIPTIONS FILLED OF CUSTOMERS 33 OF NEARLY WE COVER 44 500,000 493 ASSOCIATES MILLION DISTRIBUTION COMPANY-WIDE 35 CENTERS MEALS DONATED THROUGH FOOD 100 FEEDING AMERICA PRODUCTION FOOD BANK PARTNERS PLANTS ARE ZERO WASTE 35 STATES 2.3 MILLION 1,989 TONS OF WASTE & THE DISTRICT PICK UP 1,567 LOCATIONS DIVERTED OF COLUMBIA SUPERMARKET FROM LANDFILLS FUEL CENTERS 101MILLION POUNDS OF FOOD 2,757 RESCUED SUPERMARKETS & 2.2 MULTI-DEPARTMENT STORES 11M RECOGNIZED AMONG THE BILLION CUSTOMERS $205M KILOWATTS IN THE WALL STREET JOURNAL IN 2019 DONATIONS OF ELECTRICITY DIVERSITY AND INCLUSION RANKING TO END HUNGER FOR S&P 500 COMPANIES IN OUR COMMUNITIES SAVED TOP 20 DAILY COMPANIES KROGER FACT BOOK 2019 Table of Contents About 1 Overview 2 Letter to Shareholders 4 Restock Kroger and Our Priorities 9 Redefine Customer Expereince 10 Partner for Customer Value 21 Develop Talent 30 Live Our Purpose 34 Create Shareholder Value 37 Company Financial Metrics 45 Appendix 52 KROGER FACT BOOK 2019 ABOUT THE KROGER Fact Book This Fact Book provides certain financial and by words such as ‘‘achieve,’’ ‘‘believe,’’ economic growth; changes in inflation or operating information about The Kroger Co. ‘‘committed,’’ ‘‘continue,’’ ‘‘deliver,’’ ‘‘effect,’’ deflation in product and operating costs; stock (Kroger®) and its consolidated subsidiaries. ‘‘future,’’ ‘‘growth,’’ ‘‘imperative,’’ ‘‘may, ‘‘plan,’’ repurchases; our ability to retain pharmacy It is intended to provide general information ‘‘reinventing;’’ ‘‘result,’’ ‘‘strategy,’’ ‘‘strong,’’ sales from third party payors; consolidation in about Kroger and therefore does not include ‘‘sustainable,’’ ‘‘transform,’’ ‘‘trend,’’ ‘‘vision,’’ and the healthcare industry, including pharmacy the Company’s consolidated financial ‘‘will,’’ as well as similar words or phrases. These benefit managers; our ability to negotiate statements and notes. On January 22, 2003, statements are subject to known and unknown modifications to multi-employer pension the SEC issued release No. 33-8176 that risks, uncertainties and other important factors plans; natural disasters or adverse weather set forth new requirements relating to the that could cause actual results and outcomes conditions; the potential costs and risks disclosure of non-GAAP financial measures, as to differ materially from those contained in the associated with potential cyber-attacks or defined in the release. The release allows for forward-looking statements. These include the data security breaches; the success of our presentation of certain non-GAAP financial specific risk factors identified in ‘‘Risk Factors’’ future growth plans; the ability to execute on measures provided that the measures are and ‘‘Outlook’’ in Kroger’s Annual Report on Restock Kroger; and the successful integration reconciled to the most directly comparable Form 10-K and any subsequent filings with the of merged companies and new partnerships. GAAP financial measure. Any non-GAAP Securities and Exchange Commission. Our ability to achieve these goals may also be financial measure discussed in this Fact Book affected by our ability to manage the factors complies with this requirement. More detailed Our ability to achieve sales, earnings, identified above. Our ability to execute our financial information can be found in Kroger’s incremental FIFO operating profit, and free financial strategy may be affected by our filings with the SEC. cash flow goals may be affected by: labor ability to generate cash flow. negotiations or disputes; changes in the types This Fact Book contains ‘‘forward-looking and numbers of businesses that compete with Kroger believes that the information contained statements’’ within the meaning of the safe us; pricing and promotional activities of existing in this Fact Book is correct in all material harbor provisions of the United States Private and new competitors, including non-traditional respects as of May 2020 or such earlier date Securities Litigation Reform Act of 1995 about competitors, and the aggressiveness of that as indicated. However, such information is future performance of Kroger, including with competition; Our response to these actions; subject to change. Unless otherwise noted, respect to Kroger’s ability to achieve short- the state of the economy, including interest reference to “years” is to Kroger’s fiscal years. and long-term sales and earnings goals, rates, the inflationary and deflationary trends sustainable long-term shareholder value, in certain commodities, changes in tariffs, and ability to execute on our growth strategy and the unemployment rate; the effect that fuel business plan, ability to execute on Restock costs have on consumer spending; volatility of Kroger, ability to increase dividends, ability fuel margins; changes in government-funded to grow market share, and ability to develop benefit programs; manufacturing commodity new brands and implement new technologies, costs; diesel fuel costs related to our logistics among other statements. These statements operations; trends in consumer spending; are based on management’s assumptions and the extent to which our customers exercise beliefs in light of the information currently caution in their purchasing in response to available to it. These statements are indicated economic conditions; the uncertain pace of KROGER FACT BOOK 2019 1 OVERVIEW Kroger at a Glance Headquartered in Cincinnati, Ohio, The Kroger geographic coverage and widest variety of Co. is one of the largest retailers in the United formats in the food retailing industry. The States based on annual sales, holding the #23 merger also enabled Kroger to generate ranking on the Fortune 100 list published in significant economies of scale in purchasing, May 2020. Total company annual sales totaled manufacturing, information systems and $122.3 billion for fiscal year 2019. logistics. In 2014, Kroger finalized its merger with Harris Teeter bringing an exceptional Kroger was founded in 1883 and incorporated brand and a complementary base of stores in 1902. Throughout its rich history, Kroger in high growth markets. Later in the year, has served as an innovator and a pioneer in Kroger merged with Vitacost.com, one of the food retail industry. In the early 1900’s, the largest pure e-commerce companies in Barney Kroger became the first grocer in the nutrition and healthy living market. This the country to establish his own bakeries. merger accelerated Kroger’s entry into the Shortly after that he was also the first to sell e-commerce space by several years, bringing meats and groceries under one roof. During the ability to serve customers through ship- the 1930s, Kroger was the first grocery chain to-home orders and expanding Kroger’s reach to routinely monitor product quality and to all 50 states. In 2015, Kroger finalized a scientifically test food. We have demonstrated merger with Roundy’s bringing an expanded a long-standing commitment to food safety footprint and innovative store format within and quality. Technology has also played a the Wisconsin and the Chicagoland areas significant role in Kroger’s growth. In 1972, under multiple banners to the Kroger family of Kroger became the first grocery retailer in companies. America to test an electronic scanner, reducing the customer wait time for check out and Our business today looks very different than improving accuracy. Kroger has continued to it did over 130 years ago when Barney Kroger use technology to better serve our customers first opened his doors but the business and developed QueVision, an innovative principles that made the first Kroger store faster checkout program that has reduced the successful in 1883 – service, selection, value time customers wait in line to check out. We and our commitment to our customers– continue to innovate internally and via external continues to guide the company’s operations. partnerships with industry leaders. Our growth, innovation, partnerships and evolving business are aimed at satisfying the Mergers have also played a key role in needs of our customers. “Be particular. Never Kroger’s growth over the years. In 1983, sell anything you would not want yourself” Kroger merged with Dillon Companies Inc. in was the motto Barney Kroger ran his business Kansas to become a coast-to-coast operator with over 100 years ago and remains a guiding of food, drug and convenience stores. The principle to the way we run our business today biggest merger in Kroger’s history came in in an everchanging environment. 1999 when Kroger merged with Fred Meyer to create a supermarket chain with the broadest KROGER FACT BOOK 2019 2 OVERVIEW As of February 1, 2020, Kroger operated, % of The Kroger Co. Amount either directly or through its subsidiaries, Revenue 2,757 supermarkets under a variety of local banner names, of which 2,270 had pharmacies Non-Perishable (1)(4) $61,464 50.3% and 1,567 had fuel centers. We offer Pickup (formerly referred to as ClickList®) and Harris Fresh (2)(4) $29,452 24.1% Teeter ExpressLane®— personalized, order online, pick up at the store services — at 1,989 Supermarket Fuel $14,052 11.5% of our supermarkets and provide home delivery services. Approximately 54% of supermarkets were operated in Company-owned facilities, Pharmacy (4) $11,015 9.0% including some Company-owned buildings on leased land. Approximately 31% of Our Other (3)(4)(5) $6,303 5.1% Brands units and 42% of the grocery category Our Brands units sold in our supermarkets are Total Sales $122,286 100% produced in our food production plants; the 1. Consists primarily of grocery, general merchandise, health remaining Our Brands items are produced to our and beauty care and natural foods. strict specifications by outside manufacturers. 2. Consists primarily of produce, floral, meat, seafood, deli, bakery and fresh prepared. As of February 1, 2020, we operated 35 food 3. Consists primarily of sales related to food production production plants.