filings.toolsKroger (KR) 10-K risk factor changes: FY2021 vs FY2020
The 2022-01-29 10-K against the 2021-01-30 one, compared heading by heading and sentence by sentence.
Item 1A38 rewritten24 added3 removed121 unchanged
All filing items989 rewritten539 added398 removed1,750 unchanged
Summary
counted, not written
- Item 1A headings could not be compared: only 0 carried over between the two years, which usually means one filing was read wrongly, so none is reported as new or removed.
- Sentence by sentence, 539 added, 398 removed, 989 rewritten and 1,750 unchanged across 20 items that differ.
- New this year: Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS..
Sentences by item
23 items, with every count and a link to each item that changed
Underlined words on a shaded ground are new in FY2021; struck-through words were in FY2020. Sentences that are wholly new or wholly gone are labelled rather than marked.
Item 1A. RISK FACTORS.
38 rewritten, 24 added, 3 removed, 121 unchanged
The operating environment for the food retailing industry continues to be characterized by [removed: intense price competition, expansion, increasing] [added: the] fragmentation of [added: local, regional, and national retailers, including both] retail and [removed: online] [added: digital] formats, [added: market consolidation, intense competition and] entry of non-traditional [removed: competitors and market consolidation.][added: competitors.]
Each of these are strategic differentiators and each one is designed to [added: better serve our customers and to] generate customer loyalty and sustainable growth momentum.
We believe our plans to [removed: deepen and strengthen our competitive moats provide a balanced approach that] [added: continue to improve these four strategic differentiators] will enable us to meet the wide-ranging needs and expectations of our customers.
We may be unsuccessful in implementing our alternative profit strategy, which could adversely affect our [removed: market share and] business [removed: growth,] [added: growth] and our financial condition, results of operations or cash flows.
In addition, evolving customer preferences and the advancement of online, delivery, ship to home, and mobile channels in our industry [removed: enhance] [added: increase] the competitive environment.
In addition, if we do not successfully develop and maintain a relevant digital experience for our customers, our business, financial condition, results of operations or cash flows could be adversely [removed: impacted.][added: affected.]
Our digital business [added: has] accelerated significantly during the COVID-19 pandemic including Pickup, Delivery and Ship.
The future success of the digital business will also depend on the efficiency and cost effectiveness of fulfilling orders across our modalities, whether in store, in pickup-only locations, [removed: and] [added: or] through customer fulfillment centers powered by [removed: Ocado.][added: Ocado Group plc.]
We could be adversely affected by personal injury or [removed: project] [added: product] liability claims, product recalls, or other health and safety [removed: issues.][added: issues, which occur from time to time.]
Any issue regarding the safety of [removed: items] [added: items,] whether _Our Brands_ items manufactured by the [removed: company] [added: Company] or for the [removed: company] [added: Company] or CPG products we sell, regardless of the cause, could have a substantial and adverse effect on our reputation, financial condition, results of operations or cash flows.
We are a party to approximately [removed: 350] [added: 310] collective bargaining agreements.
Upon the expiration of our collective bargaining agreements, work stoppages by the affected workers could occur [added: (and have occurred in the past)] if we are unable to negotiate new contracts with labor unions.
We [removed: are] [added: have] committed to paying fair wages and providing the benefits that were collectively bargained with the United Food and Commercial Workers (“UFCW”) and other labor unions representing associates.
Competition among potential employers [removed: could result] [added: has resulted, and may] in [added: the future result, in] increased associate [removed: costs, or in] [added: costs and has from time to time affected] our [removed: failure] [added: ability] to recruit and retain associates.
Events that adversely affect that trust, including inadequate disclosure to our customers of our uses of their information, [added: failures to honor new and evolving data privacy rights,] failing to keep our information technology systems and our customers’ sensitive information secure from significant attack, theft, damage, loss or unauthorized disclosure or access, whether as a result of our action or inaction (including human error) or that of our business associates, vendors or other third parties, could adversely affect our brand and reputation and operating results and also could expose and/or has exposed us to mandatory disclosure to the media, litigation (including class action litigation), governmental investigations and enforcement proceedings, material fines, penalties and/or remediation costs, and compensatory, special, punitive and statutory damages, consent orders, and/or injunctive relief, any of which could adversely affect our businesses, financial condition, results of operations or cash flows.
If [removed: we] [added: we, our third party service providers,] or those with whom we share information fail to comply with laws and regulations, [added: or self-regulatory regimes, that apply to all or parts of our business,] such as [added: section 5 of] the [added: FTC Act, the] California Consumer Privacy Act [removed: (CCPA) or] [added: (CCPA),] the Health Insurance Portability and Accountability Act (HIPAA), [added: or applicable international laws such as the EU General Data Protection Regulation (GDPR),] our reputation could be damaged, possibly resulting in lost business, and we could be subjected to additional legal risk or financial losses as a result of non-compliance.
Adverse outcomes in these legal proceedings, or changes in our evaluations or predictions about the proceedings, could have [removed: a material] [added: an] adverse effect on our financial condition, results of operations or cash flows.
Please also refer to the “Litigation” section in Note [removed: 13] [added: 12] to the Consolidated Financial Statements.
We believe [removed: that] the present value of actuarially accrued liabilities in most of these multi-employer plans [removed: substantially] exceeds the value of the assets held in trust to pay benefits, and we expect that Kroger’s contributions to [removed: those] [added: most of these] funds will increase over the next few years.
We enter into mergers, acquisitions and strategic alliances with expected benefits including, among other things, operating efficiencies, procurement savings, innovation, sharing of best practices and increased [removed: market] share that may allow for future growth.
We sell a significant amount of fuel in our [removed: 1,596] [added: 1,613] fuel centers, which could face increased regulation, including due to climate change or other environmental concerns, and demand could be affected by concerns about the effect of emissions on the environment as well as retail price increases.
We are unable to predict future regulations, environmental effects, political unrest, acts of [added: war or] terrorism, disruptions to the economy, including but not limited to the COVID-19 pandemic, [added: the recent invasion of Ukraine by Russia,] and other matters that [removed: may] affect the cost and availability of fuel, and how our customers will react to such factors, which could adversely affect our financial condition, results of operations or cash flows.
Our operating results could be materially impacted by changes in overall economic conditions [added: and other economic factors] that impact consumer confidence and spending, including discretionary spending.
Future economic conditions affecting disposable consumer income such as employment levels, business conditions, [added: overall economic slowdown or recession,] changes in housing market conditions, [added: changes in government benefits such as SNAP/EBT or child care credits,] the availability of credit, interest rates, [added: inflation or deflation,] tax rates and other matters could reduce consumer spending.
Increased fuel prices [removed: could] also have an effect on consumer spending and on our costs of producing and procuring products that we sell.
A large number of our [removed: stores and] [added: stores,] distribution facilities [added: and fulfillment centers] are geographically located in areas that are susceptible to hurricanes, tornadoes, floods, [removed: droughts] [added: droughts, ice] and [added: snow storms and] earthquakes.
Weather conditions and natural disasters [removed: could] [added: have, and may again in the future,] disrupt our operations at one or more of our facilities, interrupt the delivery of products to our stores, substantially increase the cost of products, including supplies and materials and substantially increase the cost of energy needed to operate our facilities or deliver products to our facilities.
Adverse weather, natural disasters, [removed: geo-political] [added: geopolitical] and catastrophic events, such as war, civil unrest, acts of terrorism or other acts of violence, including active shooter situations (which have occurred in the past at our locations), or pandemics, such as the spread of [removed: the novel coronavirus,] COVID-19, or other future pandemics and other matters that could reduce consumer spending, could materially affect our financial condition, results of operations or cash flows.
[removed: A] [added: Two] full [removed: year] [added: years] into the pandemic, many factors and uncertainties remain, including:
| | ● | the ultimate duration of the pandemic, including whether there will be additional spikes in the number of COVID-19 cases, future [added: variants,] mutations or related strains of the virus; |
| | ● | the timing and availability of, and prevalence of access to and utilization of, effective medical treatments [removed: and timely rollout of vaccinations] for COVID-19; |
| | ● | the impact of the pandemic on economic activity and the pace and extent of recovery when the pandemic [removed: subsides,] [added: subsides or becomes endemic,] which may vary materially over time and among the different regions and markets we serve; |
In addition, we cannot predict with certainty the extent of the [removed: impact] [added: effect] that COVID-19 will have on our customers, suppliers, vendors, and other business partners, and each of their financial conditions; however, any [removed: material] adverse effect on these parties could materially and adversely impact us.
[removed: GOVERNMENT] [added: LEGAL AND GOVERNMENT] REGULATION
[removed: We] [added: Additionally, we] must comply with numerous provisions regulating, among other things, health and sanitation standards, food labeling and safety, equal employment opportunity, minimum wages, licensing for the sale of food, drugs, and alcoholic beverages, and new provisions relating to the COVID-19 pandemic.
Disruption in our global supply chain could negatively [removed: impact] [added: affect] our business.
The products we sell are sourced from a wide variety of domestic and international vendors, and any future disruption in our supply chain or inability to find qualified vendors and access products that meet requisite quality and safety standards in a timely and efficient manner could adversely [removed: impact] [added: affect] our business.
The loss or disruption of such supply arrangements for any reason, labor disputes, loss or impairment of key manufacturing sites, acts of war or terrorism, [added: disruptive global political events, for example, the recent invasion of Ukraine by Russia,] quality control issues, a supplier’s financial distress, natural disasters or health crises, [added: including the COVID-19 pandemic,] regulatory actions or ethical sourcing issues, trade sanctions or other external factors over which we have no control, could interrupt product supply and, if not effectively managed and remedied, have [removed: a material] [added: an] adverse [removed: impact] [added: effect] on our business, financial condition, results of operations or cash flows.
Our ecosystem monetizes the traffic and data insights generated by our retail supermarket business to create fast-growing, asset-light and margin rich revenue streams.
Due to the political uncertainty involving Russia and Ukraine, there is a possibility that the escalation of tensions could result in cyberattacks that could either directly or indirectly affect our operations.
Inflation could materially affect our operating results through increases to our cost of goods, supply chain costs and labor costs.
In addition, the economic factors listed above, or any other economic factors or circumstances resulting in higher transportation, labor, insurance or healthcare costs or commodity prices, and other economic factors can increase our merchandise costs and operating, general and administrative expenses and otherwise adversely affect our financial condition, results of operations or cash flows.
A deterioration in overall economic conditions, the likelihood of which is made more uncertain by the recent increases in the inflation rate, could adversely affect our business in many ways, including slowing sales growth, reducing overall sales and reducing gross margins.
| | ● | the effectiveness of vaccines against variants and efficacy of vaccines over time, vaccine availability for young children, global vaccine access, and the percentage of fully vaccinated individuals in the US and the corresponding effect on the duration of the pandemic; |
| | ● | whether and when the global pandemic will become endemic; |
| --- | --- | --- |
| --- | --- | --- |
We are subject to various laws, regulations, and administrative practices that affect our business, including laws and regulations involving antitrust and competition, privacy, data protection, environmental, healthcare, anti-bribery, anti-corruption, tax, accounting, and financial reporting or other matters.
These and other rapidly changing laws, regulations, policies and related interpretations, as well as increased enforcement actions by various governmental and regulatory agencies, create challenges for the Company, may alter the environment in which we do business and may increase the ongoing costs of compliance, which could adversely affect our financial condition, results of operations and cash flows.
If we are unable to continue to meet these challenges and comply with all laws, regulations, policies and related interpretations, it could negatively affect our reputation and our business results.
Additionally, we are currently, and in the future may be, subject to a number of inquiries, investigations, claims, proceeding, and requests for information from governmental agencies or private parties, the adverse outcomes of which could harm our business.
Failure to successfully manage these new or pending regulatory and legal matters and resolve such matters without significant liability or damage to our reputation may adversely affect our financial condition, results of operations and cash flows.
Furthermore, if new or pending legal or regulatory matters result in fines or costs in excess of the amounts accrued to date, that may also materially affect our financial condition, results of operations or cash flows.
In addition, increasing governmental and societal attention to environmental, social, and governance (ESG) matters, including expanding voluntary reporting, diligence, and disclosure on topics such as climate change, waste production, water usage, human capital, labor, and risk oversight, could expand the nature, scope, and complexity of matters that we are required to control, assess, and report and could negatively affect the Company’s reputation.
CLIMATE IMPACT
The long-term effects of global climate change present both physical risks, such as extreme weather conditions or rising sea levels, and transition risks, such as regulatory or technology changes, which are expected to be widespread and unpredictable.
These changes could over time affect, for example, the availability and cost of products, commodities and energy including utilities, which in turn may impact our ability to procure goods or services required for the operation of our business at the quantities and levels we require.
In addition, many of our operations and facilities are in locations that may be affected by the physical risks of climate change, and we face the risk of losses incurred as a result of physical damage to stores, distribution or fulfillment centers, loss or spoilage of inventory and business interruption caused by such events.
We also use natural gas, diesel fuel, gasoline and electricity in our operations, all of which could face increased regulation and cost increases as a result of climate change or other environmental concerns.
Transitioning to alternative energy sources, such as renewable electricity or electric vehicles, could incur higher costs.
Regulations limiting greenhouse gas emissions and energy inputs will also increase in coming years, which may increase our costs associated with compliance, tracking, reporting, and sourcing.
These events and their impacts could otherwise disrupt and adversely affect our operations and could have an adverse effect on our financial condition, results of operations or cash flows.
Our ecosystem monetizes the traffic and data insights generated by our enhanced customer experience.
We are using our assets in new ways through these fast-growing, asset-light and margin rich businesses.
Our stores are subject to various laws, regulations, and administrative practices that affect our business.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
250 rewritten, 256 added, 115 removed, 312 unchanged
MD&A is provided as a supplement to, and should be read in conjunction with, our Consolidated Financial Statements and the accompanying notes thereto contained in Item 8 of this report, as well as Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the year ended [removed: February 1, 2020,] [added: January 30, 2021,] which provides additional information on comparisons of fiscal years [removed: 2019] [added: 2020] and [removed: 2018.][added: 2019.]
[removed: EXECUTIVE SUMMARY] [added: OUR VALUE CREATION MODEL] – [removed: OUR PATH TO] DELIVERING CONSISTENT AND ATTRACTIVE TOTAL SHAREHOLDER RETURN
[removed: We grew digital] [added: Digital] sales [removed: triple digits in 2020,] [added: two-year stacked growth was 113% for 2021,] enabled by our team’s ability to pivot quickly and effectively in the first stage of the pandemic to ensure that we were meeting our customers’ demand for safe, low-touch or touchless shopping modalities.
We continue to invest in areas of the business that matter most to our customers and deepen our competitive [removed: moats,] [added: moats of Fresh, _Our Brands_, Data & Personalization and Seamless,] to drive [added: sustainable] sales growth in our retail supermarket business, including fuel and [removed: pharmacy.][added: health & wellness.]
[removed: This] [added: This,] in [removed: turn] [added: turn,] generates the data and traffic that enables our [removed: fast-growing] [added: fast-growing, high operating margin] alternative [removed: profit streams.][added: profits.]
Our [removed: financial strategy] [added: first priority] is to [removed: continue to use our free cash flow to] invest in the business [removed: to] [added: through attractive high return organic and inorganic opportunities that] drive long-term sustainable net earnings [removed: growth, through the identification of high-return projects that support our strategy.][added: growth.]
[removed: At the same time, we] [added: We] are committed to maintaining our [added: current investment grade debt rating and our] net [added: total] debt to adjusted EBITDA [added: ratio target] range of 2.30 to [removed: 2.50 in order to keep our current investment grade debt rating.][added: 2.50.]
| [removed: ] [added: ] | [removed: ] [added: ] | [added: 2021 | | | Change(1) | |] 2020 | | | [removed: Change] [added: Change(2)] | | 2019 | | |
| [removed: Sales] [added: Total sales] | | $ | [added: 137,888 | | 4.1 | % | $ |] 132,498 | | 8.4 | % | $ | 122,286 | |
| Sales without fuel | | [removed: ] [added: $] | [removed: 123,012] [added: 123,210] | | [removed: 13.7] [added: 0.2] | % | [removed: ] [added: $] | [removed: 108,234] [added: 123,012] | |
| Net earnings attributable to The Kroger Co. | | [removed: ] [added: $] | [removed: 2,585] [added: 1,655] | | [removed: 55.8] [added: $] | [removed: %] [added: 2,585] | | [added: $ |] 1,659 | |
| [removed: Adjusted net] [added: Net] earnings attributable to The Kroger Co. [added: excluding the Adjusted Items] | | [added: $] | [removed: 2,740] [added: 2,802] | | [removed: 53.4] [added: $] | [removed: %] [added: 2,740] | [added: ] | [added: $ |] 1,786 | |
| Net earnings attributable to The Kroger Co. per diluted common share | | [added: $] | [removed: 3.27] [added: 2.17] | | [removed: 60.3] [added: $] | [removed: %] [added: 3.27] | [added: ] | [added: $ |] 2.04 | |
| [removed: Adjusted net] [added: Net] earnings attributable to The Kroger Co. per diluted common share [added: excluding the Adjusted Items] | | [removed: ] [added: $] | [removed: 3.47] [added: 3.68] | | [removed: 58.4] [added: $] | [removed: %] [added: 3.47] | [added: ] | [added: $ |] 2.19 | |
| Operating profit | | [removed: ] [added: $] | [removed: 2,780] [added: 3,477] | | [removed: 23.5 | % | ] [added: $] | [removed: 2,251] [added: 2,780] | |
| Adjusted FIFO operating profit | | [removed: ] [added: $] | [removed: 4,056] [added: 4,310] | | [removed: 35.4] [added: 6.3] | % | [removed: ] [added: $] | [removed: 2,995] [added: 4,056] | |
| Dividends paid | | [removed: ] [added: $] | [removed: 534] [added: 589] | | [removed: 9.9] [added: 10.3] | % | [removed: ] [added: $] | [removed: 486] [added: 534] | |
| Dividends paid per common share | | [removed: ] [added: $] | [removed: 0.68] [added: 0.78] | | [removed: 13.3] [added: 14.7] | % | [removed: ] [added: $] | [removed: 0.60] [added: 0.68] | |
| Identical sales excluding fuel | | | [removed: 14.1] [added: 0.2] | % | N/A | | | [removed: 2.0] [added: 14.1] | % |
| FIFO gross margin rate, excluding fuel, bps increase (decrease) | | | [removed: 0.14] [added: (0.43)] | | N/A | | | [removed: (0.23)] [added: 0.14] | |
| OG&A rate, excluding fuel and Adjusted Items, bps decrease | | | [removed: 0.06] [added: 0.61] | | N/A | | | [removed: 0.29] [added: 0.06] | |
| Reduction in total debt, including obligations under finance leases compared to prior fiscal year end | | [removed: ] [added: $] | [removed: 663] [added: 49] | | N/A | | [removed: ] [added: $] | [removed: 1,153] [added: 663] | |
| Share repurchases | | [removed: ] [added: $] | [removed: 1,324] [added: 1,647] | | N/A | | [removed: ] [added: $] | [removed: 465] [added: 1,324] | |
Notable items for [removed: 2020] [added: 2021] are:
| [removed: | ● |] Net earnings attributable to The Kroger Co. per diluted common share [removed: of $3.27.] | [added: | $ | 2.17 | | $ | 2.04 |]
| [removed: | ● |] Adjusted net earnings attributable to The Kroger Co. per diluted common share [removed: of $3.47.] | [added: | $ | 3.68 | | 6.1 | % | $ | 3.47 | |]
| | ● | Generated cash [added: flows] from operations of [removed: $6.8] [added: $6.2] billion. |
| | ● | [removed: Increased cash and temporary cash investments by $1.3 billion, reflecting improved operating performance, significant improvements] [added: An increase] in [removed: working capital and] [added: long-term liabilities at] the [added: end of 2020, primarily due to an increase in the noncurrent portion of the] deferral of [added: the employer portion of social security] tax payments as a result of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which was enacted in the first quarter of [removed: 2020.] [added: 2020;] |
| | ● | Returned [removed: $1.9] [added: $2.2] billion to shareholders through share repurchases and dividend payments. |
| | ● | [removed: Decreased total debt,] [added: Increased payments on long-term debt] including obligations under finance [removed: leases, by $663 million.] [added: leases; and] |
| | ● | Alternative profit streams contributed an incremental $150 million of operating profit [removed: in 2020] [added: for 2021] fueled by our [removed: retail] [added: digital] media business – Kroger Precision [removed: Marketing.] [added: Marketing (“KPM”) and Kroger Personal Finance.] |
As the pandemic has evolved, we have experienced unusually strong [removed: sales.][added: sales beginning in 2020 and continuing throughout 2021.]
The change in customer behavior caused by COVID-19 was a major factor in our [removed: 2020 results.][added: results over the past two years.]
The pandemic brought to the forefront the importance to the customer of fresh and [removed: digital.][added: a seamless digital offering.]
Our OG&A expenses [removed: include] [added: for 2020 included] significant incremental costs related to investments in pay and benefits for our associates and measures to safeguard our associates and customers.
As a percentage of sales, these incremental costs [added: in 2020] were partially offset by sales leverage resulting from strong sales growth due to the COVID-19 pandemic.
[removed: On] [added: At the onset of the pandemic in] March [removed: 18,] 2020, we proactively borrowed $1 billion under the revolving credit facility.
Strong execution by our team and accelerated investments in our competitive moats [removed: during] [added: over] the [removed: pandemic] [added: past two fiscal years] allowed us to strengthen our balance sheet.
During 2020, we fully repaid the $1 billion borrowed under the revolving credit facility [removed: and] [added: in addition to] $1.2 billion [removed: in outstanding] [added: of] commercial paper [removed: obligations,] [added: obligations outstanding] as of year-end 2019, using cash generated by operations.
For additional information about our debt activity in [added: 2021 and] 2020, including the drawdown and repayments under our revolving credit facility, forward-starting interest rate swap agreements and our senior note issuances, see Note [removed: 6] [added: 5] to the Consolidated Financial Statements.
Significant fluctuations occurred in our business during 2020 due to the COVID-19 pandemic.
As a result, management compares current year identical sales without fuel, adjusted FIFO operating profit and adjusted net earnings per diluted share results to the same metrics for the comparable period in 2019, in addition to comparisons made to 2020.
This enables management to evaluate results of the business and our financial model over a longer period of time, and to better understand the state of the business after the height of the pandemic compared to the period of time prior to the pandemic.
Kroger has developed multiple levers within our business model to ensure we deliver net earnings growth and consistent and attractive total shareholder return (“TSR”).
Our execution of this model is allowing us to deliver today and invest for the future.
The foundation of our value creation model is our market leading omnichannel position in food retail, which is built on Kroger’s unique assets: our stores, digital ecosystem, _Our Brands_ and our data.
These unique assets, when combined with our go-to-market strategy, deliver an unmatched value proposition for our customers.
We are evolving from a traditional food retailer into a more diverse, food first business that we expect will consistently deliver net earnings growth in the future.
This will be achieved by:
| | ● | Growing identical sales without fuel. A key component of our growth plan is to double digital sales and our digital profitability rate by 2023. Our plan also involves maximizing growth levers in our supermarket business and is supported by continued strategic investments in our customers, associates, and our Seamless eco-system to ensure we deliver a full, friendly and fresh experience for every customer, every time; and |
| | ● | Expanding operating margin, through a balanced model where strategic price investments for our customers and investments in our associates and seamless ecosystem are offset by our cost savings program, which has delivered $1 billion in cost savings annually for the past four years, and sustained growth in our alternative profit streams. |
We expect to continue to generate strong free cash flow and are committed to being disciplined with capital deployment in support of our value creation model and stated capital allocation priorities.
We also expect to continue to grow our dividend over time and return excess cash to shareholders via stock repurchases.
We expect our value creation model will result in total shareholder return over the long-term within our target range of 8% to 11%.
2021 EXECUTIVE SUMMARY
Our strategic priorities of leading with fresh and accelerating with digital propelled Kroger to record performance in 2021, on top of record results in 2020.
These results demonstrate the strength of our go-to-market strategy, which led to achieving positive identical sales without fuel against very strong identical sales without fuel last year, resulting in a two-year stacked growth rate of 14.3%.
Digital sales two-year stacked growth was 113% for 2021 and has grown triple digits since the beginning of 2019.
We connected with customers through our expanding seamless ecosystem and the consistent delivery of a full, fresh, and friendly customer experience.
We invested more than ever before in our associates to raise our average hourly wage to $17 and our average hourly rate to over $22 with comprehensive benefits included.
We balanced these investments by achieving cost savings greater than $1 billion for the fourth consecutive year and alternative profits contributed an incremental $150 million of operating profit.
Our agility and the commitment from our associates is allowing us to navigate a more volatile inflationary environment, current labor and supply chain conditions, and provide fresh food at affordable prices across our seamless ecosystem.
The following graphic illustrates our go-to-market strategy:
As we look to 2022, we expect the momentum in our business to continue and have confidence in our ability to navigate a rapidly changing operating environment.
Our 2022 guidance reaffirms that we are creating a new, higher base from which we expect to grow.
Our adjusted FIFO operating profit guidance for 2022 is $900 million higher than our TSR model would have projected when we announced it in 2019.
Our guidance also highlights the flexibility and multiple levers that exist within our model today, which will allow us to deliver adjusted net earnings per diluted share growth in 2022, while cycling COVID-19 effects and investing for future growth.
We are leveraging technology, innovation, and our competitive moats to build lasting competitive advantages.
Our balanced model is allowing us to deliver for shareholders, invest in our associates, continue to provide fresh affordable food to our customers and uplift our communities.
We remain confident in our value creation model and we expect to deliver total shareholder return over the long-term within our target range of 8% to 11%.
| Sales | | $ | 137,888 | | 4.1 | % | $ | 132,498 | |
| Net earnings attributable to The Kroger Co. | | $ | 1,655 | | (36.0) | % | $ | 2,585 | |
| Adjusted net earnings attributable to The Kroger Co. | | $ | 2,802 | | 2.3 | % | $ | 2,740 | |
| Operating profit | | $ | 3,477 | | 25.1 | % | $ | 2,780 | |
| | ● | Net earnings attributable to The Kroger Co. per diluted common share of $2.17, which results in a two-year compounded annual growth rate of 3.1%. |
| | ● | Adjusted net earnings attributable to The Kroger Co. per diluted common share of $3.68, which results in a two-year compounded annual growth rate of 29.6%. |
| | ● | Achieved operating profit of $3.5 billion, which results in a two-year compounded annual growth rate of 24.3%. |
| | ● | Achieved adjusted FIFO operating profit of $ 4.3 billion, which results in a two-year compounded annual growth rate of 20.0%. |
| --- | --- |
We are proud of our results in 2020 and the balance achieved in delivering for all our key stakeholders – our Associates, Customers, Communities and Investors.
We gained market share and exceeded guidance that we gave in the second half of 2020.
We committed more than $2.5 billion to safeguard the environment our associates and customers work and shop in and to reward associates, including a $1 billion commitment to a UFCW pension fund.
Identical sales, without fuel, were 14.1% for 2020, as customers continued to consolidate trips and spend more per transaction.
Our strong performance in digital is also a testament to the proactive investments we made over the last several years in our network, which positioned us to respond with agility during this critical time.
We were disciplined in balancing investments in our customers and associates with cost savings.
For the third year in a row, our operations and sourcing teams delivered over $1 billion in incremental cost savings.
These savings continue to be focused in areas that take complexity out of the business and allow our associates to provide a better customer experience.
Strong execution by our team and accelerated investments in our competitive moats – Fresh, _Our Brands_, Data & Personalization and Seamless, during the pandemic allowed us to create significant value for shareholders and strengthen our balance sheet, including accelerated growth in our alternative profit business.
The momentum we see in our business, which started pre-pandemic and accelerated during the pandemic, places us in an even better position to grow sales and profitability in the future and deliver on our total shareholder return commitments.
Our financial model is underpinned by our leading position in food.
Capital allocation is a core element of our value creation model, and we will allocate capital towards driving profitable sales growth, accelerating digital, expanding margin as well as maintaining the business.
We will continue to be disciplined in deploying capital towards projects that exceed our hurdle rate of return and prioritize the highest return opportunities to drive 3% to 5% net earnings growth.
Our resilient cash flow will allow us to continue to grow our dividend over time and continue to return excess cash to investors via share repurchases, resulting in consistently strong and sustainable total shareholder return of between 8% and 11%.
| --- | --- | --- |
| | ● | Achieved operating profit of $2.8 billion. |
| | ● | Achieved adjusted FIFO operating profit of $4.1 billion. |
| | ● | Identical sales, excluding fuel, increased 14.1% in 2020. |
| | ● | Digital revenue grew 116% in 2020. Digital revenue primarily includes Pickup, Delivery, Ship and pharmacy e-commerce sales. |
| | ● | Cost savings for 2020 exceeded $1 billion. |
| | ● | During the fourth quarter of 2020, certain of the Company’s associates ratified an agreement with certain UFCW local unions to withdraw from the UFCW International Union-Industry Pension Fund (“National Fund”). We incurred a withdrawal liability charge of $962 million, on a pre-tax basis, to fulfill obligations for past service for associates and retirees in the National Fund. We also made a $27 million commitment to a transition reserve in the new variable annuity pension plan. On an after-tax basis, the withdrawal liability and commitment to the transition reserve total $754 million (collectively, the “National Fund Commitment”). The withdrawal liability will be satisfied by payments to the National Fund over the next three years. |
| | ● | During 2020, we invested over $1.5 billion to support and safeguard associates, customers and communities during the COVID-19 pandemic. These investments primarily relate to items within OG&A such as associate appreciation awards, expanded sick and emergency leave pay and investments in associate and customer safety during the pandemic (collectively, the “COVID-19 Investments”). Supported by our strong performance and cash position, we committed more than $2.5 billion to safeguard the environment our associates and customers work and shop in and to reward associates, including the National Fund Commitment. |
| | ● | During the first quarter of 2020, in addition to the recurring multi-employer pension contributions we make in the normal course of business, we contributed an incremental $236 million, $180 million net of tax, to multi-employer pension plans, helping stabilize future associate benefits (the “First Quarter 2020 Multi-Employer Pension Contribution”). |
On March 11, 2020, the World Health Organization announced that infections of COVID-19 had become a pandemic, and on March 13, the U.S. President announced a National Emergency relating to the disease.
The impact on our financial condition, results of operations, and cash flows was material in fiscal year 2020.
We’ve implemented dozens of new safety and cleanliness processes and procedures in our stores and other facilities, including safety partitions and physical distancing floor decals, implementation of customer capacity limits, and providing personal protective equipment like masks for our associates.
All of which are described in our _Blueprint for Businesses_ – an open source guide we created to help other companies navigate the complexities of safely operating during a pandemic.
We continued to invest and grow our capabilities in these areas, leading to gains in both digital and total food at home market share.
Digital revenue grew 116% in 2020, enabled by our team’s ability to pivot quickly and effectively in the first stage of the pandemic to ensure that we were meeting our customers’ demand for safe, low-touch or touchless shopping modalities.
Supported by our strong performance and cash position, in 2020 we committed more than $2.5 billion to safeguard the environment our associates and customers work and shop in and to reward associates, including committing nearly $1 billion to better secure pensions for over 30,000 associates.
This was in addition to paid emergency leave, financial assistance through our _Helping Hands_ program and more.
Of these stores, 2,255 have pharmacies and 1,596 have fuel centers.
We also operate an online retailer.
On June 22, 2018, we closed our merger with Home Chef by purchasing 100% of the ownership interest in Home Chef, for $197 million net of cash and cash equivalents of $30 million, in addition to future earnout payments of up to $500 million over five years that are contingent on achieving certain milestones.
Home Chef is included in our ending Consolidated Balance Sheet for 2019 and 2020 and in our Consolidated Statements of Operations from June 22, 2018 through February 2, 2019 and all periods in 2019 and 2020.
On April 20, 2018, we completed the sale of our convenience store business unit for $2.2 billion.
The convenience store business is included in our Consolidated Statements of Operations through April 19, 2018.
| | ● | Charges to OG&A of $155 million, $121 million net of tax, for obligations related to withdrawal liabilities for certain local unions of the Central States multi-employer pension fund; $33 million, $26 million net of tax, for the revaluation of Home Chef contingent consideration; and $42 million, $33 million net of tax, for an impairment of financial instrument (the “2018 OG&A Adjusted Items”). We had initially received the financial instrument in 2016 with no cash outlay as part of the consideration for entering into agreements with a third party. |
| | ● | A reduction to depreciation and amortization expenses of $14 million, $11 million net of tax, related to held for sale assets (the “2018 Depreciation Adjusted Item”). |
An excerpt. Shown here: 40 of 250 rewritten, 40 of 256 added and 40 of 115 removed. The counts are complete. For every sentence, read Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. in the FY2021 filing and the FY2020 filing.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
15 rewritten, 38 added, 4 removed, 27 unchanged
[removed: _Financial Risk Management_][added: FINANCIAL RISK MANAGEMENT]
[removed: As of January 30, 2021, we] [added: We] had no forward-starting interest rate swap agreements [removed: outstanding.][added: outstanding as of January 29, 2022 or January 30, 2021.]
The tables below provide information about our underlying debt portfolio as of January [removed: 30, 2021] [added: 29, 2022] and [removed: February 1, 2020.][added: January 30, 2021.]
The amounts shown for each year represent the contractual maturities of long-term debt, excluding finance leases, as of January [removed: 30, 2021] [added: 29, 2022] and [removed: February 1, 2020.][added: January 30, 2021.]
The variable rate debt is based on [removed: U.S. dollar LIBOR] [added: a reference rate] using the forward yield curve as of January [removed: 30, 2021] [added: 29, 2022] and [removed: February 1, 2020.][added: January 30, 2021.]
The Fair Value column includes the fair value of our debt instruments as of January [removed: 30, 2021] [added: 29, 2022] and [removed: February 1, 2020.][added: January 30, 2021.]
We [removed: have] [added: had] no outstanding interest rate derivatives classified as fair value hedges as of January [removed: 30, 2021] [added: 29, 2022] or [removed: February 1, 2020.][added: January 30, 2021.]
See Notes [removed: 6, 7] [added: 5, 6] and [removed: 8] [added: 7] to the Consolidated Financial Statements.
| Fixed rate | | $ | (802) | | $ | (894) | | $ | [removed: (594)] [added: (1,093)] | | $ | [removed: (494)] [added: —] | | $ | [removed: (494)] [added: —] | | $ | [removed: (8,986)] [added: (9,475)] | | $ | (12,264) | | $ | (14,534) | |
| Average interest rate | | | 4.20 | % | | 4.29 | % | | [removed: 4.41] [added: 4.53] | % | | [removed: 4.55] [added: —] | [removed: %] [added: ] | | [removed: 4.58] [added: —] | [removed: %] [added: ] | | [removed: 4.40] [added: 4.36] | % | | | | | | |
| Average interest rate | | | 1.87 | % | | — | | | 2.62 | % | | — | | | 0.08 | % | | — | [removed: %] [added: ] | | | | | | |
| | | [removed: 2020] [added: 2022] | | | [removed: 2021] [added: 2023] | | | [removed: 2022] [added: 2024] | | | [removed: 2023] [added: 2025] | | | [removed: 2024] [added: 2026] | | | Thereafter | | | Total | | | Fair Value | | |
| Variable rate | | $ | [removed: (1,221)] [added: (35)] | | $ | [removed: —] [added: (23)] | | $ | — | | $ | [removed: —] [added: (81)] | | $ | — | | $ | [removed: (81)] [added: —] | | $ | [removed: (1,302)] [added: (139)] | | $ | [removed: (1,302)] [added: (139)] | |
Based on our year-end [removed: 2020] [added: 2021] variable rate debt levels, a 10 percent change in interest rates would be immaterial.
See Note [removed: 7] [added: 6] to the Consolidated Financial Statements for further discussion of derivatives and hedging policies.
**
In addition to the risks inherent in our operations, we are exposed to market risk from a variety of sources, including changes in interest rates, commodity prices, the fair value of certain equity investments and defined benefit pension and other post-retirement benefit plans.
Our market risk exposures are discussed below.
_Interest Rate Risk_
| | | January 29, 2022 | | | | | | | | | | | | | | | | | | | | | | | |
| Fixed rate | | $ | (416) | | $ | (1,107) | | $ | (5) | | $ | (3) | | $ | (1,387) | | $ | (8,688) | | $ | (11,606) | | $ | (13,050) | |
| Average interest rate | | | 4.38 | % | | 4.50 | % | | 1.51 | % | | 3.53 | % | | 4.27 | % | | 4.46 | % | | | | | | |
| Average interest rate | | | 1.86 | % | | 2.61 | % | | — | | | 0.12 | % | | — | | | — | | | | | | | |
_Commodity Price Risk_
We are subject to commodity price risk generated by our purchases of meat, seafood and dairy products, among other food items.
We purchase, manufacture and sell various commodity related food products and risk arises from the price volatility of these commodities.
The price and availability of these commodities directly impacts our results of operations.
To help manage or minimize the effect of commodity price risk exposure on our operations, we use a combination of pricing features embedded within supply contracts, such as fixed-price and price-to-be-fixed contracts, and have the ability to increase or decrease retail prices to our customers as commodity prices change.
We are exposed to changes in the prices of diesel and unleaded fuel.
The majority of our fuel contracts utilize index-based pricing formulas plus or minus a fixed locational/supplier differential.
We expect to take delivery of these commitments in the normal course of business, and, as a result, these contracts qualify as normal purchases.
While many of the indices are aligned, each index may fluctuate at a different pace, driving variability in the prices paid for fuel.
Because of this, our operating results may be affected should the market price of fuel suddenly change by a significant amount, which can affect our operating results either positively or negatively in the short-term.
We have entered into fixed price contracts to purchase electricity and natural gas for a portion of our energy needs.
We expect to take delivery of these commitments in the normal course of business, and, as a result, these contracts qualify as normal purchases.
As of January 29, 2022 and January 30, 2021, we had no commodity derivative contracts outstanding.
_Equity Investment Risk_
We are exposed to market price volatility for our investment in Ocado Group plc (“Ocado”), which is measured at fair value through net earnings.
Fair value adjustments flow through “(Loss) gain on investments” in the Company’s Consolidated Statements of Operations.
The change in fair value of this investment resulted in an unrealized (loss) gain on investments of ($821) million in 2021, $1.0 billion in 2020 and $157 million in 2019.
As of January 29, 2022, the value of our investment in Ocado was $987 million.
As of January 29, 2022, a 10% change in the fair value of this investment would be approximately $100 million.
For additional details on this investment, see Note 7 to the Consolidated Financial Statements.
_Company-Sponsored Benefit Plans_
We sponsor defined benefit pension plans and post-retirement healthcare plans for certain eligible employees.
Changes in interest rates affect our liabilities associated with these retirement plans, as well as the amount of expense recognized for these retirement plans.
Increased interest rates could result in a lower fair value of plan assets and increased pension expense in the following years.
The target plan asset allocations are established based on our LDI strategy.
An LDI strategy focuses on maintaining a close to fully-funded status over the long-term with minimal funded status risk.
This is achieved by investing more of the plan assets in fixed income instruments to more closely match the duration of the plan liability.
As of January 29, 2022, our defined benefit pension plans had total investment assets of $3.1 billion.
Declines in the fair value of plan assets could diminish the funded status of our defined benefit pension plans and potentially increase our requirement to make contributions to these plans.
For additional details, see Note 14 to the Consolidated Financial Statements.
| | | February 1, 2020 | | | | | | | | | | | | | | | | | | | | | | | |
| Fixed rate | | $ | (705) | | $ | (804) | | $ | (894) | | $ | (594) | | $ | (495) | | $ | (8,462) | | $ | (11,954) | | $ | (13,347) | |
| Average interest rate | | | 4.39 | % | | 4.56 | % | | 4.47 | % | | 4.69 | % | | 4.86 | % | | 4.65 | % | | | | | | |
| Average interest rate | | | 1.88 | % | | — | | | — | | | — | | | — | | | 1.65 | % | | | | | | |
Item 1. BUSINESS.
37 rewritten, 65 added, 18 removed, 90 unchanged
[removed: As of January 30, 2021, we] [added: We] are one of the [added: world’s] largest [removed: retailers in the world based on annual sales.][added: retailers, as measured by revenue.]
We earn income [removed: predominantly] [added: predominately] by selling products at price levels that produce revenues in excess of the costs [added: we incur] to make these products available to our customers.
Such costs include procurement and distribution costs, facility occupancy and operational [removed: costs] [added: costs,] and overhead expenses.
All references to [removed: 2020, 2019] [added: 2021, 2020] and [removed: 2018] [added: 2019] are to the fiscal years ended January [added: 29, 2022, January] 30, [removed: 2021, February 1, 2020] [added: 2021] and February [removed: 2, 2019,] [added: 1, 2020,] respectively, unless specifically indicated otherwise.
[removed: STORES][added: _Stores_]
As of January [removed: 30, 2021,] [added: 29, 2022,] Kroger operated, either directly or through its subsidiaries, [removed: 2,742 supermarkets under a variety of local banner names,] [added: 2,726 supermarkets,] of which [removed: 2,255] [added: 2,252] had pharmacies and [removed: 1,596] [added: 1,613] had fuel centers.
We offer Pickup (also referred to as ClickList®) and Harris Teeter [removed: ExpressLane™—] [added: ExpressLane™ —] personalized, order online, pick up at the store services — at [removed: 2,223] [added: 2,257] of our supermarkets and provide home delivery [removed: service] [added: services, which allows us] to [removed: substantially all] [added: offer digital solutions to 98%] of [removed: Kroger households.][added: our customers.]
Approximately [removed: 51%] [added: 50%] of our supermarkets were operated in Company-owned facilities, including some Company-owned buildings on leased land.
We operate [removed: supermarkets and] [added: supermarkets,] multi-department stores [added: and fulfillment centers] throughout the United States.
[removed: MERCHANDISING AND MANUFACTURING][added: _Merchandising and Manufacturing_]
_Our Brands_ products play an important role in our merchandising [removed: strategy.][added: strategy and represented nearly $28 billion of our sales in 2021.]
Our supermarkets, on average, stock over [removed: 15,000] [added: 14,000] private label items.
_Our Brands_ products are primarily produced and sold in three “tiers.” Private Selection® is [removed: one of] our [added: main] premium quality [removed: brands,] [added: brand,] offering customers culinary foods and ingredients that deliver amazing eating experiences.
Approximately 29% of _Our Brands_ units and [removed: 40%] [added: 41%] of the grocery category _Our Brands_ units sold in our supermarkets are produced in our food production plants; the remaining _Our Brands_ items are produced to our strict specifications by outside manufacturers.
As of January [removed: 30, 2021,] [added: 29, 2022,] we operated [removed: 35] [added: 33] food production plants.
These plants consisted of [removed: 16] [added: 14] dairies, 9 deli or bakery plants, five grocery product plants, two beverage plants, one meat plant and two cheese plants.
We want Kroger to be a place [added: where] our customers love to shop and associates love to work.
As of January [removed: 30, 2021,] [added: 29, 2022,] Kroger employed [removed: approximately 465,000] [added: over 420,000] full- and part-time employees.
[removed: With these nearly half a million associates serving more than nine million customers every day, our] [added: Our] people are essential to our success, and we focus intentionally on attracting, developing and engaging a diverse workforce that represents the communities we serve.
In addition to competitive wages, quality [removed: benefits,] [added: benefits] and a safe work environment, we offer a broad range of employment opportunities for workers of all ages and aspirations.
In [removed: 2021,] [added: 2022,] we expect to spend approximately [removed: $125] [added: $145] million on training our associates through onboarding, leadership development programs, and programs designed to upskill associates across the Company.
Kroger has invested more than [removed: $15] [added: $40] million in this program since it launched in 2018.
[removed: During the past year, we] [added: We] have taken a very thoughtful and purposeful approach to enact meaningful change and develop what we believe are the right actions to achieve true and lasting equality.
Our [removed: new] _Framework for Action: Diversity, Equity & Inclusion_ plan reflects our desire to redefine, deepen, and advance our commitment, mobilizing our people, passion, scale and resources.
The following summarizes our framework: Create a More Inclusive Culture; Develop Diverse Talent; Advance Diverse Partnerships; Advance Equitable Communities; [added: and] Deeply Listen and Report Progress.
There are approximately [removed: 350] [added: 310] such agreements, usually with terms of three to five years.
| Mary E. Adcock | | [removed: 45] [added: 46] | | Ms. Adcock was elected Senior Vice President effective May 1, 2019 and is responsible for retail operations as well as the oversight of [removed: several] [added: all] Kroger retail divisions. From June 2016 to April 2019, she served as Group Vice President of Retail Operations. Prior to that, [removed: she served as] [added: Ms. Adcock held leadership roles in Kroger’s Columbus Division, including] Vice President of Operations [removed: for Kroger’s Columbus Division from November 2015 to May 2016] and [removed: as] Vice President of [removed: Merchandising for the Columbus Division from March 2014 to November 2015. From February 2012] [added: Merchandising. Prior] to [removed: March 2014,] [added: that,] Ms. Adcock served as Vice President of Natural Foods Merchandising and [removed: from October 2009 to February 2012, she served] as Vice President of Deli/Bakery [removed: Manufacturing. Prior to that, Ms. Adcock] [added: Manufacturing and] held several leadership positions in the manufacturing department, including human resources manager, general manager and division operations manager. Ms. Adcock joined Kroger in 1999 as human resources assistant manager at the Country Oven Bakery in Bowling Green, Kentucky. |
| Stuart W. Aitken | | [removed: 49] [added: 50] | | Mr. Aitken was named Senior Vice President and Chief Merchant and Marketing Officer in August 2020. He was elected Senior Vice President in February 2019 and served as Group Vice President from June 2015 to February 2019. He is responsible for sales, pricing, promotional and category planning for fresh foods, center store and general merchandise categories, as well as analytics & execution, e-commerce and Digital Merchandising, and _Our Brands_. Prior to joining Kroger, he served as the chief executive officer of dunnhumby USA, [removed: LLC from July 2010 to June 2015.] [added: LLC.] Mr. Aitken has over 15 years of marketing, academic and technical experience across a variety of industries, and held various leadership roles with other companies, including Michaels Stores and Safeway, Inc. |
| Gabriel Arreaga | | [removed: 46] [added: 47] | | Mr. Arreaga was elected Senior Vice President of Supply Chain in December 2020. He is responsible for the company’s industry-leading Supply Chain organization, Logistics, Inventory & Replenishment, Manufacturing, and Fulfillment Centers. Prior to Kroger, Mr. Arreaga served as [removed: senior vice president] [added: Senior Vice President] of Supply Chains for Mondelez, where he was responsible for all operations and functions from field to consumer, internal and external factories, fulfillment centers, direct to store branches, Logistics and product development. He was also [removed: global vice president] [added: Global Vice President] of Operations for Stanley Black and Decker and held numerous leadership roles at Unilever including [removed: vice president] [added: Vice President] of Food and Beverage Operations. |
| Yael Cosset | | [removed: 47] [added: 48] | | Mr. Cosset was elected Senior Vice President and Chief Information Officer in May 2019 and is responsible for leading Kroger’s digital strategy, focused on building Kroger’s presence in the marketplace in digital channels, personalization and e-commerce. In August 2020, he also assumed responsibility for Kroger’s alternative profit businesses, including Kroger’s data analytics subsidiary, 84.51 ͦ LLC and Kroger Personal Finance. Prior to that, Mr. Cosset served as Group Vice President and Chief Digital [removed: Officer from January 2017 to April 2019. Before that, he served] [added: Officer, and also] as Chief Commercial Officer and Chief Information Officer of 84.51° [removed: LLC from April 2015 to December 2016.] [added: LLC.] Prior to joining Kroger, Mr. Cosset served in several leadership roles at dunnhumby USA, [removed: LLC from 2009 to 2015,] [added: LLC,] including Executive Vice President of Consumer Markets and Global Chief Information Officer. |
| Carin L. Fike | | [removed: 52] [added: 53] | | Ms. Fike was elected Vice President and Treasurer effective April 2017. Prior to that, she served as Assistant Treasurer [removed: from March 2011 to April 2017. Before that, Ms. Fike served] [added: and also] as Director of Investor [removed: Relations from December 2003 to March 2011.] [added: Relations.] Ms. Fike began her career with Kroger in 1999 as a manager in the Financial Reporting department after working with PricewaterhouseCoopers [removed: from 1995 to 1999, where most recently she was an] [added: in various roles, including] audit manager. |
| Todd A. Foley | | [removed: 51] [added: 52] | | Mr. Foley was [removed: elected] [added: named Group] Vice [removed: President and] [added: President,] Corporate Controller [removed: effective] [added: on October 1, 2021. From] April [removed: 2017. Before that,] [added: 2017 to September 2021,] he served as Vice President and [removed: Treasurer from June 2013 to April 2017. Prior to] [added: Corporate Controller. Before] that, [removed: Mr. Foley served as] [added: he held several leadership roles, including Vice President and Treasurer,] Assistant Corporate [removed: Controller from March 2006 to June 2013,] [added: Controller,] and Controller of Kroger’s Cincinnati/Dayton [removed: division from October 2003 to March 2006.] [added: division.] Mr. Foley began his career with Kroger in 2001 as an audit manager in the Internal Audit Department after working for PricewaterhouseCoopers [removed: from 1991 to 2001, where most recently he was a] [added: in various roles, including] senior audit manager. |
| Timothy A. Massa | | [removed: 54] [added: 55] | | Mr. Massa was elected Senior Vice President of Human Resources and Labor Relations in June 2018. Prior to that, he served as Group Vice President of Human Resources and Labor Relations from June 2014 to June 2018. Mr. Massa joined Kroger in October 2010 as Vice President, Corporate Human Resources and Talent Development. Prior to joining Kroger, he served in various Human Resources leadership roles for 21 years at Procter & Gamble, most recently serving as Global Human Resources Director of Customer Business Development. |
| [removed: Stephen M. McKinney] [added: Kenneth C. Kimball] | | [removed: 64] [added: 56] | | Mr. [removed: McKinney] [added: Kimball] was elected Senior Vice President in March [removed: 2018,] [added: 2022] and is responsible for the oversight of several Kroger retail divisions. From [removed: October 2013] [added: April 2016] to March [removed: 2018,] [added: 2022,] he served as President of [removed: Kroger’s Fry’s Food Stores division.] [added: the Smith’s Division.] Prior to that, he [removed: served as] [added: held several leadership roles with the Ralphs Division, including] Vice President of Operations [removed: for the Ralphs division from October 2007 to September 2013,] and Vice President of [removed: Operations for the Southwest division from October 2006 to September 2007. From 1988] [added: Merchandising. Prior] to [removed: 1998, Mr. McKinney served in various] [added: that, he held] leadership [removed: positions in the Fry’s Food Stores division,] [added: roles,] including store manager, [removed: deli director,] [added: district manager,] and [removed: executive] director [added: in the Smith’s Division as well as Senior Vice President] of [removed: operations. From 1981 to 1998, Mr. McKinney held several roles with Florida Choice Supermarkets, a former Kroger banner, including store manager, buyer,] [added: Sales] and [removed: field representative. He started his career with Kroger] [added: Merchandising and Group Vice President of Retail Operations. Mr. Kimball joined the Company] in [removed: 1981] [added: 1984] as a clerk [removed: with Florida Choice.] [added: in the Smith’s Division.] |
| W. Rodney McMullen | | [removed: 60] [added: 61] | | Mr. McMullen was elected Chairman of the Board effective January 1, 2015, and Chief Executive Officer effective January 1, 2014. Prior to that, he served as President and Chief Operating Officer from August 2009 to December 2013. Prior to that he [removed: was elected] [added: held numerous leadership roles, including] Vice [removed: Chairman in June 2003,] [added: Chairman,] Executive Vice [removed: President,] [added: President of] Strategy, Planning and [removed: Finance in January 2000,] [added: Finance,] Executive Vice President and Chief Financial [removed: Officer in May 1999,] [added: Officer,] Senior Vice [removed: President in October 1997, and] [added: President,] Group Vice President and Chief Financial [removed: Officer in June 1995. Before that he was appointed] [added: Officer,] Vice President, Control and Financial [removed: Services in March 1993,] [added: Services,] and Vice President, Planning and Capital [removed: Management in December 1989.] [added: Management.] Mr. McMullen joined Kroger in 1978 as a part-time stock clerk. |
| Gary Millerchip | | [removed: 49] [added: 50] | | Mr. Millerchip was elected Senior Vice President and Chief Financial Officer effective April 2019. [removed: Prior to this, he served] [added: He joined Kroger in 2008, serving] as Chief Executive Officer for Kroger Personal [removed: Finance since joining Kroger in 2008.] [added: Finance.] Before coming to [removed: Kroger he] [added: Kroger, Mr. Millerchip] was responsible for the Royal Bank of Scotland (RBS) Personal Credit Card business in the United Kingdom. He joined RBS in 1987 and held leadership positions in Sales & Marketing, Finance, Change Management, Retail Banking Distribution Strategy and Branch Operations during his time there. |
| Christine S. Wheatley | | [removed: 50] [added: 51] | | Ms. Wheatley was elected Group Vice President, Secretary and General Counsel in May 2014. She joined Kroger in February 2008 as Corporate Counsel, and [removed: became] [added: thereafter served as] Senior [removed: Attorney in 2010,] [added: Attorney,] Senior [removed: Counsel in 2011,] [added: Counsel,] and Vice [removed: President in 2012.] [added: President.] Before joining Kroger, Ms. Wheatley was engaged in the private practice of law for 11 years, most recently as a partner at Porter Wright Morris & Arthur in Cincinnati. |
Our retail business is built on the foundation of our market leading position in food retail which includes the added convenience of our retail pharmacies and fuel centers.
Our market leading position in food retail reflects the strength of our competitive moats of Fresh, _Our Brands_, Data & Personalization and Seamless, and our unique combination of assets.
We also leverage the data and traffic generated by our retail business to deliver incremental value and services for our customers that generates alternative profit streams.
These alternative profit streams would not exist without our core retail business.
Kroger is diversified across brands, product categories, channels of distribution, geographies and consumer demographics.
Our unique combination of assets include the following:
As of January 29, 2022, Kroger operates supermarkets under a variety of local banner names in 35 states and the District of Columbia.
We connect with customers through our expanding seamless ecosystem and the consistent delivery of a full, fresh, and friendly customer experience.
_Seamless Digital Ecosystem_
Our digital ecosystem provides a fresh and seamless offering for our customers.
Through investment and innovation, we continue to improve our seamless ecosystem to ensure it remains relevant.
We offer a convenient shopping experience for our customers regardless of how they choose to shop with us, including Pickup, Delivery and Ship.
We provide relevant customer-facing apps and interfaces that have the features customers want that are also reliable, easy to use and deliver a seamless customer experience across our store and digital channels.
_Our Data_
We are evolving from a traditional food retailer into a more diverse, food first business.
The traffic and data generated by our retail supermarket business, including pharmacies and fuel centers, is enabling this transformation.
Kroger serves over 60 million households annually and because of our market leading rewards program, 96% of customer transactions are tethered to a Kroger loyalty card.
Our 20 years of investment in data science capabilities is allowing us to leverage this data to create personalized experiences and value for our customers and is also enabling our fast-growing, high operating margin alternative profits, including data analytic services and third party media revenue.
Our retail media business – Kroger Precision Marketing – provides best in class media capabilities for our consumer packaged goods partners and is a key driver of our digital profitability and alternative profit.
We strive to create a culture of opportunity and take seriously our role as a leading employer in the United States.
Kroger has provided a large number of people with first jobs, new beginnings and lifelong careers.
The number of associates decreased in 2021, compared to 2020, as sales normalized following the peak of the COVID-19 pandemic and we continue to achieve operational efficiencies in our business.
More than 3,000 associates, 90% of whom are hourly, have taken advantage of our tuition reimbursement program in 2021.
As we continue to operate in a challenging labor market, we are dedicated to attracting and retaining the right talent across the organization to be able to continue delivering for our customers.
We are investing in our associates by expanding our industry-leading benefits, including continuing education and tuition reimbursement, training and development, health, and wellness.
During 2021, we invested more than ever before in our associates to raise our average hourly wage to $17 and our average hourly rate to over $22 with comprehensive benefits included.
Over the last four years, Kroger has invested an incremental $1.2 billion in associate wages and training and our average hourly rate has increased 20%.
In addition, we have committed to invest over $1.8 billion during the same time period to help address underfunding and better secure pensions for tens of thousands of associates.
Since the beginning of the pandemic, our most urgent priority has been to safeguard our associates and customers.
We’ve implemented dozens of new safety and cleanliness processes and procedures in our stores and other facilities.
Wages, health care and pensions are included in all of these collective bargaining agreements that cover approximately 65% of our associates.
Our objective is to negotiate contracts that balance competitive wage increases and affordable healthcare for associates with keeping groceries affordable for the communities we serve.
Our obligation is to do this in a way that maintains a financially sustainable business.
MANAGING CLIMATE IMPACTS
Managing climate change impacts is an important part of _Thriving Together_, Kroger’s Environmental, Social & Governance (“ESG”) strategy, and has been a focus for our business for many years.
With a large portfolio of supermarkets, distribution warehouses and food production plants, as well as a complex supply chain, we recognize Kroger’s impact on our climate.
We continue to explore opportunities and take steps to reduce the impacts of our operations on the environment and to reduce the potential risk of a changing climate on our operations.
This includes increasing our usage of renewable energy, investments in new technologies and enhancing our operational efficiency.
The key elements of our ESG strategy are included below.
_Governance_
We also manufacture and process some of the food for sale in our supermarkets.
During the past decade, Kroger has added 100,000 new jobs in communities across America.
We care about our associates’ overall well-being — physical, financial and emotional — and provide wages and benefits that help associates take care of themselves and their families.
Between 2018 and 2020, we invested an incremental $800 million in associate wages.
Since 2018, Kroger’s average retail hourly wage increased to over $15 per hour.
Including benefit equivalents, the average rate surpasses $20 per hour.
Since March of 2020, we have made significant investments to reward and safeguard our associates and customers.
At the onset of the COVID-19 pandemic, we activated our _Pandemic Preparedness Plan_ and _Business Resilience Plan_ to help protect frontline associates, stay open to serve our customers and communities, and anticipate and adapt to critical needs in a rapidly changing situation.
Since then, we have enacted more than 30 policy changes to help keep our associates safe, including offering paid emergency leave to those most directly affected by COVID-19, providing personal protective equipment, offering free testing through our COVID-19 at-home test kits, and promoting physical distancing in our locations.
We are committed to supporting the health and well-being of our associates by providing a robust range of physical and mental health benefits and offering an incentive to associates who choose to get the COVID-19 vaccine.
Our objective in every negotiation is to find a fair and reasonable balance on compensation packages that provide solid wages as well as good quality, affordable health care and retirement benefits while also keeping our family of companies competitive in the market.
| --- | --- | --- | --- | --- |
| | | | | |
| Michael J. Donnelly | | 62 | | Mr. Donnelly was elected Executive Vice President and Chief Operating Officer in December 2017. Prior to that, he was Executive Vice President of Merchandising from September 2015 to December 2017, and Senior Vice President of Merchandising from July 2011 to September 2015. Before that, Mr. Donnelly held a variety of key management positions with Kroger, including President of Ralphs Grocery Company, President of Fry’s Food Stores, and Senior Vice President, Drug/GM Merchandising and Procurement. Mr. Donnelly joined Kroger in 1978 as a clerk. Mr. Donnelly has announced his plan to retire in Spring of 2021. |
| Calvin J. Kaufman | | 58 | | Mr. Kaufman was elected Senior Vice President in June 2017, and is responsible for the oversight of several Kroger retail divisions. From July 2013 to June 2017, he served as President of the Louisville division. Prior to that, he served as President of Kroger Manufacturing and _Our Brands_ from June 2008 to June 2013, and Group Vice President of Fred Meyer Logistics from September 2005 to May 2008. Mr. Kaufman held various positions in Logistics after joining Kroger in the Fred Meyer division in September 1994. |
| Erin S. Sharp | | 63 | | Ms. Sharp has served as Group Vice President of Manufacturing since June 2013. She joined Kroger in 2011 as Vice President of Operations for Kroger’s Manufacturing division. Before joining Kroger, Ms. Sharp served as Vice President of Manufacturing for the Sara Lee Corporation. In that role, she led the manufacturing and logistics operations for the central region of their U.S. Fresh Bakery Division. Ms. Sharp has over 30 years of experience supporting food manufacturing operations. Ms. Sharp has announced her plan to retire in Spring of 2021. |
| Mark C. Tuffin | | 61 | | Mr. Tuffin has served as Senior Vice President since January 2014, and is responsible for the oversight of several of Kroger’s retail divisions. Prior to that, he served as President of Kroger’s Smith’s division from July 2011 to January 2014. From September 2009 to July 2011, Mr. Tuffin served as Vice President of Transition, where he was responsible for implementing an organizational restructuring initiative for Kroger’s retail divisions. He joined Kroger’s Smith’s division in 1996 and served in a series of leadership roles, including Vice President of Merchandising from September 1999 to September 2009. Mr. Tuffin held various positions with other supermarket retailers before joining Smith’s in 1996. |
An excerpt. Shown here: all 37 rewritten, 40 of 65 added and all 18 removed. The counts are complete. For every sentence, read Item 1. BUSINESS. in the FY2021 filing and the FY2020 filing.
Item 3. LEGAL PROCEEDINGS.
1 rewritten, 0 added, 0 removed, 1 unchanged
Incorporated by reference herein is information regarding certain legal proceedings in which we are involved as set forth under “Litigation” contained in Note [removed: 13] [added: 12] – “Commitments and Contingencies” in the notes to the Consolidated Financial Statements in Item 8 of Part II of this Annual Report.
Cover and table of contents
33 rewritten, 2 added, 1 removed, 89 unchanged
For the fiscal year ended January [removed: 30, 2021.][added: 29, 2022.]
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter (August [removed: 15, 2020).][added: 14, 2021).]
[removed: 751,993,701] [added: 723,308,230] shares of Common Stock of $1 par value, as of March [removed: 24, 2021.][added: 23, 2022.]
Portions of Kroger’s definitive proxy statement for its [removed: 2020] [added: 2022] annual meeting of shareholders, which shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report relates, are incorporated by reference into Part III of this Report.
For the Fiscal Year Ended January [removed: 30, 2021][added: 29, 2022]
| [Item 1A](#ITEM1ARISKFACTORS_427495) | [Risk Factors](#ITEM1ARISKFACTORS_427495) | [removed: 9] [added: 11] |
| [Item 1B](#ITEM1BUNRESOLVEDSTAFF_782482) | [Unresolved Staff Comments](#ITEM1BUNRESOLVEDSTAFF_782482) | [removed: 16] [added: 19] |
| [Item 2](#ITEM2PROPERTIES_938453) | [Properties](#ITEM2PROPERTIES_938453) | [removed: 16] [added: 19] |
| [Item 3](#ITEM3LEGALPROCEEDINGS_398656) | [Legal Proceedings](#ITEM3LEGALPROCEEDINGS_398656) | [removed: 16] [added: 19] |
| [Item 4](#ITEM4MINESAFETY_848917) | [Mine Safety Disclosures](#ITEM4MINESAFETY_848917) | [removed: 16] [added: 20] |
| [Part II](#PARTII_655666) | | [removed: 17] [added: 20] |
| [Item 5](#ITEM5MARKETFORREGISTRANTS_787451) | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#ITEM5MARKETFORREGISTRANTS_787451) | [removed: 17] [added: 20] |
| [Item 6](#ITEM6SELECTEDFINANCIALDATA_648582) | [removed: [Selected Financial Data](#ITEM6SELECTEDFINANCIALDATA_648582)] [added: [Reserved](#ITEM6SELECTEDFINANCIALDATA_648582)] | [removed: 20] [added: 22] |
| [Item 7](#ITEM7MANAGEMENTSDISCUSSION_279865) | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#ITEM7MANAGEMENTSDISCUSSION_279865) | [removed: 21] [added: 23] |
| [Item 7A](#ITEM7AQUANTITATIVEANDQUALITATIVE_789704) | [Quantitative and Qualitative Disclosures About Market Risk](#ITEM7AQUANTITATIVEANDQUALITATIVE_789704) | [removed: 43] [added: 49] |
| [Item 8](#ITEM8FINANCIALSTATEMENTS_150262) | [Financial Statements and Supplementary Data](#ITEM8FINANCIALSTATEMENTS_150262) | [removed: 44] [added: 51] |
| [Item 9](#ITEM9CHANGESINANDDISAGREEMENTS_94374) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#ITEM9CHANGESINANDDISAGREEMENTS_94374) | [removed: 95] [added: 96] |
| [Item 9A](#ITEM9ACONTROLSANDPROCEDURES_212235) | [removed: [Controls] [added: [Evaluation of Disclosure Controls] and Procedures](#ITEM9ACONTROLSANDPROCEDURES_212235) | [removed: 95] [added: 96] |
| [Item 9B](#ITEM9BOTHERINFORMATION_351052) | [Other Information](#ITEM9BOTHERINFORMATION_351052) | [removed: 95] [added: 96] |
| [Part III](#PARTIII_970612) | | [removed: 96] [added: 97] |
| [Item 10](#ITEM10DIRECTORSEXECUTIVEOFFICERS_174492) | [Directors, Executive Officers and Corporate Governance](#ITEM10DIRECTORSEXECUTIVEOFFICERS_174492) | [removed: 96] [added: 97] |
| [Item 11](#ITEM11EXECUTIVECOMPENSATION_619783) | [Executive Compensation](#ITEM11EXECUTIVECOMPENSATION_619783) | [removed: 96] [added: 97] |
| [Item 12](#ITEM12SECURITYOWNERSHIP_54845) | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#ITEM12SECURITYOWNERSHIP_54845) | [removed: 96] [added: 97] |
| [Item 13](#ITEM13CERTAINRELATIONSHIPS_678646) | [Certain Relationships and Related Transactions, and Director Independence](#ITEM13CERTAINRELATIONSHIPS_678646) | [removed: 97] [added: 98] |
| [Item 14](#ITEM14PRINCIPALACCOUNTINGFEES_666861) | [Principal Accounting Fees and Services](#ITEM14PRINCIPALACCOUNTINGFEES_666861) | [removed: 97] [added: 98] |
| [Part IV](#PARTIV_153847) | | [removed: 98] [added: 99] |
| [Item 15](#ITEM15EXHIBITSFINANCIALSTATEMENT_412498) | [Exhibits, Financial Statement Schedules](#ITEM15EXHIBITSFINANCIALSTATEMENT_412498) | [removed: 98] [added: 99] |
| [Item 16](#ITEM16FORM10KSUMMARY_429814) | [Form 10-K Summary](#ITEM16FORM10KSUMMARY_429814) | [removed: 100] [added: 101] |
| | [Signatures](#SIGNATURES_425578) | [removed: 101] [added: 102] |
Such statements are indicated by words such as “achieve,” “affect,” [added: “anticipate,”] “believe,” “committed,” “continue,” “could,” “deliver,” “effect,” “estimate,” “expects,” “future,” “growth,” “intends,” “likely,” “may,” “model,” [added: “objective,”] “plan,” “position,” “range,” “result,” “strategy,” [added: “strive,”] “strong,” [added: “target,”] “trend,” “will” and “would,” and similar words or phrases.
| | ● | The extent to which our sources of liquidity are sufficient to meet our requirements may be affected by the state of the financial markets and the effect that such condition has on our ability to issue commercial paper at acceptable rates. Our ability to borrow under our committed lines of credit, including our bank credit facilities, could be impaired if one or more of our lenders under those lines is unwilling or unable to honor its contractual obligation to lend to us, or in the event that global pandemics, including the [added: ongoing] COVID-19 [removed: pandemic,] [added: pandemic (including any variant),] natural disasters or weather conditions interfere with the ability of our lenders to lend to us. Our ability to refinance maturing debt may be affected by the state of the financial markets. |
| | ● | Our ability to achieve sales, [removed: earnings,] [added: earnings and] incremental FIFO operating [removed: profit, and adjusted free cash flow] [added: profit] goals may be affected by: COVID-19 [added: pandemic] related factors, risks and challenges, including among others, the length of time that the pandemic continues, [added: future variants, mutations or related strains of] the [removed: temporary inability] [added: virus and the effectiveness] of [removed: customers to shop due] [added: vaccines against variants, continued efficacy of vaccines over time and availability of vaccine boosters, the extent of vaccine refusal, and global access] to [removed: illness, quarantine, or other travel] [added: vaccines, as well as the effect of vaccine and/or testing mandates and related regulations, the potential for additional future spikes in infection and illness rates including breakthrough infections among the fully vaccinated, and the corresponding potential for disruptions in workforce availability and customer shopping patterns, re-imposed] restrictions [removed: or financial hardship, shifts] [added: as a result of resurgence and the corresponding future easing of restrictions, and interruptions] in [removed: demand away from discretionary or higher priced products to lower priced products,] [added: domestic and global supply chains] or [removed: stockpiling] [added: capacity constraints; whether and when the global pandemic will become endemic, the pace of recovery when the pandemic subsides] or [removed: similar pantry-filling activities, reduced workforces] [added: becomes endemic,] which may [removed: be caused by, but not limited to, the temporary inability of] [added: vary materially over time and among] the [removed: workforce to] [added: different regions we serve; labor negotiations; potential] work [removed: due to illness, quarantine, or government mandates, temporary store closures due to reduced workforces or government mandates, or] [added: stoppages; changes in] the [removed: availability and efficacy of a vaccine;] [added: unemployment rate; pressures in the] labor [removed: negotiations or disputes;] [added: market;] changes in [added: government-funded benefit programs; changes in] the types and numbers of businesses that compete with [removed: Kroger;] [added: us;] pricing and promotional activities of existing and new competitors, including non-traditional competitors, and the aggressiveness of that competition; [removed: Kroger's] [added: our] response to these actions; the state of the economy, including interest rates, the [added: current] inflationary [added: environment] and [added: future potential inflationary and/or] deflationary trends [added: and such trends] in certain commodities, [added: products and/or operating costs; the geopolitical environment; unstable political situations and social unrest;] changes in [removed: tariffs, and the unemployment rate;] [added: tariffs;] the effect that fuel costs have on consumer spending; volatility of fuel margins; [removed: changes in government-funded benefit programs and the extent and effectiveness of any COVID-19 stimulus packages;] manufacturing commodity costs; diesel fuel costs related to [removed: Kroger's] [added: our] logistics operations; trends in consumer spending; the extent to which our customers exercise caution in their purchasing in response to economic conditions; the uncertainty of economic growth or recession; [added: stock repurchases;] changes in [removed: inflation or deflation] [added: the regulatory environment] in [removed: product and operating costs; stock repurchases;] [added: which we operate;] our ability to retain pharmacy sales from [removed: third-party] [added: third party] payors; consolidation in the healthcare industry, including pharmacy benefit managers; our ability to negotiate modifications to multi-employer pension plans; natural disasters or adverse weather conditions; the effect of public health crises or other significant catastrophic [removed: events, including the coronavirus;] [added: events;] the potential costs and risks associated with potential cyber-attacks or data security breaches; the success of our future growth plans; the ability to execute our growth strategy and value creation model, including continued cost savings, growth of our alternative profit businesses, and [removed: widening] [added: our ability to better serve our customers] and [removed: deepening] [added: to generate customer loyalty and sustainable growth through] our strategic moats of fresh, _Our Brands_, personalization, and seamless; and the successful integration of merged companies and new partnerships. |
| | ● | Our effective tax rate may differ from the expected rate due to changes in [added: tax] laws, the status of pending items with various taxing authorities, and the deductibility of certain expenses. |
$31.8 billion.
| [Item 9C](#ITEM_9C_DISCLOSURE_REGARDING_FOREIGN) | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#ITEM_9C_DISCLOSURE_REGARDING_FOREIGN) | 96 |
$27.6 billion.
Item 2. PROPERTIES.
3 rewritten, 0 added, 0 removed, 12 unchanged
As of January [removed: 30, 2021,] [added: 29, 2022,] we operated approximately 2,800 owned or leased supermarkets, distribution warehouses and food production plants through divisions, subsidiaries or affiliates.
The total cost of our owned assets and finance leases at January [removed: 30, 2021,] [added: 29, 2022,] was [removed: $46.0] [added: $49.9] billion while the accumulated depreciation was [removed: $23.6] [added: $26.1] billion.
For additional information on lease obligations, see Note [removed: 10] [added: 9] to the Consolidated Financial Statements.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
20 rewritten, 7 added, 7 removed, 24 unchanged
Our common stock is listed on the New York Stock Exchange under the symbol “KR.” As of March [removed: 24, 2021,] [added: 23, 2022,] there were [removed: 25,973] [added: 25,466] shareholders of record.
During [removed: 2019,] [added: 2021,] we paid two quarterly cash dividends of [removed: $0.14] [added: $0.18] per share and two quarterly cash dividends of [removed: $0.16] [added: $0.21] per share.
On March 1, [removed: 2021,] [added: 2022,] we paid a quarterly cash dividend of [removed: $0.18] [added: $0.21] per share.
On March [removed: 11, 2021,] [added: 10, 2022,] we announced that our Board of Directors declared a quarterly cash dividend of [removed: $0.18] [added: $0.21] per share, payable on June 1, [removed: 2021,] [added: 2022,] to shareholders of record at the close of business on May [removed: 14, 2021.][added: 13, 2022.]
Description automatically [removed: generated](https://www.sec.gov/Archives/edgar/data/56873/000155837021003706/kr-20210130x10k001.jpg)][added: generated](https://www.sec.gov/Archives/edgar/data/56873/000155837022004595/kr-20220129x10k001.jpg)]
| Company Name/Index | | [removed: 2015 | |] 2016 | | 2017 | | 2018 | | 2019 | | 2020 | | [added: 2021 | |]
* Total assumes $100 invested on January [removed: 30, 2016,] [added: 28, 2017,] in The Kroger Co., S&P 500 Index, and the Peer Group, with reinvestment of dividends.
The Peer Group consists of Albertsons Companies, Inc. (included from June 26, 2020 when it began trading), Costco Wholesale Corp., CVS Health Corporation, [removed: Etablissements Delhaize Freres Et Cie Le Lion (“Groupe Delhaize”, which is included through July 22, 2016 when it merged with] Koninklijke [removed: Ahold), Koninklijke] Ahold Delhaize [removed: NV (changed name from Koninklijke Ahold after merger with Groupe Delhaize),] [added: N.V.,] Supervalu Inc. (included through October 19, 2018 when it was acquired by United Natural Foods), Target Corp., Walgreens Boots Alliance Inc., Walmart Inc., Whole Foods Market Inc. (included through August 28, 2017 when it was acquired by Amazon.com, Inc.).
The following table presents information on our purchases of our common shares during the fourth quarter of [removed: 2020.][added: 2021:]
| | | | | | | | [removed: Total Number of] [added: ] | | Approximate Dollar | | |
| | | | | | | | [removed: Shares] [added: ] | | Value of Shares | | |
| | | | | | | | [removed: Purchased as] [added: Total Number of] | | that May Yet Be | | |
| | | | | | | | [removed: Part of Publicly] [added: Shares Purchased] | | Purchased Under | | |
| | | Total Number | | Average | | | [removed: Announced] [added: as Part of Publicly] | | the Plans or | | |
| | | of Shares | | Price Paid Per | | | [removed: Plans or] [added: Announced Plans] | | Programs(4) | | |
| Period(1) | | Purchased(2) | | Share(2) | | | [removed: Programs(3)] [added: or Programs(3)] | | (in millions) | | |
| (1) | The reported periods conform to our fiscal calendar composed of thirteen 28-day periods. The fourth quarter of [removed: 2020] [added: 2021] contained three 28-day periods. |
| (2) | Includes (i) shares repurchased under the [removed: September 2020] [added: June 2021] Repurchase Program [added: and the December 2021 Repurchase Program] described below in (4), (ii) shares repurchased under a program announced on December 6, 1999 to repurchase common shares to reduce dilution resulting from our employee stock option and long-term incentive plans, under which repurchases are limited to proceeds received from exercises of stock options and the tax benefits associated therewith (“1999 Repurchase Program”) and (iii) [removed: 32,120] [added: 18,908] shares that were surrendered to the Company by participants under our [removed: long term] [added: long-term] incentive plans to pay for taxes on restricted stock awards. |
| (3) | Represents shares repurchased under the [removed: September 2020] [added: June 2021] Repurchase [added: Program, the December 2021 Repurchase] Program and the 1999 Repurchase Program. |
| (4) | On [removed: September 11, 2020,] [added: June 16, 2021,] our Board of Directors approved a $1.0 billion share repurchase program to reacquire shares via open market purchase or privately negotiated transactions, block trades, or pursuant to trades intending to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the [removed: “September 2020] [added: “June 2021] Repurchase Program”). [added: On December 30, 2021, our Board of Directors approved a $1.0 billion share repurchase program to reacquire shares via open market purchase or privately negotiated transactions, block trades, or pursuant to trades intending to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “December 2021 Repurchase Program”).] The [added: December 2021 Repurchase Program authorization replaced the existing June 2021 Repurchase Program. The] amounts shown in this column reflect the amount remaining under the [removed: September 2020] [added: June 2021] Repurchase Program [added: or the December 2021 Repurchase Program] as of the specified period end dates. Amounts available under the 1999 Repurchase Program are dependent upon option exercise activity. The [removed: September 2020] [added: December 2021] Repurchase Program and the 1999 Repurchase Program do not have an expiration date but may be suspended or terminated by our Board of Directors at any time. |
| The Kroger Co. | | 100 | | 89.60 | | 87.34 | | 85.54 | | 112.22 | | 144.28 | |
| S&P 500 Index | | 100 | | 122.83 | | 122.76 | | 149.23 | | 174.97 | | 211.72 | |
| Peer Group | | 100 | | 129.19 | | 125.47 | | 151.40 | | 186.24 | | 219.91 | |
| November 7, 2021 to December 4, 2021 | | 2,710,844 | | $ | 42.15 | | 2,710,600 | | $ | 387 | |
| December 5, 2021 to January 1, 2022 | | 6,239,527 | | $ | 44.64 | | 6,220,863 | | $ | 140 | |
| January 2, 2022 to January 29, 2022 | | 4,368,946 | | $ | 47.28 | | 4,368,946 | | $ | 821 | |
| Total | | 13,319,317 | | $ | 45.00 | | 13,300,409 | | $ | 821 | |
| The Kroger Co. | | 100 | | 87.11 | | 78.05 | | 76.08 | | 74.51 | | 97.75 | |
| S&P 500 Index | | 100 | | 120.87 | | 148.47 | | 148.38 | | 180.37 | | 211.48 | |
| Peer Group | | 100 | | 98.35 | | 127.05 | | 123.40 | | 148.90 | | 183.16 | |
| November 8, 2020 to December 5, 2020 | | 4,397,677 | | $ | 32.38 | | 4,397,633 | | $ | 583 | |
| December 6, 2020 to January 2, 2021 | | 3,788,929 | | $ | 31.10 | | 3,756,853 | | $ | 470 | |
| January 3, 2021 to January 30, 2021 | | 2,363,215 | | $ | 32.05 | | 2,363,215 | | $ | 400 | |
| Total | | 10,549,821 | | $ | 31.85 | | 10,517,701 | | $ | 400 | |
Item 6. RESERVED.
0 rewritten, 1 added, 27 removed, 1 unchanged
Not applicable.
The following table presents our selected consolidated financial data for each of the last five fiscal years.
| | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | Fiscal Years Ended | | | | | | | | | | | | | | |
| | | January 30, | | | February 1, | | | February 2, | | | February 3, | | | January 28, | | |
| | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | | |
| | | (52 weeks) | | | (52 weeks) | | | (52 weeks) | | | (53 weeks) | | | (52 weeks) | | |
| | | | | | | | | | | | | | | | | |
| | | (In millions, except per share amounts) | | | | | | | | | | | | | | |
| Sales | | $ | 132,498 | | $ | 122,286 | | $ | 121,852 | | $ | 123,280 | | $ | 115,337 | |
| Net earnings including noncontrolling interests | | $ | 2,588 | | $ | 1,512 | | $ | 3,078 | | $ | 1,889 | | $ | 1,957 | |
| Net earnings attributable to The Kroger Co. | | $ | 2,585 | | $ | 1,659 | | $ | 3,110 | | $ | 1,907 | | $ | 1,975 | |
| Net earnings attributable to The Kroger Co. per diluted common share | | $ | 3.27 | | $ | 2.04 | | $ | 3.76 | | $ | 2.09 | | $ | 2.05 | |
| Total assets | | $ | 48,637 | | $ | 45,256 | | $ | 38,118 | | $ | 37,197 | | $ | 36,505 | |
| Long-term liabilities, including obligations under finance leases | | $ | 23,717 | | $ | 22,440 | | $ | 16,009 | | $ | 16,095 | | $ | 16,935 | |
| Total shareholders’ equity — The Kroger Co. | | $ | 9,576 | | $ | 8,602 | | $ | 7,886 | | $ | 6,931 | | $ | 6,698 | |
| Cash dividends per common share | | $ | 0.68 | | $ | 0.60 | | $ | 0.53 | | $ | 0.49 | | $ | 0.45 | |
Note: This information should be read in conjunction with MD&A and the Consolidated Financial Statements.
Fiscal year 2016, 2018, 2019 and 2020 each include 52 weeks.
Fiscal year 2017 includes 53 weeks.
Total assets and long-term liabilities, including obligations under finance leases, were impacted in 2019 by the adoption of ASU 2016-02, “Leases,” as further described in Notes 10 and 18 to the Consolidated Financial Statements.
Prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting policies.
Products and services related primarily to Kroger Personal Finance and Media, which were historically accounted for as an offset to operating, general and administrative expenses (“OG&A”), are classified as a component of sales as of the beginning of fiscal year 2019, except for certain amounts in Media, which are netted against merchandise costs.
The prior-year amounts have been reclassified to conform to current-year presentation with the exception of 2016, which was not material and not adjusted for the sales reclassification.
Fiscal year ended February 2, 2019 includes the gain on sale of our convenience store business unit.
Additionally, refer to Note 17 to the Consolidated Financial Statements for disclosure of disposals of businesses.
Refer to Note 2 to the Consolidated Financial Statements for disclosure of business combinations and their effect on the Consolidated Statements of Operations and the Consolidated Balance Sheets.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
560 rewritten, 119 added, 218 removed, 932 unchanged
For the Fiscal Year Ended January [removed: 30, 2021][added: 29, 2022]
| [Report of Independent Registered Public Accounting Firm](#ReportofIndependentRegisteredPublic) | [removed: 45] [added: 52] |
| [Consolidated Balance Sheets](#BALANCE_SHEETS) | [removed: 48] [added: 55] |
| [Consolidated Statements of Operations](#STATEMENTS_OF_OPERATIONS) | [removed: 49] [added: 56] |
| [Consolidated Statements of Comprehensive Income](#STATEMENTS_COMPREHENSIVE_INCOME) | [removed: 50] [added: 57] |
| [Consolidated Statements of Cash Flows](#STATEMENTS_CASH_FLOWS) | [removed: 51] [added: 58] |
| [Consolidated Statements of Changes in Shareholders’ Equity](#CONSOLIDATEDSTATEMENTOFCHANGESINSHA) | [removed: 52] [added: 59] |
| [Notes to Consolidated Financial Statements](#NOTES_TO_FINANCIAL_STATEMEN) | [removed: 53] [added: 60] |
We have audited the accompanying consolidated balance sheets of The Kroger Co. and its subsidiaries (the “Company”) as of January [removed: 30, 2021] [added: 29, 2022] and [removed: February 1, 2020,] [added: January 30, 2021,] and the related consolidated statements of operations, of comprehensive income, of changes in shareholders' equity and of cash flows for each of the three years in the period ended January [removed: 30, 2021,] [added: 29, 2022,] including the related notes (collectively referred to as the “consolidated financial statements”).
We also have audited the Company's internal control over financial reporting as of January [removed: 30, 2021] [added: 29, 2022,] based on criteria established in [removed: _Internal] [added: Internal] Control - Integrated [removed: Framework_] [added: Framework] (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January [removed: 30, 2021] [added: 29, 2022] and [removed: February 1, 2020,] [added: January 30, 2021,] and the results of its operations and its cash flows for each of the three years in the period ended January [removed: 30, 2021] [added: 29, 2022] in conformity with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January [removed: 30, 2021,] [added: 29, 2022,] based on criteria established in [removed: _Internal] [added: Internal] Control - Integrated [removed: Framework_] [added: Framework] (2013) issued by the COSO.
[removed: _Goodwill] [added: Goodwill] Impairment Assessment – Kroger Specialty Pharmacy (“KSP”) Reporting [removed: Unit_][added: Unit]
As described in Notes 1 and [removed: 3] [added: 2] to the consolidated financial statements, the Company’s consolidated goodwill balance was $3.1 billion as of January [removed: 30, 2021, a portion of which is allocated to] [added: 29, 2022 and] the [added: goodwill associated with the] KSP reporting [removed: unit.][added: unit was $242 million.]
These procedures also included, among others, testing management’s process for developing the fair value estimate, evaluating the appropriateness of the income and market approach models, testing the [removed: completeness] [added: completeness, accuracy,] and [removed: accuracy] [added: relevance] of the underlying data used in the models and evaluating the [removed: reasonableness of] significant assumptions used by management related to the revenue growth rates, margin assumptions, discount rate, peer group determination, and market multiple selection.
Professionals with specialized skill and knowledge were used to assist in [removed: evaluating] the [removed: appropriateness] [added: evaluation] of the [added: Company’s] discounted cash flow and market [removed: models] [added: models,] and [removed: evaluating the reasonableness of] certain significant assumptions related to the discount rate, peer group determination, and market multiples.
| | | January [removed: 30,] [added: 29,] | | | [removed: February 1,] [added: January 30,] | | |
| (In millions, except par amounts) | | [removed: 2021] [added: 2022] | | | [removed: 2020] [added: 2021] | | |
| Cash and temporary cash investments | | $ | [removed: 1,687] [added: 1,821] | | $ | [removed: 399] [added: 1,687] | |
| Store deposits in-transit | | | [removed: 1,096] [added: 1,082] | | | [removed: 1,179] [added: 1,096] | |
| Receivables | | | [removed: 1,781] [added: 1,828] | | | [removed: 1,706] [added: 1,781] | |
| FIFO inventory | | | [removed: 8,436] [added: 8,353] | | | [removed: 8,464] [added: 8,436] | |
| LIFO reserve | | | [removed: (1,373)] [added: (1,570)] | | | [removed: (1,380)] [added: (1,373)] | |
| Prepaid and other current assets | | | [removed: 876] [added: 660] | | | [removed: 522] [added: 876] | |
| Total current assets | | | [removed: 12,503] [added: 12,174] | | | [removed: 10,890] [added: 12,503] | |
| Property, plant and equipment, net | | | [removed: 22,386] [added: 23,789] | | | [removed: 21,871] [added: 22,386] | |
| Operating lease assets | | | [removed: 6,796] [added: 6,695] | | | [removed: 6,814] [added: 6,796] | |
| Intangibles, net | | | [removed: 997] [added: 942] | | | [removed: 1,066] [added: 997] | |
| Other assets | | | [removed: 2,904] [added: 2,410] | | | [removed: 1,539] [added: 2,904] | |
| Total Assets | | $ | [removed: 48,662] [added: 49,086] | | $ | [removed: 45,256] [added: 48,662] | |
| Current portion of long-term debt including obligations under finance leases | | $ | [removed: 911] [added: 555] | | $ | [removed: 1,965] [added: 911] | |
| Current portion of operating lease liabilities | | | [removed: 667] [added: 650] | | | [removed: 597] [added: 667] | |
| Trade accounts payable | | | [removed: 6,679] [added: 7,117] | | | [removed: 6,349] [added: 6,679] | |
| Accrued salaries and wages | | | [removed: 1,413] [added: 1,736] | | | [removed: 1,168] [added: 1,413] | |
| Other current liabilities | | | [removed: 5,696] [added: 6,265] | | | [removed: 4,164] [added: 5,696] | |
| Total current liabilities | | | [removed: 15,366] [added: 16,323] | | | [removed: 14,243] [added: 15,366] | |
| Long-term debt including obligations under finance leases | | | [removed: 12,502] [added: 12,809] | | | [removed: 12,111] [added: 12,502] | |
| Noncurrent operating lease liabilities | | | [removed: 6,507] [added: 6,426] | | | [removed: 6,505] [added: 6,507] | |
| Deferred income taxes | | | [removed: 1,542] [added: 1,562] | | | [removed: 1,466] [added: 1,542] | |
| Pension and postretirement benefit obligations | | | [removed: 535] [added: 478] | | | [removed: 608] [added: 535] | |
March 29, 2022
| Proceeds from financing arrangement | | | 166 | | | — | | | — | |
Years Ended January 29, 2022, January 30, 2021 and February 1, 2020
| Other | | — | | | — | | | 130 | | — | | | (129) | | | — | | | — | | | (8) | | | (7) |
| Balances at January 29, 2022 | | 1,918 | | $ | 1,918 | | $ | 3,657 | | 1,191 | | $ | (19,722) | | $ | (467) | | $ | 24,066 | | $ | (23) | | $ | 9,429 |
Costs to transfer inventory and equipment from closed stores are expensed as incurred.
The Company’s goodwill balance as of January 29, 2022 and January 30, 2021 was $3,076.
Gross goodwill and accumulated impaired losses were $5,737 and $2,661, respectively, as of January 29, 2022 and January 30, 2021.
| 2026 | | | 10 |
| Resolution of tax audit examinations | | (3.1) | | — | | (0.1) | |
| Non-deductible executive compensation | | 0.6 | | 0.3 | | 0.3 | |
The Company’s effective income tax rates were 18.8% in 2021 and 23.2% in 2020.
The 2021 tax rate differed from the federal statutory rate primarily due to a discrete benefit of $47 which was primarily from the favorable outcome of income tax audit examinations covering multiple years, the benefit from share-based payments and the utilization of tax credits, partially offset by the effect of state income taxes.
These state credit carryforwards expire from 2022 through 2035.
As of January 29, 2022, the Internal Revenue Service had concluded its examination of all federal tax returns up to and including the return for the year ended February 3, 2018.
| | | 2022 | | | 2021 | |
In 2021, the Company repaid $300 of senior notes bearing an interest rate of 2.60%, $500 of senior notes bearing an interest rate of 2.95%, and $500 of senior notes bearing an interest rate of 3.40%, all using cash on hand.
Additionally in 2021, the Company acquired 28, previously leased, properties for a purchase price of $455.
Separately, the Company also entered into a transaction to sell those properties to a third party for total proceeds of $621.
Total cash proceeds received as a result of the transactions was $166.
The sale transaction did not qualify for sale-leaseback accounting treatment.
As a result, the Company recorded property, plant and equipment for the $455 price paid and recorded a $621 financing obligation.
The leases have a base term of 25 years and twelve option periods of five years each.
The Company has the option to purchase the individual properties for fair market value at the end of the base term or at the end of any option period.
The Company is obligated to repurchase the properties at the end of the base term for $300 if the lessor exercises its put option.
The Credit Agreement includes fallback language related to the transition from LIBOR to alternative reference rates.
The Company does not expect a significant change to its cost of debt as a result of the transition from LIBOR to an alternative reference rate.
| 2022 | | $ | 451 | |
| 2023 | | | 1,130 | |
| 2026 | | | 1,387 | |
| Thereafter | | | 8,688 | |
| | | | |
| --- | --- | --- | --- |
| | | Assets | |
| Marketable Securities | | $ | 1,054 |
During 2020, certain of these investments with a carrying value of $87 were remeasured to their fair value of $160, resulting in an unrealized gain of $73.
There were no observable price changes or impairments for these investments during 2021, and as such, they are excluded from the fair value measurements table above for January 29, 2022.
The following table presents the Company’s remaining other assets as of January 29, 2022 and January 30 2021:
| | | January 29, 2022 | | | January 30, 2021 | |
| Equity method and other long-term investments | | $ | 282 | | $ | 250 |
| --- | --- |
_Changes in Accounting Principles_
As discussed in Note 18 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenues from contracts with customers in 2018.
March 30, 2021
| | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Realized gains on available for sale securities, net of income tax(1) | | | — | | | — | | | (4) |
| (4) | Amount is net of tax expense of $2 in 2020, $3 in 2019 and $3 in 2018. |
| | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Contribution to company-sponsored pension plan | | | — | | | — | | | (185) | |
| Proceeds on settlement of financial instrument | | | — | | | — | | | 235 | |
| Payments for acquisitions, net of cash acquired | | | — | | | — | | | (197) | |
| Purchases of stores | | | — | | | — | | | (44) | |
| Purchases of Ocado securities | | | — | | | — | | | (392) | |
| Balances at February 3, 2018 | | 1,918 | | $ | 1,918 | | $ | 3,161 | | 1,048 | | $ | (14,684) | | $ | (471) | | $ | 17,007 | | $ | (26) | | $ | 6,905 |
| | | | | | | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Convenience Stores (3) | | | — | | \- | % | | — | | \- | % | | 944 | | 0.8 | % |
| --- | --- | --- |
| | (3) | The Company completed the sale of its convenience store business unit during the first quarter of 2018. |
| 2. | PARTNERSHIP AGREEMENTS |
The Partnership Framework Agreement was amended in 2020.
As part of the agreement, the Company provided a letter of credit which supports its commitment to contract with Ocado to build a number of fulfilment centers.
The balance of the letter of credit was $207 as of January 30, 2021 and will reduce primarily upon the construction of each fulfillment center.
In addition, on May 17, 2018, the Company entered into a Share Subscription Agreement with Ocado, pursuant to which the Company agreed to purchase 33.1 million ordinary shares of Ocado for an aggregate purchase price of $243.
The Company completed the purchase of these 33.1 million shares on May 29, 2018.
This is in addition to 8.1 million Ocado shares purchased earlier in the first quarter of 2018, and 6.5 million additional shares purchased in the second quarter of 2018.
Fair value adjustments in equity of Ocado flow through “Gain on investments” in the Company’s Consolidated Statements of Operations.
The Company recorded an unrealized gain of $1,032 in 2020, $157 in 2019 and $228 in 2018, none of which was realized during the period as the Company did not sell any Ocado securities.
| Goodwill | | $ | 5,737 | | $ | 5,729 | |
| Accumulated impairment losses | | | (2,661) | | | (2,642) | |
| Subtotal | | | 3,076 | | | 3,087 | |
| Activity during the year | | | | | | | |
| Mergers | | | — | | | 8 | |
| Impairment losses | | | — | | | (19) | |
| Balance end of year | | | | | | | |
| Goodwill | | | 5,737 | | | 5,737 | |
| Accumulated impairment losses | | | (2,661) | | | (2,661) | |
| Total Goodwill | | $ | 3,076 | | $ | 3,076 | |
An excerpt. Shown here: 40 of 560 rewritten, 40 of 119 added and 40 of 218 removed. The counts are complete. For every sentence, read Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. in the FY2021 filing and the FY2020 filing.
Item 9A. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
5 rewritten, 5 added, 0 removed, 5 unchanged
As of January [removed: 30, 2021,] [added: 29, 2022,] our Chief Executive Officer and Chief Financial Officer, together with a disclosure review committee appointed by the Chief Executive Officer, evaluated the Company’s disclosure controls and procedures.
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of January [removed: 30, 2021.][added: 29, 2022.]
There [removed: was] [added: were] no [removed: change] [added: changes] in [removed: our] [added: Kroger’s] internal control over financial reporting [removed: during the fiscal quarter ended January 30, 2021] that [removed: has] materially affected, or [removed: is] [added: were] reasonably likely to materially affect, [removed: our] [added: Kroger’s] internal control over financial [removed: reporting.][added: reporting during the quarter ended January 29, 2022.]
Based on the evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of January [removed: 30, 2021.][added: 29, 2022.]
The effectiveness of the Company’s internal control over financial reporting as of January [removed: 30, 2021,] [added: 29, 2022,] has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which can be found in Item 8 of this Form 10-K.
The Company is in the process of implementing a broad, multi-year, technology transformation project to modernize mainframe, middleware and legacy systems to achieve better process efficiencies across customer service, merchandising, sourcing, payroll and accounting through the use of various solutions.
Implementation of new accounting ERP modules for general ledger, accounts receivable, accounts payable, fixed assets and a new indirect procurement module were implemented at the beginning of the first quarter of 2021.
Additional phases of the project will continue to be implemented over the next several years.
As of January 29, 2022, there have been no material additional implementations of modules since the beginning of the first quarter of 2021.
As the Company’s technology transformation project continues, the Company continues to emphasize the maintenance of effective internal controls and assessment of the design and operating effectiveness of key control activities throughout development and deployment of each phase and will evaluate as additional phases are deployed.
Item 9B. OTHER INFORMATION.
0 rewritten, 0 added, 1 removed, 2 unchanged
PART III
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
0 rewritten, 2 added, 0 removed, 0 unchanged
New section this year
Not applicable.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
1 rewritten, 0 added, 0 removed, 7 unchanged
The information required by this Item 10 with respect to executive officers is included within Item 1 in Part I of this Annual Report on Form 10-K under the caption “Information about our Executive Officers.” The information required by this Item not otherwise set forth in Part I above or in this Item 10 of Part III is set forth under the headings Election of Directors, Information Concerning the Board of Directors- Committees of the Board, Information Concerning the Board of Directors- Audit Committee and Delinquent 16(a) Reports in the definitive proxy statement to be filed by the Company with the Securities and Exchange Commission within 120 days after the end of the fiscal year [removed: 2020] [added: 2021] (the [removed: “2021] [added: “2022] proxy statement”) and is hereby incorporated by reference into this Form 10-K.
Item 11. EXECUTIVE COMPENSATION.
1 rewritten, 0 added, 0 removed, 1 unchanged
The information required by this Item is set forth in the sections entitled Compensation Discussion and Analysis, Compensation Committee Report, and Compensation Tables in the [removed: 2021] [added: 2022] proxy statement and is hereby incorporated by reference into this Form 10-K.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
5 rewritten, 2 added, 2 removed, 14 unchanged
The following table provides information regarding shares outstanding and available for issuance under our existing equity compensation [removed: plans.][added: plans:]
(1)The total number of securities reported includes the maximum number of common shares, [removed: 3,693,198,] [added: 8,541,763,] that may be issued under performance units granted under our long-term incentive plans.
The nature of the awards is more particularly described in the Compensation Discussion and Analysis section of the definitive [removed: 2021] [added: 2022] proxy statement and is hereby incorporated by reference into this Form 10-K.
Based on historical data, or in the case of the awards made in [removed: 2018] [added: 2019] through [removed: 2020] [added: 2021] and earned in [removed: 2020] [added: 2021] the actual payout percentage, our best estimate of the number of common shares that will be issued under the performance unit grants is approximately [removed: 5,052,484.][added: 4,504,253.]
The remainder of the information required by this Item is set forth in the section entitled Beneficial Ownership of Common Stock in the [removed: 2021] [added: 2022] proxy statement and is hereby incorporated by reference into this Form 10-K.
| Equity compensation plans approved by security holders | | 29,683,904 | | $ | 28.15 | | 19,319,196 | |
| Total | | 29,683,904 | | $ | 28.15 | | 19,319,196 | |
| Equity compensation plans approved by security holders | | 30,516,238 | | $ | 26.65 | | 33,857,862 | |
| Total | | 30,516,238 | | $ | 26.65 | | 33,857,862 | |
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
1 rewritten, 0 added, 0 removed, 1 unchanged
[removed: This] [added: The] information required by this Item is set forth in the sections entitled Related Person Transactions and Information Concerning the Board of Directors-Independence in the [removed: 2021] [added: 2022] proxy statement and is hereby incorporated by reference into this Form 10-K.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
1 rewritten, 0 added, 0 removed, 2 unchanged
The information required by this Item is set forth in the section entitled Ratification of the Appointment of Kroger’s Independent Auditor in the [removed: 2021] [added: 2022] proxy statement and is hereby incorporated by reference into this Form 10-K.
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
15 rewritten, 17 added, 1 removed, 56 unchanged
| [removed: (a)1.] [added: (a)1.†] | | Financial Statements: |
| | | Report of Independent Registered Public Accounting Firm [added: (PCAOB ID 238)] |
| | | Consolidated Balance Sheets as of January [added: 29, 2022 and January] 30, 2021 [removed: and February 1, 2020] |
| | | Consolidated Statements of Operations for the years ended January [added: 29, 2022, January] 30, [removed: 2021,] [added: 2021 and] February 1, 2020 [removed: and February 2, 2019] |
| | | Consolidated Statements of Comprehensive Income for the years ended January [added: 29, 2022, January] 30, [removed: 2021,] [added: 2021and] February 1, 2020 [removed: and February 2, 2019] Consolidated Statements of Cash Flows for the years ended January [added: 29, 2022, January] 30, [removed: 2021,] [added: 2021 and] February 1, 2020 [removed: and February 2, 2019] |
| | | Consolidated Statement of Changes in Shareholders’ Equity for the years ended January [added: 29, 2022, January] 30, [removed: 2021,] [added: 2021 and] February 1, 2020 [removed: and February 2, 2019] |
| 4.2 | | [Description of Securities. Incorporated by reference to Exhibit 4.2 of the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, [removed: 2020..](https://www.sec.gov/Archives/edgar/data/56873/000155837020003501/kr-20200201ex423a773e4.htm)] [added: 2020.](https://www.sec.gov/Archives/edgar/data/56873/000155837020003501/kr-20200201ex423a773e4.htm)] |
| 10.6 | | [Amended and Restated Credit Agreement dated [removed: August 29, 2017,] [added: July 6, 2021,] among The Kroger Co., the initial lenders named therein, and Bank of America, N.A. and Wells Fargo [removed: Bank] [added: Bank,] National Association, as co-administrative agents, Citibank, N.A., as syndication agent, and Mizuho Bank, Ltd. and U.S. Bank National Association, as co-documentation agents, incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on [removed: August 29, 2017.](http://www.sec.gov/Archives/edgar/data/56873/000110465917054301/a17-21118_1ex10d1.htm)] [added: July 7, 2021.](http://www.sec.gov/Archives/edgar/data/56873/000110465917054301/a17-21118_1ex10d1.htm)] |
| [removed: 10.16*†] [added: 10.16*] | | [Form of Restricted Stock Grant Agreement under Long-Term Incentive and Cash Bonus [removed: Plans.](https://www.sec.gov/Archives/edgar/data/56873/000155837021003706/kr-20210130xex10d16.htm)] [added: Plan. Incorporated by reference to Exhibit 10.16 of the Company’s Annual Report on Form 10-K for the fiscal year ended January 30, 2021.](https://www.sec.gov/Archives/edgar/data/56873/000155837021003706/kr-20210130xex10d16.htm)] |
| 21.1 | | [Subsidiaries of the [removed: Registrant.](https://www.sec.gov/Archives/edgar/data/56873/000155837021003706/kr-20210130xex21d1.htm)] [added: Registrant.](https://www.sec.gov/Archives/edgar/data/56873/000155837022004595/kr-20220129xex21d1.htm)] |
| 23.1 | | [Consent of Independent Registered Public Accounting [removed: Firm.](https://www.sec.gov/Archives/edgar/data/56873/000155837021003706/kr-20210130xex23d1.htm)] [added: Firm.](https://www.sec.gov/Archives/edgar/data/56873/000155837022004595/kr-20220129xex23d1.htm)] |
| 24.1 | | [Powers of [removed: Attorney.](https://www.sec.gov/Archives/edgar/data/56873/000155837021003706/kr-20210130xex24d1.htm)] [added: Attorney.](https://www.sec.gov/Archives/edgar/data/56873/000155837022004595/kr-20220129xex24d1.htm)] |
| 31.1 | | [Rule 13a-14(a)/15d-14(a) [removed: Certification.](https://www.sec.gov/Archives/edgar/data/56873/000155837021003706/kr-20210130xex31d1.htm)] [added: Certification.](https://www.sec.gov/Archives/edgar/data/56873/000155837022004595/kr-20220129xex31d1.htm)] |
| 31.2 | | [Rule 13a-14(a)/15d-14(a) [removed: Certification.](https://www.sec.gov/Archives/edgar/data/56873/000155837021003706/kr-20210130xex31d2.htm)] [added: Certification.](https://www.sec.gov/Archives/edgar/data/56873/000155837022004595/kr-20220129xex31d2.htm)] |
| 32.1 | | [Section 1350 [removed: Certifications.](https://www.sec.gov/Archives/edgar/data/56873/000155837021003706/kr-20210130xex32d1.htm)] [added: Certifications.](https://www.sec.gov/Archives/edgar/data/56873/000155837022004595/kr-20220129xex32d1.htm)] |
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Item 16. FORM 10-K SUMMARY.
3 rewritten, 1 added, 1 removed, 46 unchanged
| Dated: March [removed: 30, 2021] [added: 29, 2022] | /s/ W. Rodney McMullen |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities indicated on the [removed: 30th] [added: 29th] March [removed: 2021.][added: 2022.]
| /s/ Todd A. Foley | | | [added: Group] Vice President & Corporate Controller |
| Elaine L. Chao | | | |
| Susan J. Kropf | | | |