Kroger

Kroger said it benefited from inflation because it was still cheaper to eat at home

Kroger’s CFO said “We’ve been very comfortable with our ability to pass on the increases that we’ve seen at this point. And we would expect that to continue to be the case.” “Some of the retailers that sell many of those companies’ products also weighed in on their buck-passing ability. ‘We’ve been very comfortable with our ability to pass on the increases that we’ve seen at this point,’ Kroger CFO Gary Millerchip said. ‘And we would expect that to continue to be the case.’” (Business Insider, 11/2/2021)

Kroger CFO: “while food at home inflation is higher, actually relative to other inflation and how I need to manage my budget, food at home is more attractive in terms of helping me be able to manage my budget and manage my dollars.” “Gary Millerchip — Chief Financial Officer: The only other thing I would add that — Rodney shared this earlier in the QA, but we are seeing customers tell us that as inflation is certainly higher in food, which obviously we’re all focused on, but inflation is obviously higher pretty much everywhere in the economy right now. And actually, whereas maybe a few months ago, customers were telling us they were eating more food at home because of concerns around COVID, some of that shifted more to — while food at home inflation is higher, actually relative to other inflation and how I need to manage my budget, food at home is more attractive in terms of helping me be able to manage my budget and manage my dollars.” (Kroger Q4 2021 Earnings Call, 3/3/2022)

Kroger CEO: “we operate successfully in every operating environment, whether it’s inflationary or deflationary….what we’re finding is we get a bigger part of their overall household spend.” “Rodney McMullen — Chairman and Chief Executive Officer: If you look at — as Gary mentioned, we would expect inflation in the second half of the year to moderate just because it’s cycling the inflation from the second half of this year — or last year, I guess, now. Overall, as you know, we operate successfully in every operating environment, whether it’s inflationary or deflationary. And we’re doing everything we can to minimize the impact on our customers. If you look at overall, we would expect the business to continue to grow. And part of that is really the seamless ecosystem. Altogether, what we’re finding is we get a bigger part of their overall household spend. We also — if you look at total households, we had good numbers on total households for the fourth quarter versus 2020 and 2019. And we would — and what we find is that once we get a new customer, we’re able to move them up the loyalty ladder over time because of the experience they get from our associates on the customer experience, the seamless ecosystem, fresh and good value, plus we’re able to start personalized rewards for them.” (Kroger Q4 2021 Earnings Call, 3/3/2022)

After calling inflation good for business, Kroger cited it justify price increases

In June 2021, Kroger’s CEO said it would benefit from rising prices, saying “Our business operates the best when inflation is about 3% to 4%…A little bit of inflation is always good in our business.”Leading grocery chains such as Kroger (KR) and Albertsons have said in recent days that they expect to benefit from rising prices. Sales boomed at these chains and other grocers during the early stages of the pandemic, but have slowed down in recent months as more people return to eating meals out. ‘Our business operates the best when inflation is about 3% to 4%,” Kroger CEO Rodney McMullen said on an earnings call with analysts Thursday. “A little bit of inflation is always good in our business.’ Kroger can pass off costs to consumers when inflation hovers around that mark, McMullen said, and ‘customers don’t overly react to that.’” (CNN, 6/18/2021)

In September 2021, Kroger cited inflation to increase prices and said it was “passing along higher costs to the customer where it makes sense to do so. “Grocery prices are headed higher later this year, according to the U.S.’s largest supermarket by sales.  Cincinnati-based Kroger Co., which had $132 billion in sales last year, says inflation is running hotter than management previously anticipated and that expectations are now for prices to rise 2% to 3% over the second half of this year.  Kroger is “passing along higher costs to the customer where it makes sense to do so,” said CFO Gary Millerchip on the company’s second-quarter earnings call on Friday.” (Fox Business, 9/12/2021)

Kroger also blamed the impact of “organized crime” to justify price increases passed along to consumers. “Kroger grocery chain will raise food prices from 2-3% this year, more than what they expected, Rodney McMullen, the Kroger grocery chain’s chief executive officer, says. On Kroger’s earnings report call on Friday, the chief financial officer, Gary Millerchip, said higher supply chain costs, rising levels of theft, and increasing food prices all will play roles. ‘We are being more aggressive,’ Millerchip said on the call. ‘Our general counsel is also working with some trade associations to try to start working on it in a broader group, not just Kroger-specific, when you look at organized crime.’” (WISH TV, 9/13/2021)

After a temporary pay bump for workers, Krogers has funneled profits back to shareholders and even closed stores to avoid pay increases 

Kroger reported record earning during the pandemic, redirecting that money to investors and shareholders. “Kroger has tallied record earnings as the pandemic has encouraged more Americans to stay at home, boosting food and other grocery sales. The company recorded more than $2.9 billion in operating profits through the third quarter of 2020, taking in an extra $1.2 billion in earnings compared with a year earlier.  Kroger is redirecting some of that money to investors, with a $1 billion in stock repurchase announced in September. On February 5, the company announced a $147 million dividend payment and said it expects to increase its dividend over time.”  (CBS, 2/3/2021)

Kroger ended a temporary $2 per hour “hero” pay increase in May 2020, but went on to authorize $1 billion in stock buybacks in September 2020. “Some major retailers are continuing a controversial practice known as share buybacks in the pandemic, despite ending hazard pay for their workers or not providing any at all. Kroger (KR) bought back more than $200 million of shares during its latest quarter ending Aug. 15, and its board authorized $1 billion in additional repurchases on Friday. The grocery chain in May halted a $2 per hour pay bump it gave to its workers for doing their jobs in the pandemic.” (CNN Business, 9/12/2020)

In February 2021, Kroger announced it would close two stores in California rather than temporarily pay some employees $4 an hour more in ‘hazard pay.’ ”Kroger is closing two stores in California rather than pay grocery workers an extra four dollars an hour for working at the nation’s largest supermarket chain during the coronavirus pandemic. The company blamed a decision by local officials who recently approved a temporary wage increase for some supermarket employees. Kroger said it will close the stores, a Ralphs and a Food 4 Less, in April because of the law, passed in January by the Long Beach city council. With a handful of cities across California weighing whether to mandate “hazard pay” for grocery workers, Kroger also warned that it could shut more stores.  Long Beach last month became the first city in California to approve a hazard pay ordinance, with the law requiring grocery stores with at least 300 workers nationwide and more than 15 employees within Long Beach to pay an extra $4 an hour for a 120-day period.” (CBS, 2/3/2021) 

During the pandemic, Kroger spent over $1.5 billion on stock buybacks and dividends 

YCharts reported Kroger spent $1.498 billion on stock buybacks between April 30, 2020 and July 31 2021. (Kroger, YCharts, accessed 9/15/2021)

Kroger reported spending $534 million on dividends in 2020. “In total, Kroger returned $1.9 billion to shareholders in 2020. Kroger repurchased $1.32 billion of shares in 2020 under its board authorizations. Kroger increased the dividend by 13 percent, from 64¢ to 72¢ per year, marking the 14th consecutive year of dividend increases, which resulted in a payout of $534 million.” (Kroger, Q4 Earnings Report, 3/4/2021)

Kroger reported spending $274 million on dividends in the first six months of 2021. (Kroger, Q2 Earnings Report, 9/10/2021)

Kroger’s executives saw their pay increase during the pandemic, while their workers pay fell

For 2020, Kroger reported that its CEO’s total compensation had increased to $22.3 million while median employee had decreased to $24,617 or a ratio of 909 to 1. “As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information regarding the ratio of the annual total compensation of our Chairman and CEO, Mr. McMullen, to the annual total compensation of our median employee. As reported in the Summary Compensation Table, our CEO had annual total compensation for 2020 of $22,373,574. Using this Summary Compensation Table methodology, the annual total compensation of our median employee for 2020 was $24,617. As a result, we estimate that the ratio of our CEO’s annual total compensation to that of our median employee for fiscal 2020 was 909 to 1.” (Kroger 2021 Proxy Statement, 5/13/2021)

Average compensation for Kroger’s top five executives increased 15% in 2020, including a 6% increase for its CEO. “In 2020, five Kroger executives received on average a compensation package of $10M, a 15% increase compared to previous year. W. Rodney McMullen, Chief Executive Officer, received $22M in total, which increased by 6% compared to 2019. 49% of McMullen’s compensation, or $11M, was in stock awards. McMullen also received $769K in bonus, $1.8M of change in pension value and nonqualified deferred compensation earnings, $4.9M in non-equity incentive plan, $2.1M in option awards, $1.3M in salary, as well as $577K in other compensation.” (ExecPay, 5/13/2021) 

While Kroger’s CEO pay increased by 6% in 2020, pay for the median employee fell by 8%. “In early 2020, as the coronavirus swept across the U.S., McMullen announced a $2 hourly hazard increase, or “Hero Bonus,” for store and warehouse workers. Two months later, the company ended the raise — even as critics pointed out that the hazard remained. McMullen, meanwhile, collected a $22.4 million pay package for 2020 — his largest haul since he became Kroger’s boss in 2014.The package, disclosed Thursday in a regulatory filing, rose almost 6% from the prior year thanks to a bigger bonus, a larger package of stock awards and a salary increase. Pay for Kroger’s median employee fell 8% to $24,617.” (Bloomberg, 5/13/2021)

For 2019, Kroger reported its CEO had a total compensation of $21 million compared to $26,790 for its median employee or a ratio of 789 to 1. “As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information regarding the ratio of the annual total compensation of our Chairman and CEO, Mr. McMullen, to the annual total compensation of our median employee. As reported in the Summary Compensation Table, our CEO had annual total compensation for 2019 of $21,129,648. Using this Summary Compensation Table methodology, the annual total compensation of our median employee for 2019 was $26,790. As a result, we estimate that the ratio of our CEO’s annual total compensation to that of our median employee for fiscal 2019 was 789 to 1.” (Kroger 2020 Proxy Statement, 5/12/2020)

In 2019, Kroger reported average executive compensation of $8.7 million, which was a 46% increase from 2018. “Kroger reported fiscal year 2019 executive compensation information on May 12, 2020. In 2019, six Kroger executives received on average a compensation package of $8.7M, a 46% increase compared to previous year.” (ExecPay, 5/12/2020)

Kroger’s CEO took home $21 million in 2019, a 76% increase from 2018. “W. Rodney McMullen, Chief Executive Officer, received $21M in total, which increased by 76% compared to 2018. 40% of McMullen’s compensation, or $8.4M, was in stock awards. McMullen also received $7M of change in pension value and nonqualified deferred compensation earnings, $2M in non-equity incentive plan, $2.1M in option awards, $1.3M in salary, as well as $349K in other compensation.” (ExecPay, 5/12/2020)