Kroger 2012 Annual Report Download - page 3

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1
FE L L O W S H A R E H O L D E R S :
We begin our 130th anniversary year with confidence.
The ways we listen to Customers and respond to their ever-changing needs have evolved through our
history, and yet several clear principles have remained constant for The Kroger Co. family of stores.
•฀ Our฀ success฀ comes฀ from฀ our฀ people฀ and฀ their฀ dedication฀ to฀ making฀ a฀ difference฀ in฀ the฀ lives฀ of฀ our฀
Customers;
•฀ We฀continually฀seek฀to฀strengthen฀our฀connection฀with฀our฀Customers,฀which฀results฀in
•฀ Consistent฀returns฀for฀shareholders.
Our confidence is firmly rooted in Kroger’s strong foundation for growth. About 10 years ago we
announced our Customer 1st business strategy, which truly puts the Customer at the center of how we
manage our business. Through our focus on the Four Keys of our strategy – our people, products, price
and the shopping experience – we are connecting with Customers in more powerful ways than ever
before. Kroger’s identical store sales trend is the clearest measure of that growing connection. In 2012,
Kroger achieved a retail industry-leading 37 consecutive quarters – more than nine years – of positive identical
sales growth.
Late in 2012 we announced aggressive new growth plans to expand Customer 1st into the next decade.
The Company is investing in a targeted expansion strategy to increase square footage and store penetration
in฀ existing฀ markets฀ and฀ enter฀ new฀ markets.฀ Through฀ additional฀ capital฀ investments฀ in฀ new฀ and฀ existing฀
stores, new store formats, and new ways to connect with our Customers and Associates, including our digital
connection, we expect to achieve a higher long-term financial target and increase Shareholder return.
A Year of Record Earnings and Focus on Shareholder Value
Kroger’s unique offering of better service, great products, an enjoyable shopping experience and
low฀prices฀and฀weekly฀specials฀continues฀to฀resonate฀with฀a฀full฀range฀of฀Customers.฀As฀a฀result,฀fiscal฀2012฀
sales฀grew฀$6.4฀billion฀for฀total฀revenue฀of฀$96.8฀billion,฀making฀Kroger฀one of the largest retailers in the
world. Net earnings were $1.5 billion or $2.77 per diluted share; this includes an $0.11 per diluted share
benefit฀of฀the฀extra฀week.฀We฀achieved฀record฀earnings฀per฀share฀for฀the฀year,฀and฀grew฀adjusted฀net฀earnings฀
per share by more than 16 percent.
Our outstanding business results allowed Kroger to continue using free cash flow to reward shareholders.
We increased our quarterly dividend by 30 percent and returned more than $1.5 billion to shareholders
through฀dividends฀and฀stock฀buybacks฀in฀2012.฀Since฀2006,฀Kroger฀has฀paid฀nearly฀$1.6฀billion฀in฀dividends฀to฀
Shareholders. We have been able to accomplish this while maintaining our investment-grade credit rating and
improving our debt leverage ratio and annual interest expense. Since January 2000, Kroger has returned
$9.0 billion to Shareholders through share repurchases.
Now,฀what฀makes฀this฀best-in-class฀performance฀possible?฀A฀large฀part฀of฀the฀answer฀is฀simple:฀Our฀Great฀
People. Associates in the Kroger family of stores are uniquely and authentically passionate for people and for
delivering superior results. This is brought to life through their dedication to making the day better for
every one of the more than seven million Customers who shop our stores daily – whether through a simple
smile, solving a problem or helping Customers on a budget feed their family.
* * *
Celebration of Our Shared Heritage
Barney Kroger opened his first store in Cincinnati, Ohio on July 1, 1883. That his Company not only
survived but is thriving 130 years later is an amazing accomplishment. And yet two of our banners have been
in฀business฀even฀longer.฀In฀1873,฀George฀Ralphs฀–฀founder฀of฀our฀Ralphs฀division฀–฀opened฀his฀first฀store฀in฀
Los฀Angeles.฀Ten฀years฀earlier,฀in฀1863,฀John฀C.฀Groub฀–฀founder฀of฀our฀Jay฀C฀division฀–฀opened฀his฀first฀store฀
in฀Rockford,฀Indiana.
We are celebrating the shared heritage of our entire family of stores – a heritage of transformative growth
and innovation that continues to inspire us today.