Kroger 2013 Annual Report Download - page 3

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FE L L O W S H A R E H O L D E R S :
Kroger achieved another outstanding year of performance for shareholders in 2013.
We are a company with many strengths, among them:
•฀ Strong฀and฀consistent฀returns฀to฀shareholders,฀
•฀ An฀aggressive฀strategic฀plan฀that฀delivers฀reliable฀growth฀and฀financial฀performance,฀and฀
•฀ Deeply฀loyal฀customers฀who฀are฀the฀basis฀for฀our฀broad฀and฀growing฀market฀share.฀
Our Company’s most enduring strength is our people — our more than 375,000 associates who strive
to฀make฀every฀customer’s฀day฀a฀little฀better฀each฀time฀they฀visit฀one฀of฀our฀stores.฀
Our foundational approach is called Customer 1st. It simply means that the needs and wants of our
customers฀are฀at฀the฀heart฀of฀every฀decision฀we฀make—in฀our฀stores,฀plants,฀offices,฀and฀facilities.฀It฀is฀our฀
associates฀who฀bring฀Customer฀1st to life. From product and technology innovation to improvements in the
shopping฀experience,฀we฀are฀ inspired฀by฀the฀ever-changing฀ needs฀and฀wants฀of฀ customers.฀Our greatest
strategic advantage is our Customer 1st culture.
We฀are฀proud฀to฀be฀both฀large฀and฀small.฀As฀one฀of฀the฀world’s฀largest฀retailers,฀we฀leverage฀economies฀
of฀scale฀in฀ways฀that฀make฀a฀difference฀for฀our฀customers฀in฀their฀daily฀lives.฀For฀example,฀we฀implemented฀
an฀innovative,฀faster฀checkout฀approach฀that฀saves฀minutes฀for฀each฀customer฀every฀time฀they฀shop.฀We฀also฀
leverage฀our฀size฀to฀offer฀great฀value฀on฀everyday฀items฀and฀weekly฀specials,฀and฀then฀provide฀a฀personalized฀
mobile฀ app—one฀ of฀ the฀ most฀ popular฀ in฀ that฀ crowded฀ space—that฀ highlights฀ the฀ deals฀ that฀ match฀ each฀
shopper’s list.
In฀this฀letter,฀I฀will฀provide฀more฀detail฀behind฀our฀outstanding฀results฀in฀2013฀and฀explain฀the฀basis฀of฀
our firm conviction that there is much more to come for shareholders, associates and customers.
Fiscal 2013 Results – Delivering Growth That Investors Can Count On
At฀ our฀ October฀ 2012฀ investor฀ meeting,฀ we฀ announced฀ aggressive growth plans that expand our
Customer 1st฀Strategy฀by฀ accelerating฀ growth฀in฀our฀ core฀ business฀ and฀improving฀our฀ connection฀with฀ all฀
customers,฀expanding฀our฀presence฀in฀new฀and฀existing฀markets,฀and฀investing฀to฀create฀unique฀competitive฀
positioning฀for฀today฀and฀the฀future.฀As฀a฀result,฀we฀expect฀to฀achieve฀a฀long-term,฀net-earnings-per-diluted-
share฀growth฀rate฀of฀8-11%฀and฀an฀increasing฀dividend฀over฀time.
We committed to four key performance indicators to measure our progress at that meeting as well:
•฀ Positive฀identical฀supermarket฀sales;฀
•฀ Slightly฀expanding฀FIFO฀operating฀margin฀on฀a฀rolling฀four฀quarters฀basis,฀excluding฀fuel;฀
•฀ Improving฀return฀on฀invested฀capital;฀and฀
•฀ Growing฀market฀share.฀
In 2013, the first full fiscal year executing our aggressive growth plan, Kroger delivered on all four
indicators. We achieved an unparalleled 41st฀ consecutive฀ quarter฀ of฀ positive฀ identical฀ supermarket฀ sales;฀
expanded฀ FIFO฀ operating฀ margin฀ on฀ a฀ rolling฀ four฀ quarters฀ and฀ adjusted฀ basis,฀ excluding฀ fuel;฀ improved฀
return฀on฀invested฀capital,฀even฀as฀we฀increased฀capital฀investments;฀and฀grew฀market฀share฀for฀the฀ninth฀
consecutive year.
Kroger’s consistent and reliable performance฀delivers฀long-term฀growth investors can count on.
And฀2013฀was฀another฀year฀of฀steady฀growth.฀Total฀sales฀were฀$98.4฀billion฀in฀fiscal฀2013,฀an฀increase฀of฀3.9%฀
after฀adjusting฀for฀the฀53rd฀week฀in฀fiscal฀2012.฀Net฀earnings฀were฀$1.52฀billion,฀or฀$2.90฀per฀diluted฀share.฀
On฀an฀adjusted฀basis,฀net฀earnings฀grew฀13฀percent฀over฀last฀year’s฀adjusted฀amount.฀We฀continue฀to฀lower฀
Kroger’s฀costs฀of฀doing฀business฀–฀achieving฀our฀ninth฀consecutive฀year฀of฀reducing฀operating฀expenses฀as฀a฀
rate฀of฀sales฀–฀and฀to฀reinvest฀these฀savings฀in฀lower฀prices฀for฀our฀customers.