Kroger 2014 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 :
Thanks to Kroger’s 400,000 associates – who strive to provide friendly service and the freshest
products to every customer, every shopping trip – 2014 was a record-breaking year.
• Ourrevenuereached$108.5billion–anall-timehigh;
• Ourstockpricerose91%,makingKrogeroneofthetop10performingstocksintheS&P500;
• Ourpositiveidenticalstoresalesgrewforanunprecedented45consecutivequarters;and
• Ourmarketshareexpandedforthe10th year running.
Inshort,2014wasablockbusteryear.Weaddednearly25,000newjobs,creatingopportunityforour
current and future associates. And we have confidence there is more growth and opportunity ahead
for our company.
SincebecomingCEOlastyear,thetwomostcommonquestionsIhearfromshareholdersare“Why is
Kroger doing so well?” and “Can you keep it up?” It is my great honor to try and provide answers in this letter.
* * *
Answering“whyisKrogerdoingsowell?”isliketryingtoanswer“whatmakesamealgreat?”
Whatmakesamealmemorableandenjoyable?Itisthecombinationoffoodanddrink,yourcompanions
andtheatmosphere,surpriseanddelight.Itisnotanyonething,butthesum of its parts.
Likeagreatmeal,thereisnosinglecharacteristic–noonepersonorthing–thatmakesKrogergreat.
Rather, it is a unique and powerful combination of factorsthathelpsexplainKroger’ssuccess.
It all starts with our friendly associates executingour powerful Customer 1st Strategy, which we
launched12yearsago.Weputthecustomerfirstineverydecisionwemake.
Ourstoremanagerssuccessfullymanagemulti-million-dollarbusinesses.Butfirstandforemost,theyare
focusedonourcustomersandassociates.Ourgoalistoextendourfriendlyhospitalitytoeachoneoftheeight
million customers who shop in our stores daily.
Our merchandisers are the best in the industry.Theirdepthofexperience,combinedwithour
world-classcustomerscienceanddataanalytics,createsapowerfulblendofartandsciencethatisthehallmark
ofKroger’sfresh andrelevantmerchandising.Wearefocused onbringingtoeachcustomer what is most
relevanttothem–totheirtastes,budgetandlifestyle–anddeliveringuniqueoffersthroughpersonalized
coupons,ourpopularfuelrewardsprogram,andexclusivedigitaloffers.
Ourstrong Corporate Brands portfoliocontinuestogainmarketshare,reachingitshighestlevelof
penetrationinsevenyearsduringthefourthquarterof2014,whenitrepresented28.2%oftotalunitssoldin
ourstores.Thesegreatproducts,whichcanonlybefoundinourfamilyofstores,setusapart.
Wecontinuetoinvestinpriceeveryyear.Today,wearesaving our customers more than $3.5 billion
annuallythrougheverydaylowerprices.Ourproductivityimprovementsfuelthesepriceinvestments.
We continue to improve the customer shopping experience. And, as I will outline below, we are
accelerating our entry into eCommerce through our recent mergers with Harris Teeter and Vitacost.com,
andbygrowingourdigitalcapabilities.
Itisthecombinationofthesestrengths–andmanymorenotmentionedhere–thattogetherdelivered
ourstrongfinancialresultsinfiscal2014.
* * *
Fiscal 2014 Results – An Outstanding Year
Kroger’sconsistentlyremarkableperformancedeliveredforshareholdersin2014.Thegrowthplanwe
firstoutlinedinOctober2012includesfourkeyperformancemeasures:positiveidenticalsupermarketsales
growth,slightlyexpandingnon-fuelFIFOoperatingmargin,growingreturnoninvestedcapitalandannual
marketsharegrowth.In2014,wemetorexceededeachofthesemetrics.