Kroger 2015 Annual Report Download - page 3

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FELLOW SHAREHOLDERS:
Every day we open our doors and welcome more than eight-and-a-half million people who are
hungry for more than food. They want to make their lives easier, healthier, brighter and a bit lighter. Our
purpose at Kroger is to do just that – to make a difference for our customers, our communities and our
associates. When our business delivers on that purpose, we create value for our shareholders.
What makes Kroger different? It all starts with our more than 431,000 associates who share a
passion for people, a passion for results, and a passion for food. We like to say that Kroger is more than
the sum of its parts. Like a great meal, there is no single characteristic – no one person or thing – that
explains Kroger’s success. Rather, it is a unique and powerful combination of factors that make Kroger
unique, including our:
• Customer 1st Strategy and our team’s extraordinary execution of it;
• Exceptional merchandisers, operators and deep bench of leaders;
• Ability to leverage scale as a large company and remain local and relevant to individual customers
through our use of data;
• Strong manufacturing base and diverse Corporate Brands offering; and our
• Commitment to making our customers lives better through the use of technology and innovation, to
name just a few.
There is another aspect of our company culture that I want to reiterate: Our team is never satisfied
with yesterday’s results. We are constantly challenging ourselves to do better. And this shows in the
everyday interactions with our customers – who are giving Kroger higher and higher marks in each of the
four key areas of our Customer 1st Strategy: our customer service, the quality of our products, low prices
and overall shopping experience.
Can a collective sense of urgency be a differentiator? We think so. And while our core business
is and will remain strong, we are strategically expanding beyond our core and innovating in new and
exciting ways that we believe have transformative potential for our business, customers and associates.
The following letter will outline our growth strategy and why Kroger is positioned as an exceptionally
strong long-term investment. But first, a few words about our terrific performance in 2015.
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A Triple Crown 2015
Some of my fondest memories as a child were listening to baseball games on the radio. I have been
a life-long fan of the game. When I think about extraordinary performance results in baseball, I think
about the batting Triple Crown. The Triple Crown occurs when a player posts league-leading results in
key performance areas – generally batting average, runs batted in and home runs. It occurs rarely: only
17 times since 1878, and with a forty-year drought from 1967 until 2012.
As CEO, when I judge Kroger’s overall performance, I think about how well we are delivering for our
customers, for our associates, and for our shareholders. I’m pleased to report that it has been a Triple
Crown year for Kroger. Because in fiscal 2015, we:
• Achieved our 12th consecutive year of positive identical supermarket sales growth,
• Improved overall engagement with and created more opportunity for associates, and
• Delivered financial results in line with our long-term growth objectives and a total shareholder return
of 13.63%.
In fact, we exceeded all of our financial performance targets for the year. Growth in identical
supermarket sales and net earnings per diluted share, FIFO operating profit margin expansion and
return on invested capital were all better than our long-term guidance. We also achieved our eleventh
consecutive year of market share growth. In 2015, we continued to return cash to shareholders. Kroger’s