Kroger 2015 Annual Report Download - page 4

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Board of Directors approved a quarterly dividend increase of 13.5%, a two-for-one split of Kroger’s
common shares, and a $500 million share repurchase program. We have delivered double-digit
compound annual growth in our dividend since it was reinstated in 2006, and we continue to expect an
increasing dividend over time. The stock split announced in June both increased liquidity in the trading
of our shares and, importantly, made Kroger’s common shares more accessible to all of our associates.
Kroger’s strong financial position has enabled the company to return approximately $12 billion to
shareholders through share repurchases since January 2000, and approximately $2.6 billion in dividends
since 2006.
Unlike baseball’s Triple Crown, Kroger’s 2015 performance wasn’t a rarity. Kroger is a compelling
investment because of our ability to deliver remarkably consistent results. That consistency can at times
make it easy for our results to be taken for granted. But I can assure you this: we don’t take Kroger’s
success for granted – not for a second. To repeat what I said above, what makes our team of associates
so special is that we are never satisfied with what we’ve already accomplished. Kroger may be 133 years
old, but we are just getting started.
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Improving our Core, Beyond the Core, and Innovation – A Strategy for Long-Term Value Creation
Our growth strategy is designed to deliver consistent sales growth and sustainable shareholder
value for the long-term. We aim to provide a net earnings per diluted share growth rate of 8 – 11% plus an
increasing dividend. Our Board of Directors reviews and approves our strategy annually.
We look at growth initiatives in three categories: our core business, beyond the core, and
innovation. Balance among these three areas is crucial to our strategy. Too many companies over-focus
on innovation in the hopes of discovering the next “big thing”. Balance – the integration of these strategic
elements across our business – is how we’ll continue to win with customers and create sustainable
long-term value for shareholders.
Grow Our Core
Kroger’s core business is strong and growing. Our fundamental strategy, Customer 1st, continues to
drive us forward. Productivity remains a top priority. We are not done taking costs out of the business in
places where our customers don’t notice so that we can reinvest the savings in ways that matter most to
them. Since we launched our Customer 1st strategy in 2004, we have reduced prices annually by more
than $3.6 billion.
We are also narrowing our focus on Friendly & Fresh investments. These initiatives are designed to
accelerate progress on the key factors that customers tell us determine where they shop – a store with
genuinely friendly service, and produce, meat and seafood offerings at the peak of freshness. While it
isn’t as easy to see this type of non-price investment on the balance sheet, they are no less important
than our price investments and remain a priority.
We are investing in markets with growth potential so we can serve more customers every day. In
2015 we merged with Milwaukee-based Roundy’s, Inc. Roundy’s brought to Kroger more than 22,000
talented associates and outstanding Pick ‘n Save, Copps and Metro Market store locations in new
markets in the state of Wisconsin, plus an innovative, urban format called Mariano’s in Chicago. Roundy’s
shares our commitment to putting customers first and we see great potential for future growth together.
Important to our success with mergers is that we don’t need them to meet our long-term earnings per
diluted share growth target of 8 – 11%. This frees us to only pursue deals that are the right fit for our
company and will help create long-term value for shareholders.
We continue to expand our presence in fill-in markets across the country as well. These are markets
where we already operate, yet offer a significant opportunity to grow the business. We are making
incremental capital investments in these markets to grow market share, which will, in turn, improve return
on invested capital.