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.
•฀ Our฀revenue฀reached฀$108.5฀billion฀–฀an฀all-time฀high;
•฀ Our฀stock฀price฀rose฀91%,฀making฀Kroger฀one฀of฀the฀top฀10฀performing฀stocks฀in฀the฀S&P฀500;
•฀ Our฀positive฀identical฀store฀sales฀grew฀for฀an฀unprecedented฀45฀consecutive฀quarters;฀and฀
•฀ Our฀market฀share฀expanded฀for฀the฀10th year running.
In฀short,฀2014฀was฀a฀blockbuster฀year.฀We฀added฀nearly฀25,000฀new฀jobs,฀creating฀opportunity฀for฀our฀
current and future associates. And we have confidence there is more growth and opportunity ahead
for our company.
Since฀becoming฀CEO฀last฀year,฀the฀two฀most฀common฀questions฀I฀hear฀from฀shareholders฀are฀“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.
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Answering฀“why฀is฀Kroger฀doing฀so฀well?”฀is฀like฀trying฀to฀answer฀“what฀makes฀a฀meal฀great?”฀
What฀makes฀a฀meal฀memorable฀and฀enjoyable?฀It฀is฀the฀combination฀of฀food฀and฀drink,฀your฀companions฀
and฀the฀atmosphere,฀surprise฀and฀delight.฀It฀is฀not฀any฀one฀thing,฀but฀the฀sum of its parts.
Like฀a฀great฀meal,฀there฀is฀no฀single฀characteristic฀–฀no฀one฀person฀or฀thing฀–฀that฀makes฀Kroger฀great.฀
Rather, it is a unique and powerful combination of factors฀that฀helps฀explain฀Kroger’s฀success.฀
It all starts with our friendly associates executing฀our powerful Customer 1st Strategy, which we
launched฀12฀years฀ago.฀We฀put฀the฀customer฀first฀in฀every฀decision฀we฀make.฀
Our฀store฀managers฀successfully฀manage฀multi-million-dollar฀businesses.฀But฀first฀and฀foremost,฀they฀are฀
focused฀on฀our฀customers฀and฀associates.฀Our฀goal฀is฀to฀extend฀our฀friendly฀hospitality฀to฀each฀one฀of฀the฀eight
million customers who shop in our stores daily.
Our merchandisers are the best in the industry.฀Their฀depth฀of฀experience,฀combined฀with฀our฀
world-class฀customer฀science฀and฀data฀analytics,฀creates฀a฀powerful฀blend฀of฀art฀and฀science฀that฀is฀the฀hallmark฀
of฀Kroger’s฀fresh฀ and฀relevant฀merchandising.฀We฀are฀focused฀ on฀bringing฀to฀each฀customer฀ what฀ is฀ most฀
relevant฀to฀them฀–฀to฀their฀tastes,฀budget฀and฀lifestyle฀–฀and฀delivering฀unique฀offers฀through฀personalized฀
coupons,฀our฀popular฀fuel฀rewards฀program,฀and฀exclusive฀digital฀offers.
Our฀strong Corporate Brands portfolio฀continues฀to฀gain฀market฀share,฀reaching฀its฀highest฀level฀of฀
penetration฀in฀seven฀years฀during฀the฀fourth฀quarter฀of฀2014,฀when฀it฀represented฀28.2%฀of฀total฀units฀sold฀in฀
our฀stores.฀These฀great฀products,฀which฀can฀only฀be฀found฀in฀our฀family฀of฀stores,฀set฀us฀apart.
We฀continue฀to฀invest฀in฀price฀every฀year.฀Today,฀we฀are฀saving our customers more than $3.5 billion
annually฀through฀every฀day฀lower฀prices.฀Our฀productivity฀improvements฀fuel฀these฀price฀investments.฀
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,
and฀by฀growing฀our฀digital฀capabilities.฀
It฀is฀the฀combination฀of฀these฀strengths฀–฀and฀many฀more฀not฀mentioned฀here฀–฀that฀together฀delivered฀
our฀strong฀financial฀results฀in฀fiscal฀2014.฀
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Fiscal 2014 Results – An Outstanding Year
Kroger’s฀consistently฀remarkable฀performance฀delivered฀for฀shareholders฀in฀2014.฀The฀growth฀plan฀we฀
first฀outlined฀in฀October฀2012฀includes฀four฀key฀performance฀measures:฀positive฀identical฀supermarket฀sales฀
growth,฀slightly฀expanding฀non-fuel฀FIFO฀operating฀margin,฀growing฀return฀on฀invested฀capital฀and฀annual฀
market฀share฀growth.฀In฀2014,฀we฀met฀or฀exceeded฀each฀of฀these฀metrics.฀