Kroger 2014 Annual Report Download - page 4

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At฀the฀end฀of฀the฀year,฀we:฀
•฀ Achieved฀an฀ industry-leading฀45th฀consecutive฀quarter฀of฀positive฀identical฀ supermarket฀sales฀growth,฀
without฀fuel;฀
•฀ Exceeded฀our฀goal฀ to฀slightly฀ expand฀FIFO฀operating฀margin,฀without฀fuel฀ and฀excluding฀adjustment฀
items฀noted฀in฀our฀annual฀report,฀on฀a฀rolling฀four฀quarters฀basis;฀
•฀ Improved฀return฀on฀invested฀capital฀even฀as฀we฀increased฀capital฀investment;฀and
•฀ Captured฀incremental฀market฀share฀for฀the฀10th consecutive year.
As a result, we exceeded our long-term, net earnings per diluted share growth rate of 8-11% in
fiscal 2014, and we increased our dividend for the eighth consecutive year. In fact, Kroger has delivered
double-digit฀compound฀growth฀in฀our฀dividend฀since฀we฀reinstated฀it฀in฀2006.฀
Net฀earnings฀for฀2014฀totaled฀$1.73฀billion,฀or฀$3.44฀per฀diluted฀share.฀Excluding฀adjustment฀items฀–฀the฀
benefit฀of฀certain฀tax฀items฀and฀adjustments฀for฀pension฀plan฀agreements฀–฀Kroger’s฀adjusted฀net฀earnings฀for฀
2014฀totaled฀$1.77฀billion,฀or฀$3.52฀per฀diluted฀share.
Our฀strong฀results฀during฀2014฀allowed฀us฀to฀make฀a฀strategic and significant contribution to The
Kroger Co. Foundation.฀We฀use฀our฀foundation฀dollars฀to฀support฀causes฀that฀our฀customers฀and฀associates฀
consistently฀ tell฀ us฀they฀ care฀ about,฀enhancing฀our฀ reputation฀ as฀a฀locally-connected฀ retailer.฀ We฀ are฀ very฀
proud฀that฀Forbes฀magazine฀previously฀recognized฀our฀work฀by฀naming฀us฀the฀“most฀generous฀company฀in฀
America.”฀This฀investment฀works฀to฀support฀the฀communities฀that฀we฀serve.
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Which฀brings฀us฀to฀the฀second฀question:฀“Can you keep it up?”
My฀answer฀is฀an฀unequivocal฀YES.฀Because,฀as฀I฀like฀to฀say,฀our฀“to-do”฀list฀is฀longer฀than฀our฀“done”฀list.฀
We฀are฀not฀done฀growing฀and฀differentiating.฀We฀are฀not฀done฀innovating฀to฀make฀our฀customers’฀lives฀better.฀
And we are not done investing to grow for today and the future.
Innovating to Grow
We are expanding our use of technology.฀ In฀ February฀ 2014,฀ Kroger฀ acquired฀ You฀ Technology,฀
LLC,฀ the฀ Silicon฀ Valley-based฀ leader฀ in฀ digital฀ coupons฀ and฀ promotions.฀ Several฀ months฀ later,฀ our฀ merger฀
with฀ Vitacost.com฀accelerated฀our฀ entry฀into฀the฀eCommerce฀space฀by฀several฀years.฀Vitacost฀connects฀us฀
to฀an฀amazingly฀talented฀team฀of฀associates฀who฀have฀created฀a฀substantial฀platform฀that฀includes฀advanced฀
technology฀ and฀ ship-to-home฀ fulfillment฀ centers.฀ We฀ are฀ currently฀ testing฀ Harris฀ Teeter’s฀ successful฀
ExpressLane฀concept฀–฀an฀order฀online,฀pickup฀at฀the฀store฀model฀–฀in฀Cincinnati,฀and฀we฀plan฀to฀expand฀
to฀other฀stores฀and฀markets฀in฀the฀coming฀year.฀Together,฀the฀learnings฀from฀our฀Vitacost฀and฀Harris฀Teeter฀
mergers are helping us give our customers the ability to interact with us when, where and how they
want.฀ More฀ customers฀ than฀ ever฀ before฀ are฀ engaging฀ with฀ our฀ digital฀ properties.฀ More฀ than฀ 15฀ million฀
customers฀have฀digital฀accounts฀with฀Kroger,฀through฀which฀they฀receive฀unique฀benefits฀and฀offers฀on฀our฀
suite฀of฀digital฀platforms,฀including฀our฀mobile฀app,฀website฀and฀social฀media฀sites.฀
We are entering a new era in customer engagement with the introduction of 84.51°. Early฀ in฀
2015,฀Kroger฀and฀our฀data฀analytics฀partner฀dunnhumby฀Ltd฀announced฀a฀new฀chapter฀in฀our฀relationship฀
to฀ accelerate฀ innovation฀ in฀ customer฀ science.฀ We฀ replaced฀ our฀ existing฀ exclusive฀ joint฀ venture฀ called฀
dunnhumbyUSA฀with฀a฀more฀flexible฀arrangement฀and฀the฀acquisition฀of฀certain฀assets฀from฀dunnhumbyUSA.฀
Operating฀with฀those฀acquired฀assets฀as฀its฀foundation,฀our฀new,฀wholly-owned฀subsidiary,฀84.51°,฀is฀starting฀
with฀ 500฀ talented฀ associates฀ from฀ the฀ former฀ JV฀ and฀ the฀ technology฀ to฀ continue฀ developing฀ our฀ leading฀
customer฀loyalty฀program.฀In฀addition,฀the฀ability฀to฀combine฀what฀we฀already฀know฀with฀other฀partners฀is฀
exciting฀and฀will฀speed฀up฀innovation.฀