The Kroger Co. (ticker: KR), one of the largest grocery store chains in the United States, reported a decline in the value of its equity investment in Ocado Group plc during the first quarter of 2023, according to its latest SEC report. Despite the decrease in the investment’s value, Kroger continues to expand its digital and robotics capabilities in partnership with the UK-based online grocery retailer.
Table of Contents
Decline in Ocado Investment Value
According to the SEC report, the fair value of Kroger’s shares in Ocado dropped from $401 million as of January 28, 2023, to $236 million as of May 20, 2023. This marks an unrealized loss of approximately $165 million for the first quarter of 2023, compared to an unrealized loss of $532 million for the same period in 2022. The losses are included in the “Loss on investments” section of Kroger’s Consolidated Statements of Operations.
Digital and Robotics Expansion with Ocado
Despite the decline in Ocado’s share value, Kroger’s partnership with the company is facilitating the expansion of the US grocery giant’s digital and robotics capabilities in its distribution networks. In May 2018, Kroger entered into a Partnership Framework Agreement with Ocado, which has since been amended. Under this exclusive agreement for the US market, Ocado helps Kroger enhance its digital capabilities and distribution networks using robotic equipment for fulfilling customer orders at the grocery chain’s customer fulfillment centers.
New Customer Fulfillment Center and Finance Lease Agreements
In the first quarter of 2023, Kroger opened an additional customer fulfillment center in Frederick, Maryland. To date, the company has established finance lease agreements for each of these facilities, which utilize robotic equipment provided by Ocado. As of May 20, 2023, the net finance lease assets related to Kroger’s agreement with Ocado were $1,012 million, up from $928 million as of January 28, 2023.
First Quarter Earnings and Long-Term Debt
Kroger’s net earnings for the first quarter of 2023 reached $962 million with a diluted earnings per share of $1.32, compared to net earnings of $657 million and a diluted earnings per share of $0.90 in the same period in 2022. The company continues to solidify its market position, with total long-term debt, excluding obligations under finance leases, amounting to $10.1 billion as of May 20, 2023.
Managing Financial Risks
Moreover, the recent report also disclosed that the fair value of Kroger’s forward-starting interest rate swaps, which lock in fixed interest rates for its forecasted debt issuances, stood at $6 million for those designated as cash-flow hedges and -$55 million for those not designated as cash-flow hedges as of May 20, 2023. These figures indicate that the company is actively managing its financial risks in response to market fluctuations.
Strategic Benefits of Kroger-Ocado Partnership
Although the value of Kroger’s investment in Ocado has declined, the partnership’s strategic benefits are evident in the expansion of Kroger’s digital and robotics capabilities. The ongoing development of customer fulfillment centers helps Kroger serve the continually growing online grocery market while making the grocery shopping experience more efficient and enjoyable for customers. As technology continues to play a vital role in the retail sector, Kroger’s partnership with Ocado demonstrates the company’s commitment to embracing innovation and ensuring its competitive advantage in the industry.
Income Statement
Financials in millions USD. Fiscal year is February – January. source
| Year | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 – 1992 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 0 | Revenue | 148258 | 137888 | 132498 | 122286 | 121852 | 123280 | 115337 | 109830 | 108465 | 98375 | Upgrade |
| 1 | Revenue Growth (YoY) | 7.52% | 4.07% | 8.35% | 0.36% | -1.16% | 6.89% | 5.01% | 1.26% | 10.26% | 1.82% | Upgrade |
| 2 | Cost of Revenue | 116480 | 107539 | 101597 | 95294 | 95103 | 95811 | 89502 | 85496 | 85512 | 78138 | Upgrade |
| 3 | Gross Profit | 31778 | 30349 | 30901 | 26992 | 26749 | 27469 | 25835 | 24334 | 22953 | 20237 | Upgrade |
| 4 | Selling, General & Admin | 23848 | 23203 | 24500 | 21208 | 20786 | 21510 | 19162 | 17946 | 17161 | 15196 | Upgrade |
| 5 | Other Operating Expenses | 3804 | 3669 | 3621 | 3533 | 3349 | 3347 | 3221 | 2812 | 2655 | 2316 | Upgrade |
| 6 | Operating Expenses | 27652 | 26872 | 28121 | 24741 | 24135 | 24857 | 22383 | 20758 | 19816 | 17512 | Upgrade |
| 7 | Operating Income | 4126 | 3477 | 2780 | 2251 | 2614 | 2612 | 3452 | 3576 | 3137 | 2725 | Upgrade |
| 8 | Interest Expense / Income | 535 | 571 | 544 | 603 | 620 | 601 | 522 | 482 | 488 | 443 | Upgrade |
| 9 | Other Expense / Income | 694 | 866 | -1131 | -480 | -2016 | 509 | -2 | 10 | 19 | 12 | Upgrade |
| 10 | Pretax Income | 2897 | 2040 | 3367 | 2128 | 4010 | 1502 | 2932 | 3084 | 2630 | 2270 | Upgrade |
| 11 | Income Tax | 653 | 385 | 782 | 469 | 900 | -405 | 957 | 1045 | 902 | 751 | Upgrade |
| 12 | Net Income | 2244 | 1655 | 2585 | 1659 | 3110 | 1907 | 1975 | 2039 | 1728 | 1519 | Upgrade |
| 13 | Net Income Growth | 35.59% | -35.98% | 55.82% | -46.66% | 63.08% | -3.44% | -3.14% | 18.00% | 13.76% | 1.47% | Upgrade |
| 14 | Shares Outstanding (Basic) | 718 | 744 | 773 | 799 | 810 | 895 | 942 | 966 | 981 | 1028 | Upgrade |
| 15 | Shares Outstanding (Diluted) | 727 | 754 | 781 | 805 | 818 | 904 | 958 | 980 | 993 | 1040 | Upgrade |
| 16 | Shares Change | -3.58% | -3.46% | -2.98% | -1.59% | -9.51% | -5.64% | -2.24% | -1.31% | -4.52% | -3.17% | Upgrade |
| 17 | EPS (Basic) | 3.10 | 2.20 | 3.31 | 2.05 | 3.80 | 2.11 | 2.08 | 2.09 | 1.74 | 1.47 | Upgrade |
| 18 | EPS (Diluted) | 3.06 | 2.17 | 3.27 | 2.04 | 3.76 | 2.09 | 2.05 | 2.06 | 1.72 | 1.45 | Upgrade |
| 19 | EPS Growth | 41.01% | -33.64% | 60.29% | -45.74% | 79.90% | 1.95% | -0.49% | 19.77% | 18.62% | 4.69% | Upgrade |
| 20 | Free Cash Flow Per Share | 2.09 | 5.01 | 5.32 | 2.26 | 1.58 | 0.83 | 0.75 | 1.67 | 1.45 | 1.23 | Upgrade |
| 21 | Dividend Per Share | 0.940 | 0.780 | 0.680 | 0.600 | 0.985 | 0.490 | 0.450 | 0.500 | 0.340 | 0.307 | Upgrade |
| 22 | Dividend Growth | 20.51% | 14.71% | 13.33% | -39.09% | 101.02% | 8.89% | -10.00% | 47.06% | 10.75% | 24.29% | Upgrade |
| 23 | Gross Margin | 21.43% | 22.01% | 23.32% | 22.07% | 21.95% | 22.28% | 22.40% | 22.16% | 21.16% | 20.57% | Upgrade |
| 24 | Operating Margin | 2.78% | 2.52% | 2.10% | 1.84% | 2.15% | 2.12% | 2.99% | 3.26% | 2.89% | 2.77% | Upgrade |
| 25 | Profit Margin | 1.51% | 1.20% | 1.95% | 1.36% | 2.55% | 1.55% | 1.71% | 1.86% | 1.59% | 1.54% | Upgrade |
| 26 | Free Cash Flow Margin | 1.01% | 2.70% | 3.11% | 1.48% | 1.05% | 0.60% | 0.61% | 1.47% | 1.31% | 1.29% | Upgrade |
| 27 | Effective Tax Rate | 22.54% | 18.87% | 23.23% | 22.04% | 22.44% | -26.96% | 32.64% | 33.88% | 34.30% | 33.08% | Upgrade |
| 28 | EBITDA | 7011 | 6040 | 7284 | 6020 | 7095 | 4539 | 5794 | 5655 | 5066 | 4416 | Upgrade |
| 29 | EBITDA Margin | 4.73% | 4.38% | 5.50% | 4.92% | 5.82% | 3.68% | 5.02% | 5.15% | 4.67% | 4.49% | Upgrade |
| 30 | Depreciation & Amortization | 3579 | 3429 | 3373 | 3289 | 2465 | 2436 | 2340 | 2089 | 1948 | 1703 | Upgrade |
| 31 | EBIT | 3432 | 2611 | 3911 | 2731 | 4630 | 2103 | 3454 | 3566 | 3118 | 2713 | Upgrade |
| 32 | EBIT Margin | 2.31% | 1.89% | 2.95% | 2.23% | 3.80% | 1.71% | 2.99% | 3.25% | 2.87% | 2.76% | Upgrade |
Note that we may hold securities mentioned in this article. All data is based on recent SEC filings. Even though we have implemented various manual and automatic fact-checking and data acquisition processes, some incorrect information may have slipped through (false positive). Let us know if you find any inconsistencies!