The Kroger Co. (NYSE:KR) Q4 2016 Earnings Conference Call Transcript

Mar 02, 2017 • 10:00 am ET

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The Kroger Co. (NYSE:KR) Q4 2016 Earnings Conference Call Transcript

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Operator
operator

Good morning and welcome to The Kroger Company fourth quarter earnings conference call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Kate Ward, Director of Investor Relations. Please go ahead.

Executive
Kate Ward

Thank you, Carrie. Good morning, and thank you for joining us. (Forward-Looking Cautionary Statements). Both our fourth quarter press release and our prepared remarks from this conference will be available on our website, at ir.Kroger.com. After our prepared remarks, we look forward to taking your questions. In order to cover a broad range of topics from as many of you as we can, we ask that you please limit yourself to one question and one follow-up question, if necessary. Thank you. I will now turn the call over to Kroger's Chairman and Chief Executive Officer, Rodney McMullen.

Executive
Rodney McMullen

Thank you, Kate, and good morning everyone, and thank you for joining us today. With me to review Kroger's fourth quarter and fiscal 2016 results is Mike Schlotman, Executive Vice President and Chief Financial Officer. As we all know, some times are just more challenging than others, and last year certainly didn't end the way we expected at the start of the year, but 2016 still had its bright spots. Of course, our associates and our customers are always a bright spot and I'm so proud of this team for their continuing focus on taking care of our customers each and every time they interact in our stores.

Despite the challenging operating environment, our team pulled together to deliver some results that we should take stock of. Over the past year, The Kroger team delivered our 12th consecutive year of market share growth.

Overall tonnage growth, record high unit share in our corporate brands portfolio, which was led by another blockbuster $1.7 billion year for Simple Truth, a strategic merger with specialty pharmacy leader ModernHEALTH, and reached an agreement to merge with the world's greatest purveyor of specialty cheese, Murray's Cheese, and we created more than 12,000 new American jobs in our stores and hired more than 9,000 veterans and military family members.

That's a lot to be proud of. We're obviously disappointed with our identical supermarket sales number in the fourth quarter and our performance on several other KPIs including FIFO operating margin and return on invested capital, which were driven by the deflationary environment. Kroger is always focused on executing against our long-term strategy.

We are lowering costs to invest those savings in our people, our business, and the technologies to position Kroger to deliver the value proposition customers are seeking today and in the future. One example of our efforts to control administrative cost is making the very difficult decision to extend a voluntary retirement offer for certain non-store associates that we announced in December.

Approximately 2,000 non-store associates were eligible for the offer and at this point, we estimate approximately 1,300 will accept it. As our customers change and evolve, we are taking steps to meet them where they