The Kroger Co. (NYSE:KR) Q3 2019 Earnings Conference Call - Final Transcript

Dec 05, 2019 • 10:00 am ET


The Kroger Co. (NYSE:KR) Q3 2019 Earnings Conference Call - Final Transcript


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Good morning and welcome to The Kroger Co. Third Quarter 2019 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Rebekah Manis, Director, Investor Relations. Please go ahead.

Rebekah Manis

Thank you, Gary. Good morning and thank you for joining us. Before we begin, I want to remind you that today's discussion will include forward-looking statements. We want to caution you that such statements are predictions and actual events or results can differ materially. A detailed discussion of the many factors that we believe may have a material effect on the business on an ongoing basis is contained in our SEC filings, but Kroger assumes no obligation to update that information.

Both our third quarter press release and our prepared remarks for this conference will be available on our website at After our prepared remarks, we look forward to taking your questions. In order to cover a broad range of topics from many of you as we can, we ask that you please limit yourself to one question and one follow-up question, if necessary.

I will now turn the call over to Kroger's Chairman and Chief Executive Officer, Rodney McMullen.

W. Rodney McMullen

Thank you, Rebekah. Good morning everyone and thank you for joining us today. With me to review Kroger's third quarter 2019 results is Chief Financial Officer, Gary Millerchip.

I would like to thank those of you who were able to attend our Investor Conference last month, where we shared our progress on Restock Kroger. We believe that Restock Kroger is the right framework to reposition our business to create value for all of our stakeholders. It provides us with a clear purpose and our vision to serve America through food inspiration and uplift. It focuses us on redefining the customer experience, identifying the partners who will help us deliver customer value today and in the future, and putting the right talent and teams in place to focus on growth in our supermarket business and our alternative profit businesses. We are proud of the progress we've made and we've learned from the challenges we've experienced. We are on track with a stable and growing supermarket business as a result of our customer obsession, renewed intensity around operational excellence and continued investment in seamless.

We are growing our supermarket business by focusing on three levers to drive identical sales; fresh, Our Brands, and data and personalization. And we continue to build a seamless ecosystem that is available, relevant and accessible for our customers. All of this combined to generate positive results in the third quarter.

We continue to grow identical sales, reduce cost and deliver strong free cash flow. We had a broad-based identical sales improvement. 15 of our divisions had increasing supermarket identical sales without fuel compared to the second quarter. We delivered a slightly improved FIFO gross margin, excluding fuel and pharmacy. Headwinds in pharmacy were offset by strong fuel performance during the quarter. We are on track to deliver $100 million in incremental operating profit