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Yahoo
7 hours ago
- Business
- Yahoo
Kroger Reports First Quarter 2025 Results and Updates Identical Sales without Fuel Guidance for 2025
First Quarter Highlights Identical Sales without fuel increased 3.2%* Operating Profit of $1,322 million; EPS of $1.29 Adjusted FIFO Operating Profit of $1,518 million and Adjusted EPS of $1.49 eCommerce sales increased 15% CINCINNATI, June 20, 2025 /PRNewswire/ -- The Kroger Co. (NYSE: KR) today reported its first quarter 2025 results, updated 2025 identical sales without fuel guidance and shared our progress on key priorities. Comments from Chairman and CEO Ron Sargent "Kroger delivered solid first quarter results, with strong sales led by pharmacy, eCommerce and fresh. We made good progress in streamlining our priorities, enhancing customer focus, and running great stores to improve the shopping experience. Our commitment to driving growth in our core business and moving with speed positions us well for the future. We are confident in our ability to build on our momentum, deliver value for customers, invest in associates and generate attractive returns for shareholders." * Excludes adjustment items First Quarter Financial Results1Q25 ($ in millions; except EPS) 1Q24 ($ in millions; except EPS) ID Sales(1) (Table 4) 3.2 % 0.5 % Earnings Per Share $1.29 $1.29 Adjusted EPS (Table 6) $1.49 $1.43 Operating Profit $1,322 $1,294 Adjusted FIFO Operating Profit (Table 7) $1,518 $1,499 Gross Margin (Table 8) 23.0 % 22.0 % FIFO Gross Margin Rate(2) Increased 79 basis points (including 46 basis points increase from the sale of Kroger Specialty Pharmacy) OG&A Rate(1) Increased 63 basis points (including 33 basis points increase from the sale of Kroger Specialty Pharmacy) (1) Without fuel and adjustment items, if applicable. (2) Without rent, depreciation and amortization, fuel and adjustment items, if applicable. Total company sales were $45.1 billion in the first quarter compared to $45.3 billion for the same period last year, which included $917 million from Kroger Specialty Pharmacy sales. Excluding fuel, Kroger Specialty Pharmacy and adjustment items, sales increased 3.7% compared to the same period last year. Gross margin was 23.0% of sales for the first quarter compared to 22.0% for the same period last year. The improvement in gross margin was primarily attributable to the sale of Kroger Specialty Pharmacy, lower shrink and lower supply chain costs, partially offset by the mix effect from growth in pharmacy sales which have lower margins. The FIFO gross margin rate, excluding rent, depreciation and amortization, fuel and adjustment items increased 79 basis points compared to the same period last year. The improvement in rate was primarily attributable to the sale of Kroger Specialty Pharmacy, lower shrink and lower supply chain costs, partially offset by the mix effect from growth in pharmacy sales which have lower margins. The LIFO charge for the quarter was $40 million, compared to a LIFO charge of $41 million for the same period last year. The Operating, General and Administrative rate, excluding fuel, and adjustment items, increased 63 basis points compared to the same period last year. The increase in rate was primarily attributable to the sale of Kroger Specialty Pharmacy and an accelerated contribution to a multi-employer pension plan, partially offset by improved productivity. Multi-employer pension contributions drove a 29 basis point increase in the quarter. In the first quarter, Kroger recognized an impairment charge of $100 million related to the planned closing of approximately 60 stores over the next 18 months. As a result of these store closures, Kroger expects a modest financial benefit. Kroger is committed to reinvesting these savings back into the customer experience, and as a result, this will not impact full-year guidance. Kroger will offer roles in other stores to all associates currently employed at affected stores. Capital Allocation Strategy Kroger expects to continue to generate strong free cash flow and remains committed to investing in the business to drive long-term sustainable net earnings growth, as well as maintaining its current investment grade debt rating. The Company expects to continue to pay its quarterly dividend and expects this to increase over time, subject to board approval. During the fourth quarter of Kroger's fiscal 2024, Kroger entered into a $5 billion accelerated share repurchase program (ASR), which is expected to be completed by no later than Kroger's fiscal third quarter 2025. The ASR is being completed under Kroger's $7.5 billion share repurchase authorization. After completion of the ASR program, Kroger expects to resume open market share repurchases under the remaining $2.5 billion authorization. Kroger expects to complete these open market share repurchases by the end of fiscal 2025, which is contemplated in full-year guidance. Kroger's net total debt to adjusted EBITDA ratio is 1.69, compared to 1.25 a year ago (Table 5). The company's net total debt to adjusted EBITDA ratio target range is 2.30 to 2.50. Kroger's strong balance sheet provides ample opportunities for the Company to invest in the business and enhance shareholder value. Full-Year 2025 Guidance* Updated Identical Sales without fuel of 2.25% – 3.25% Reaffirmed Adjusted FIFO Operating Profit of $4.7 – $4.9 billion Adjusted net earnings per diluted share of $4.60 – $4.80 Adjusted Free Cash Flow of $2.8 – $3.0 billion** Capital expenditures of $3.6 – $3.8 billion Adjusted effective tax rate of 23%*** * Without adjusted items, if applicable. Kroger is unable to provide a full reconciliation of the GAAP and non-GAAP measures used in 2025 guidance without unreasonable effort because it is not possible to predict certain of our adjustment items with a reasonable degree of certainty. This information is dependent upon future events and may be outside of our control and its unavailability could have a significant impact on 2025 GAAP financial results. ** Adjusted free cash flow excludes planned payments related to the restructuring of multi-employer pension plans, payments related to opioid settlements and merger litigation costs. *** The adjusted tax rate reflects typical tax adjustments and does not reflect changes to the rate from the completion of income tax audit examinations and changes in tax laws and policies, which cannot be predicted. Comments from CFO David Kennerley "Our strong sales results and positive momentum give us confidence to raise our identical sales without fuel guidance, to a new range of 2.25% to 3.25%. While first quarter sales and profitability exceeded our expectations, the macroeconomic environment remains uncertain and as a result other elements of our guidance remain unchanged. We continue to believe that our strategy focusing on fresh, Our Brands and eCommerce will continue to resonate with customers and our resilient model positions us well to navigate the current environment." About Kroger At The Kroger Co. (NYSE: KR), we are dedicated to our Purpose: To Feed the Human Spirit™. We are, across our family of companies nearly 410,000 associates who serve over 11 millioncustomers daily through an eCommerce and store experience under a variety of banner names, serving America through food inspiration and uplift, and creating #ZeroHungerZeroWaste communities. To learn more about us, visit our newsroom and investor relations site. Kroger's first quarter 2025 ended on May 24, 2025. Note: Fuel sales have historically had a low gross margin rate and operating expense rate as compared to corresponding rates on non-fuel sales. As a result, Kroger discusses the changes in these rates excluding the effect of fuel. Please refer to the supplemental information presented in the tables for reconciliations of the non-GAAP financial measures used in this press release to the most comparable GAAP financial measure and related disclosure. As noted above, Kroger is unable to provide a full reconciliation of the GAAP and non-GAAP measures used in its guidance without unreasonable effort because it is not possible to predict certain of our adjustment items with a reasonable degree of certainty. This information is dependent upon future events and may be outside of our control and its unavailability could have a significant impact on GAAP financial results. This press release contains certain statements that constitute "forward-looking statements" about Kroger's financial position and the future performance of the company. These statements are based on management's assumptions and beliefs in light of the information currently available to it. Such statements are indicated by words or phrases such as "achieve," "committed," "confidence," "continue," "deliver," "drive," "expect," "future," "guidance," "model," "opportunities," "outlook," "strategy," "target," "trends," "will," and variations of such words and similar phrases. Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. These include the specific risk factors identified in "Risk Factors" in our annual report on Form 10-K for our last fiscal year and any subsequent filings, as well as the following: Kroger's ability to achieve sales, earnings, incremental FIFO operating profit, and adjusted free cash flow goals may be affected by: labor negotiations; potential work stoppages; changes in the unemployment rate; pressures in the labor market; changes in government-funded benefit programs; changes in the types and numbers of businesses that compete with Kroger; pricing and promotional activities of existing and new competitors, and the aggressiveness of that competition; Kroger's response to these actions; the state of the economy, including interest rates, the inflationary, disinflationary and/or deflationary trends and such trends in certain commodities, products and/or operating costs; the geopolitical environment including wars and conflicts; unstable political situations and social unrest; changes in tariffs; the effect that fuel costs have on consumer spending; volatility of fuel margins; manufacturing commodity costs; supply constraints; diesel fuel costs related to Kroger's logistics operations; trends in consumer spending; the extent to which Kroger's customers exercise caution in their purchasing in response to economic conditions; the uncertainty of economic growth or recession; stock repurchases; changes in the regulatory environment in which Kroger operates, along with changes in federal policy and at regulatory agencies; Kroger's ability to retain pharmacy sales from third party payors; consolidation in the healthcare industry, including pharmacy benefit managers; Kroger's ability to negotiate modifications to multi-employer pension plans; natural disasters or adverse weather conditions; the effect of public health crises or other significant catastrophic events; the potential costs and risks associated with potential cyber-attacks or data security breaches; the success of Kroger's future growth plans; the ability to execute our growth strategy and value creation model, including continued cost savings, growth of our alternative profit businesses, and our ability to better serve our customers and to generate customer loyalty and sustainable growth through our strategic pillars of fresh, our brands, personalization, and seamless; the outcome of litigation matters, including those relating to the terminated transaction with Albertsons; and the risks relating to or arising from our opioid litigation settlements, including the risk of litigation relating to persons, entities, or jurisdictions that do not participate in those settlements . Our ability to achieve these goals may also be affected by our ability to manage the factors identified above. Our ability to execute our financial strategy may be affected by our ability to generate cash flow. Kroger's adjusted effective tax rate may differ from the expected rate due to changes in tax laws and policies, the status of pending items with various taxing authorities, and the deductibility of certain expenses. Kroger assumes no obligation to update the information contained herein unless required by applicable law. Please refer to Kroger's reports and filings with the Securities and Exchange Commission for a further discussion of these risks and uncertainties. Note: Kroger's quarterly conference call with investors will broadcast live at 10 a.m. (ET) on June 20, 2025 at An on-demand replay of the webcast will be available at approximately 1 p.m. (ET) on Friday, June 20, 2025. 1st Quarter 2025 Tables Include: Consolidated Statements of Operations Consolidated Balance Sheets Consolidated Statements of Cash Flows Supplemental Sales Information Reconciliation of Net Total Debt and Net Earnings Attributable to The Kroger Co. to Adjusted EBITDA Net Earnings Per Diluted Share Excluding the Adjustment Items Operating Profit Excluding the Adjustment Items Gross Margin Table 1. THE KROGER CO. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share amounts) (unaudited)FIRST QUARTER 20252024 SALES $ 45,118100.0 %$ 45,269100.0 % OPERATING EXPENSES MERCHANDISE COSTS, INCLUDING ADVERTISING, WAREHOUSING AND TRANSPORTATION (a), AND LIFO CHARGE (b) 34,55176.635,12477.6 OPERATING, GENERAL AND ADMINISTRATIVE (a) 7,92317.67,60416.8 RENT 2710.62690.6 DEPRECIATION AND AMORTIZATION 1,0512.39782.1 OPERATING PROFIT1,3222.91,2942.9 OTHER INCOME (EXPENSE) NET INTEREST EXPENSE (199)(0.5)(123)(0.3) NON-SERVICE COMPONENT OF COMPANY-SPONSOREDPENSION PLAN (EXPENSE) BENEFITS (1)-4- (LOSS) GAIN ON INVESTMENTS (19)-16- NET EARNINGS BEFORE INCOME TAX EXPENSE1,1032.41,1912.6INCOME TAX EXPENSE2350.52350.5 NET EARNINGS INCLUDING NONCONTROLLING INTERESTS8681.99562.1 NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS2-9- NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. $ 8661.9 %$ 9472.1 % NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER BASIC COMMON SHARE$ 1.30$ 1.30 AVERAGE NUMBER OF COMMON SHARES USED IN BASIC CALCULATION660721 NET EARNINGS ATTRIBUTABLE TO THE KROGER CO. PER DILUTED COMMON SHARE$ 1.29$ 1.29 AVERAGE NUMBER OF COMMON SHARES USED IN DILUTED CALCULATION664727DIVIDENDS DECLARED PER COMMON SHARE $ 0.32$ 0.29Note: Certain percentages may not sum due to rounding. Note: The Company defines First-In First-Out (FIFO) gross profit as sales minus merchandise costs, including advertising, warehousing and transportation, but excluding the Last-In First-Out (LIFO) charge, rent and depreciation and amortization. The Company defines FIFO gross margin as FIFO gross profit divided by sales. The Company defines FIFO operating profit as operating profit excluding the LIFO charge. The Company defines FIFO operating margin as FIFO operating profit divided by sales. The above FIFO financial metrics are important measures used by management to evaluate operational effectiveness. Management believes these FIFO financial metrics are useful to investors and analysts because they measure our day-to-day operational effectiveness. (a) Merchandise costs ("COGS") and operating, general and administrative expenses ("OG&A") exclude depreciation and amortization expense and rent expense which are included in separate expense lines. (b) LIFO charges of $40 and $41 were recorded in the first quarters of 2025 and 2024, respectively. Table 2. THE KROGER CO. CONSOLIDATED BALANCE SHEETS (in millions) (unaudited) May 24,May 25, 20252024 ASSETS Current AssetsCash $ 340$ 345 Temporary cash investments 4,3982,501 Store deposits in-transit1,1791,226 Receivables 2,1311,968 Inventories 7,0206,694 Assets held for sale-607 Prepaid and other current assets 697822 Total current assets15,76514,163 Property, plant and equipment, net 25,82925,537Operating lease assets6,8406,695Intangibles, net 836864Goodwill 2,6742,673Other assets 1,3041,647 Total Assets $ 53,248$ 51,579LIABILITIES AND SHAREOWNERS' EQUITYCurrent LiabilitiesCurrent portion of long-term debt including obligations under finance leases$ 807$ 198 Current portion of operating lease liabilities668665 Accounts payable10,56210,777 Accrued salaries and wages 1,2091,208 Liabilities held for sale-242 Other current liabilities3,3793,288 Total current liabilities16,62516,378 Long-term debt including obligations under finance leases 17,13812,021Noncurrent operating lease liabilities 6,5956,412Deferred income taxes1,4011,535Pension and postretirement benefit obligations381386Other long-term liabilities2,2002,434 Total Liabilities44,34039,166 Shareowners' equity 8,90812,413 Total Liabilities and Shareowners' Equity$ 53,248$ 51,579Total common shares outstanding at end of period661722Total diluted shares year-to-date 664727 Table 3. THE KROGER CO. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited) YEAR-TO-DATE 20252024 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings including noncontrolling interests$ 868$ 956 Adjustments to reconcile net earnings including noncontrollinginterests to net cash provided by operating activities: Depreciation and amortization 1,051978 Asset impairment and store closure changes 10820 Operating lease asset amortization184187 LIFO charge4041 Share-based employee compensation3857 Deferred income taxes (16)(64) Loss (gain) on investments 19(16) Other(37)(10) Changes in operating assets and liabilities: Store deposits in-transit 133(11) Receivables 47(102) Inventories (23)225 Prepaid and other current assets86(208) Accounts payable 288622 Accrued expenses (381)(327) Income taxes receivable and payable41180 Operating lease liabilities (134)(137) Other(163)(49)Net cash provided by operating activities2,1492,342CASH FLOWS FROM INVESTING ACTIVITIES: Payments for property and equipment, including payments for lease buyouts(1,044)(1,304) Proceeds from sale of assets 12304 Other(7)(14)Net cash used by investing activities (1,039)(1,014)CASH FLOWS FROM FINANCING ACTIVITIES: Payments on long-term debt including obligations under finance leases(52)(54) Dividends paid(211)(210) Proceeds from issuance of capital stock14585 Treasury stock purchases (181)(103) Other(32)(66)Net cash used by financing activities (331)(348) NET INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS 779980 CASH AND TEMPORARY CASH INVESTMENTS: BEGINNING OF YEAR 3,9591,883 END OF PERIOD$ 4,738$ 2,863Reconciliation of capital investments:Payments for property and equipment, including payments for lease buyouts$ (1,044)$ (1,304) Payments for lease buyouts 1137 Changes in construction-in-progress payables(150)37Total capital investments, excluding lease buyouts$ (1,183)$ (1,230) Disclosure of cash flow information: Cash paid during the year for net interest$ 269$ 70Cash paid during the year for income taxes$ 203$ 119 Table 4. Supplemental Sales Information (in millions, except percentages) (unaudited)Items identified below should not be considered as alternatives to sales or any other GAAP measure of performance. Identical sales is an industry-specific measure, and it is important to review it in conjunction with Kroger's financial results reported in accordance with GAAP. Other companies in our industry may calculate identical sales differently than Kroger does, limiting the comparability of the defines identical sales, excluding fuel, as sales to retail customers, including sales from all departments at identical supermarket locations, jewelry and ship-to-home solutions. Kroger defines a supermarket as identical whenit has been in operation without expansion or relocation for five full quarters. We include Kroger Delivery sales as identical if the delivery occurs in an existing Kroger Supermarket geography or when the location has been in operation for five full quarters. IDENTICAL SALES (a)EXCLUDING ADJUSTMENT ITEMS FIRST QUARTER (a)FIRST QUARTER 2025202420252024EXCLUDING FUEL$ 39,766$ 38,535$ 40,027$ 38,867EXCLUDING FUEL3.2 %0.5 %3.0 %0.5 % (a) Identical sales, excluding fuel, were adjusted to exclude stores involved in the labor disputes in Colorado. Identical sales, excluding fuel, were excluded for the first four weeks of the quarter for stores involved in this labor dispute. Table 5. Reconciliation of Net Total Debt and Net Earnings Attributable to The Kroger Co. to Adjusted EBITDA (in millions, except for ratio) (unaudited)The items identified below should not be considered an alternative to any GAAP measure of performance or access to liquidity. Net total debt to adjusted EBITDA is an important measure used by management to evaluate the Company's access to liquidity. The items below should be reviewed in conjunction with Kroger's financial results reported in accordance with following table provides a reconciliation of net total 24,May 25, 20252024ChangeCurrent portion of long-term debt including obligations under finance leases$ 807$ 198$ 609 Long-term debt including obligations under finance leases17,13812,0215,117 Total debt17,94512,2195,726Less: Temporary cash investments4,3982,5011,897 Net total debt$ 13,547$ 9,718$ 3,829 The following table provides a reconciliation from net earnings attributable to The Kroger Co. to adjusted EBITDA, as defined in the Company's credit agreement, on a rolling four quarter 52-week basis. ROLLING FOUR QUARTERS ENDEDMay 24, May 25,2025 2024Net earnings attributable to The Kroger Co. on a 53-week basis in fiscal year 2023 $ 2,584 $ 2,149 LIFO charge 94 55 Depreciation and amortization 3,319 3,146 Net interest expense 526 411 Income tax expense 670 616 Adjustment for loss (gain) on investments 183 (245) Adjustment for severance charge and related benefits 32 - Adjustment for impairment of intangible assets 30 - Adjustment for property losses 25 - Adjustment for merger-related costs (a) 509 450 Adjustment for merger-related litigation costs 15 - Adjustment for opioid settlement charges and vendor reserves (5) 1,413 Adjustment for gain on sale of Kroger Specialty Pharmacy (79) - Adjustment for labor dispute charges 44 - Adjustment for store closures 100 - Adjustment for executive stock compensation for a former executive (21) - 53rd week EBITDA adjustment - (187) Other (11) (14)Adjusted EBITDA $ 8,015 $ 7,794Net total debt to adjusted EBITDA ratio on a 52-week basis 1.69 1.25 (a) Merger-related costs primarily include third-party professional fees and credit facility fees associated with the terminated merger with Albertsons Companies, Inc. Table 6. Net Earnings Per Diluted Share Excluding the Adjustment Items (in millions, except per share amounts) (unaudited)The purpose of this table is to better illustrate comparable operating results from our ongoing business, after removing the effects on net earnings per diluted common share for certain items described below. Adjusted net earnings and adjusted net earnings per diluted share are useful metrics to investors and analysts because they present more accurately year-over-year comparisons for net earnings and net earnings per diluted share because adjusted items are not the result of normal operations. Items identified in this table should not be considered alternatives to net earnings attributable to The Kroger Co. or any other GAAP measure of performance. These items should not be reviewed in isolation or considered substitutes for the Company's financial results as reported in accordance with GAAP. Due to the nature of these items, as further described below, it is important to identify these items and to review them in conjunction with the Company's financial results reported in accordance with following table summarizes items that affected the Company's financial results during the periods presented. FIRST QUARTER20252024Net earnings attributable to The Kroger Co.$ 866$ 947Adjustment for loss (gain) on investments (a)(b)15(12)Adjustment for labor dispute charges (a)(c)33-Adjustment for store closures (a)(d)77-Adjustment for executive stock compensation for a former executive (a)(e)(16)-Adjustment for merger-related costs (a)(f) -143Adjustment for merger-related litigation costs (a)(g)11-Adjustment for opioid settlement charges and vendor reserves (a)(h) 17-Executive stock compensation for a former executive income tax adjustment(7)-Held for sale income tax adjustment -(31)2025 and 2024 Adjustment Items 130100Net earnings attributable to The Kroger Co. excluding the adjustment items above$ 996$ 1,047Net earnings attributable to The Kroger Co. per diluted common share $ 1.29$ 1.29Adjustment for loss (gain) on investments (i)0.02(0.02)Adjustment for labor dispute charges (i)0.05-Adjustment for store closures (i)0.12-Adjustment for executive stock compensation for a former executive (i)(0.03)-Adjustment for merger-related costs (i) -0.20Adjustment for merger-related litigation costs (i)0.02-Adjustment for opioid settlement charges and vendor reserves (i) 0.03-Executive stock compensation for a former executive income tax adjustment (i)(0.01)-Held for sale income tax adjustment (i)-(0.04)2025 and 2024 Adjustment Items 0.200.14Net earnings attributable to The Kroger Co. per diluted common share excluding the adjustment items above$ 1.49$ 1.43Average number of common shares used in diluted calculation 664727 Table 6. Net Earnings Per Diluted Share Excluding the Adjustment Items (continued) (in millions, except per share amounts) (unaudited) (a) The amounts presented represent the after-tax effect of each adjustment. (b) The pre-tax adjustments for loss (gain) on investments were $19 and $(16) in the first quarters of 2025 and 2024, respectively. (c) The pre-tax adjustments to Sales, COGS and OG&A expenses for labor dispute charges was $44. (d) The pre-tax adjustment to OG&A expenses for store closures was $100. (e) The pre-tax adjustment to OG&A expenses for executive stock compensation for a former executive was $(21). (f) The pre-tax adjustment to OG&A expenses for merger-related costs was $175. (g) The pre-tax adjustment to OG&A expenses for merger-related litigation costs was $15. (h) The pre-tax adjustments to OG&A expenses for opioid settlement charges and vendor reserves was $22. (i) The amounts presented represent the net earnings (loss) per diluted common share effect of each adjustment. Note: 2025 First Quarter Adjustment Items include adjustments for the loss on investments, labor dispute charges, store closures, executive stock compensation for a former executive, merger-related litigation costs, opioid settlement charges and vendor reserves and executive stock compensation for a former executive income tax.2024 First Quarter Adjustment Items include adjustments for the gain on investments, merger-related costs and held for sale income tax . Table 7. Operating Profit Excluding the Adjustment Items (in millions) (unaudited)The purpose of this table is to better illustrate comparable operating results from our ongoing business, after removing the effects on operating profit for certain items described below. Adjusted FIFO operating profit is a useful metric to investors and analysts because it presents more accurately year-over-year comparisons for operating profit because adjusted items are not the result of normal operations. Items identified in this table should not be considered alternatives to operating profit or any other GAAP measure of performance. These items should not be reviewed in isolation or considered substitutes for the Company's financial results as reported in accordance with GAAP. Due to the nature of these items, as further described below, it is important to identify these items and to review them in conjunction with the Company's financial results reported in accordance with following table summarizes items that affected the Company's financial results during the periods presented. FIRST QUARTER20252024Operating profit$ 1,322$ 1,294LIFO charge4041FIFO operating profit 1,3621,335Adjustment for merger-related costs (a)-175Adjustment for merger-related litigation costs15-Adjustment for opioid settlement charges and vendor reserves22-Adjustment for labor dispute charges44-Adjustment for store closures 100-Adjustment for executive stock compensation for a former executive(21)-Other (4)(11)2025 and 2024 Adjustment items156164Adjusted FIFO operating profit excluding the adjustment items above $ 1,518$ 1,499 (a) Merger-related costs primarily include third party professional fees and credit facility fees associated with the terminated merger with Albertsons Companies, Inc. Table 8. Gross Margin (in millions, except percentages) (unaudited) In the Consolidated Statements of Operations within Table 1, the Company separately presents rent and depreciation and amortization to evaluate operational effectiveness. The table below calculates gross margin in accordance with Generally Accepted Accounting Principles ("GAAP") by including a portion of rent and depreciation and amortization related to the Company's manufacturing and warehousing and transportation activities. The following table provides the calculation of gross profit and gross margin in accordance with QUARTER20252024Sales $ 45,118$ 45,269Merchandise costs, including advertising, warehousing and transportation and LIFO charge, excluding rent and depreciation and amortization34,55135,124Rent 1823Depreciation and amortization 193181Gross profit$ 10,356$ 9,941Gross margin23.0 %22.0 % View original content to download multimedia: SOURCE The Kroger Co.
BBC News
14 hours ago
- Health
- BBC News
Rabies death prompts jump in vaccine inquiries
The death of a British grandmother from rabies after she was scratched by a puppy while on holiday has sparked a surge in the number of travellers seeking advice about vaccinations, a pharmacist has said. Yvonne Ford, 59, from Barnsley, died in hospital in Sheffield on 11 June after having light contact with the stray dog during a family trip to Morocco in Olamide Olokanmi said that, following news of the tragic case: "We've had a lot of phone calls asking about it."He said his pharmacy in Otley, West Yorkshire, had stocked up on the jab but he was concerned that an increase in demand may lead to a shortage of supply. "We frequently have supply issues with vaccines, especially when there's a high demand for them, and rabies notoriously seems to be one of them," said Mr Olokanmi. "Year-on-year we always have that problem, so I do foresee that being a problem."There would then be a wait for it to come back in or we'd have to go to another manufacturer which then drives up the price of the vaccine."It currently costs up to £330 for a three-dose rabies vaccine. 'Lots of calls' Mrs Ford's death from the the virus was the first in the UK since 2018 when a British man was bitten by a cat in the same African Olokanmi said there had already been an upsurge in the number of people seeking advice about whether to get the vaccination before travelling to high-risk regions such as Asia, Africa and Central and South news of Mrs Ford's death, most people accessing the pharmacy's travel clinic opted not to get the jab, he said. Mr Olokanmi added: "We had one lady come in on Wednesday night who is going on holiday to Morocco."She wasn't going to get the vaccine but after hearing what happened to this lady she changed her mind."A young man has also come in who is going to Morocco and we've had a lot of phone calls from people asking about it." Dr Chris Smith, consultant virologist at the University of Cambridge, said rabies was a "big international problem" but very few people in the UK were affected. "We never take risks with rabies. It's universally fatal if you catch it with very few exceptions."Dr Smith, who heads up the university-based The Naked Scientists podcast, added: "Most of the infections we see come from stray dogs and feral cats."It's very tempting when you see a cute looking puppy or kitten and think, I'll just pet that. But if they've got rabies their behaviour changes."They can scratch or bite you and rabies is spread in the saliva of an infected animal and it's then injected into the wound site either by the scratch or bite."Once it's in you, you have very little time for us to intervene to block it before it gets into the nervous system with fatal consequences."If the worst did happen, thankfully we can intervene but you have to do that promptly. Act immediately and in most countries medical facilities know what to do." The London School of Hygiene and Tropical Medicine said the latest case involving Mrs Ford underscored "the importance of awareness and timely treatment" for UK the Association of British Travel Agents (ABTA), said under its code of conduct, it required its members to direct customers to the UK government's travel advice when planning and booking their Brennan, from the organisation, said: "The UK Foreign Office does do a lot to raise awareness of checking this advice and we support them in that, and their work with industry."
Associated Press
a day ago
- Health
- Associated Press
Pharmacy Times® Releases 2025 OTC Guide® Featuring Brands Most Recommended by Pharmacists Nationwide
CRANBURY, N.J., June 19, 2025 (GLOBE NEWSWIRE) -- Pharmacy Times ®, the leading multimedia resource for pharmacy professionals, has released its 2025 OTC Guide ®, the most comprehensive and trusted directory of pharmacist-recommended OTC health products in the United States. Now in its 29th year, the OTC Guide highlights the top pharmacist-recommended brands across 149 product categories, including cough and cold remedies, pain relief, pediatric care, vitamins, skin care and more. The results are based on a national survey of 1,880 pharmacists conducted by Healthcare Research & Analytics (HRA®), a consultative health care market research firm. 'Pharmacists play a pivotal role in the health care system, serving as accessible and highly trained experts in medication use for acute and chronic care, and to support self-care,' said Gil Hernandez, senior vice president of corporate development at MJH Life Sciences®, parent company of Pharmacy Times. 'With the OTC Guide, we are proud to provide a clear and dependable resource that empowers consumers to make smarter health choices backed by the professionals they trust most.' The significance of OTC products in American health care cannot be overstated. According to the Consumer Healthcare Products Association, over 80% of U.S. adults use OTC medicines first for common ailments, making more than 2.9 billion trips annually to purchase these products. For many families, these accessible remedies serve as the first line of defense against everyday health concerns, saving time, lowering health care costs and reducing the need for physician visits. It is estimated that OTC products provide symptomatic relief for an estimated 60 million individuals who would not otherwise seek medical care. With more patients making wellness decisions at home or in community pharmacies, the OTC Guide offers essential insights for navigating the vast landscape of self-care options. Pharmacists are often the first health care professionals consulted when individuals seek relief for everyday conditions, and their recommendations are grounded in real-world experience and patient outcomes. This year's OTC Guide features standout brands across several popular categories: These brands are trusted by consumers and consistently recommended by pharmacists for their safety, efficacy and reliability. 'Consumers are increasingly turning to their local pharmacists for guidance on symptom relief, wellness, and everyday health care decisions,' Hernandez added. 'The 2025 OTC Guide reinforces the vital connection between the pharmacy counter and confident, informed self-care.' The 2025 OTC Guide by Pharmacy Times is available online and in print. To view the full list of pharmacist-recommended brands and get expert guidance for your family's health needs, visit About Pharmacy Times Pharmacy Times is the industry-leading multimedia pharmacy network of community, health system, oncology and specialty pharmacy platforms, providing practical clinical and professional information pharmacists can use in everyday practice when counseling patients and interacting with other health care providers. Each issue and the website contain articles and features covering industry trends, drug interactions, patient education, disease state management, patient counseling, product news, pharmacy law and more. Pharmacy Times Continuing Education is accredited by the Accreditation Council for Pharmacy Education as a provider of continuing pharmacy education. About MJH Life Sciences MJH Life Sciences is the largest privately held, independent, full-service medical media company in North America dedicated to delivering trusted health care news across multiple channels, providing health care professionals with the information and resources they need to optimize patient outcomes. MJH combines the reach and influence of its powerful portfolio of digital and print product lines, live events, educational programs and market research with the customization capabilities of a boutique firm. Clients include world-leading pharmaceutical, medical device, diagnostic and biotech companies. For more information, please visit Media Contact: Julia Paradizova MJH Life Sciences [email protected]
Yahoo
a day ago
- Business
- Yahoo
Exploring CVS' Health Services Segment: A Key Growth Engine for 2025?
Healthcare conglomerate CVS Health CVS formed its Health Services segment through a realignment tied to a new operating model adopted in early 2023. In its last reported quarter, the segment contributed more than $43 billion in revenues — up 8% year over year — driven by growth in specialty pharmacy, higher pricing of branded medications and pharmacy drug mix. However, these gains were partially offset by ongoing price improvements extended to pharmacy clients. The segment includes CVS Caremark, one of the leading pharmacy benefit managers (PBM) in the United States, which helps curb drug spend through its solutions without compromising quality care. Starting July 1, Caremark will list Novo Nordisk's NVO Wegovy as the preferred GLP-1 medicine on its largest commercial template formularies. The Novo Nordisk partnership echoes CVS' launch of a low-cost Humira biosimilar via its Cordavis subsidiary, which now leads the U.S. market. CVS will also serve as the first retail pharmacy in NVO's NovoCare pharmacy network, increasing Wegovy's access at 9,000 community health locations. In the first quarter of 2025, CVS Health processed more than $464 million of pharmacy claims on a 30-day equivalent basis, with membership reaching almost 88 million as of March-end. In the healthcare delivery business, growth continues to be led by the performance of Oak Street and Signify Health assets. Still, persistently elevated Medicare Advantage remains a concern for Oak Street Health's growth. Meanwhile, CVS exited the Accountable Care Organization Realizing Equity, Access and Community Health ('ACO REACH') program and sold its Medicare Shared Savings Program ('MSSP') business to Wellvana Health, incurring a combined loss of $247 million in the first quarter. Still, analysts continue to remain bullish on the segment, with the Zacks Consensus Estimate indicating a 4.6% increase in Health Services revenues over 2024. The Cigna Group CI is gaining from the strength of its Evernorth Health Services portfolio. Within this, CI reported 14% year-over-year growth in Pharmacy Benefit Services in the first quarter of 2025, mainly from existing client relationships and new businesses. Strong specialty volume growth in Cigna's Specialty and Care Services drove an 18.9% improvement. Organic growth in specialty businesses was supported by higher Humira biosimilar adoption. At Humana HUM, the CenterWell segment, which includes the company's pharmacy, primary care and home solutions operations, reported a 37.5% increase in service revenues in the first quarter of 2025. Humana reduced operating costs in this segment owing to its value creation initiatives and also benefited from more favorable operating trends in the primary care business. Still, HUM saw some of the improvement being offset by the impact of the v28 risk model revision. Year to date, CVS Health shares have surged 49.4% against the industry's 0.2% dip. Image Source: Zacks Investment Research In terms of valuation, CVS is trading at a forward 12-month price-to-sales of 0.22X compared to the industry average of 0.41X. The stock's Value Score of A further adds to its appeal. Image Source: Zacks Investment Research Consensus estimates for CVS Health's 2025 earnings have been trending upward over the past 90 days. Image Source: Zacks Investment Research CVS stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Novo Nordisk A/S (NVO) : Free Stock Analysis Report Humana Inc. (HUM) : Free Stock Analysis Report Cigna Group (CI) : Free Stock Analysis Report CVS Health Corporation (CVS) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
Yahoo
2 days ago
- Business
- Yahoo
Walgreens' lost decade: How M&A mania and retail neglect shrunk a $100 billion giant to a $10 billion private equity gamble
In hindsight, it was an exchange that encapsulated years of shopper an earnings call in January, a Wall Street analyst asked Walgreens Boots Alliance CEO Tim Wentworth about his efforts to ease the strain that the U.S. drugstore chain's security measures were putting on its sales. As millions of American shoppers know, and many deeply resent, a great many items in a typical Walgreens are locked up behind glass—obtainable only with help from a clerk. (And, by the way, good luck finding a clerk.) Wentworth responded that countering shoplifting was like 'hand-to-hand combat.' He then made a comment that earned him countless headlines: 'When you lock things up, you don't sell as many of them. We've kind of proven that pretty conclusively.' 'No s–t, Sherlock,' was the general flavor of reactions in countless comment sections, as critics noted that the CEO of the company that owns the eighth-largest U.S. retailer ought to have understood that equation intuitively. Wentworth, a well-regarded executive, went on to explain that the loss to theft was hurting the company's profit too much, hence the draconian lockdowns. But investors' annoyance over his answers pointed to Walgreens' much deeper problems. In 2024, Walgreens drugstores generated non-pharmacy revenue—called 'front-of-store sales' in the industry—of some $27 billion, from items like toothpaste, soda, aspirin, and potato chips; and another $89 billion from filling prescriptions and other pharmacy services. Pharmacy has historically had lower margins than front-of-store, and in recent years, under pressure from insurance companies and rivals, those pharmacy margins have only gotten lower. In the old days, front-of-stores' better profits helped raise overall margins. But alas for Walgreens, its retail business, left on autopilot for years, analysts say, has slipped—and in 2023 and 2024, the company posted a total of $11.7 billion in losses, among the highest totals of any Fortune 500 company. Wentworth will likely soon be spared from having to publicly field any more investor questions. In March, Walgreens Boots Alliance announced that it had reached a deal to be bought by a private equity firm, Sycamore Partners, for $10 billion, in a transaction that will take it off the U.S. stock market after 98 years. The deal is expected to close in late 2025. For Walgreens, going private is the culmination of an epic fall from grace. A decade ago, it was worth $100 billion, riding high on the buzz of a bold albeit controversial merger. But since then, its failings have sent shares down 91%. The company has been weakened by years of bad dealmaking that left it with too many stores; detritus from failed efforts to become a successful player in health care; and a heavy debt burden. In early 2024, Walgreens was removed from the Dow Jones industrial average, a sign of its rapidly declining relevance. Another indignity: In January, Walgreens suspended its quarterly dividend, one it had paid without fail for 91 years, to hold on to desperately needed cash. On the bright side, going private will give the venerable chain's leaders an opportunity to fix its many problems. Since taking the helm in 2023, Wentworth has repeatedly warned investors that many elements of the company need a time-consuming turnaround—from its tired stores, ill-equipped for the e-commerce era, to shrinking reimbursement rates, to demoralized staff. All that work will be more easily and quickly done away from Wall Street's klieg lights. 'It's hard to do under the microscope of quarterly check-ins with the investor community, so hopefully they can get back up there with the hard decisions they're going to have to make,' says Michael Cherny, an analyst at Leerink Partners, an investment bank focused solely on health care. Walgreens has in recent years undone, or is preparing to undo, some of its ill-advised acquisitions. It has already taken a $5.8 billion write-down on its acquisition of primary care provider VillageMD. But such changes leave the company extremely reliant on its core drugstore businesses, selling general merchandise and filling prescriptions, to get out of the hole it has fallen into. Wentworth has won credit from analysts for his early progress in improving Walgreens' cost structure, and his willingness to close money-sapping stores. But Wentworth, or whoever becomes CEO if Sycamore brings in someone else, faces a long, tough slog. (Walgreens declined to make Wentworth available for an interview; Sycamore declined to comment.) 'The next few quarters are about laying bricks, not finishing walls, to set the foundation for the company's next chapter,' Jonathan Palmer, an analyst at Bloomberg Intelligence, wrote in a research note. Walgreens, the U.S. druggist that is the biggest component of Walgreens Boots Alliance, was founded in 1901 when Chicago pharmacist Charles R. Walgreen bought the store at which he worked. By the time the Great Depression hit, the company was already a 500-store chain with locations far afield from Chicago, many of them anchored by lunch counters whose malted milkshakes and hot meals helped make the chain beloved. Later, Walgreens pioneered features like drive-thru pharmacies and in 1999, an online pharmacy. It also became a front-runner in the pharmacy wars, along with CVS (initially called Consumer Value Stores) and Rite Aid. As these national chains emerged, they absorbed countless local drugstores along the way. By the early 2010s, after years of industry consolidation, CVS and Walgreens were duking it out for the top spot, each with about 10,000 locations at their peak, and Rite Aid a distant third. By that point, the two behemoths, long interchangeable, were going in different directions. Walgreens believed that its scale and its millions of customers gave it clout with pharmacy benefits managers, or PBMs, which function as a type of go-between, negotiating how much patients pay for drugs, what insurers owe drugmakers, and how much pharmacies are reimbursed. It believed that clout would only grow if it continued its drugstore pharmacy land grab. But CVS had already started to pursue ambitions well beyond its drugstore roots. The company bought Caremark, a leading PBM, in 2007 for $21 billion. Seven years later, CVS garnered big headlines when it stopped selling cigarettes and changed its name to CVS Health, making its new orientation unmistakable. It followed that move with several big acquisitions of clinics and specialty pharmacies. While CVS reinvented itself, Walgreens kept fumbling the ball. In 2011, it overplayed its hand in a dispute with Express Scripts, a major PBM, and lost the business of millions of customers for years. That stoked investor interest in a new catalyst for growth and new management. Enter Italian billionaire Stefano Pessina, the largest shareholder in British druggist chain Alliance Boots. In 2012, Walgreens bought a minority stake in Alliance Boots; it then bought the rest of it two years later for $10 billion in all. The deal was something of a reverse merger, with Pessina and his posse becoming CEO and top managers, respectively, of the newly minted Walgreens Boots Alliance. The idea was to create the first ever international drugstore chain operator and drug wholesaling company. And the plan might have worked—had it been executed well. Pessina, an M&A enthusiast (some might even say addict) was still caught up in the Walgreens vs. CVS race to be the chain with the most stores. Not long after the Boots Alliance merger, he set his eyes on Rite Aid, the third-place pharmacy contender, which had been struggling for years under $3 billion debt stemming from a 2006 deal to buy rival chains Eckerd and Brooks. The interest expense had been impeding Rite Aid from investing in keeping stores enticing enough to keep up with its bigger rivals. In 2015, Walgreens made a bid to buy Rite Aid and its 5,000 stores for $9.4 billion. But in a case of antitrust regulators saving a company from itself, the Federal Trade Commission blocked the deal but ultimately allowed Walgreens to buy only 2,100 stores. The result was a larger Walgreens store footprint—but one with tons of overlap, given the proximity of many Rite Aids to nearby Walgreens. Walgreens had bragged for years about having the stores on the best corners. Now it often had two stores within blocks of each other, cannibalizing each other's sales. Last year, Wentworth announced Walgreens would close 1,200 stores out of 8,700. While he didn't specify which ones had been Rite Aid locations, the store closures announcement was a tacit admission that much of the $4 billion Walgreens had plunked down for 40% of Rite Aid's fleet had been a waste of money. Even as Walgreens expanded its store footprint, some analysts were bemoaning the lack of innovation at and updating of its existing fleet. When Walgreens bought Boots, a chain beloved in Great Britain for sleek stores with cool beauty areas and for its No. 7 store brand, it touted how it could borrow from Boots' playbook. But that never took place. 'It was a massive missed opportunity to elevate Walgreens,' says Neil Saunders, managing director of GlobalData. He also sees Walgreens' inertia as contributing to it losing much of its beauty industry market share to Ulta Beauty. For both Walgreens and CVS, retail seemed to become an afterthought by the late 2010s. For both chains, the traditional retail piece should be a bonanza of easy, profitable sales, given how many people come into a Walgreens or a CVS to pick up their prescriptions. And excellent retail in turn should entice people to choose one store over another and visit often. That opportunity is even greater given the ubiquity of their stores: Some 78% of Americans live within 10 miles of a Walgreens. But consumers have choices, and Walmart, Amazon, and Target have been more than happy to pick up that casual retail business, given their stronger e-commerce muscles and, Saunders says, much better prices. 'The drugstore is an ecosystem of a number of different parts of the business, from health care to prescriptions to retail, and it only really works if you have all those engines whirring,' says Saunders. 'Both CVS and Walgreens took their eyes off the ball ages ago, and it's had a detrimental impact on their pharmacy businesses.' Both CVS and Walgreens have seen their front-of-store sales struggle for years, aside from a COVID bump fueled by vaccine-driven foot traffic in 2021. But retail is much more important to Walgreens than it is to CVS. (CVS has begun to see improvements in its retail business.) While Pessina doggedly pursued Rite Aid, CVS was head down, continuing to build out its health care empire and buying health insurer Aetna in 2018 for a whopping $69 billion. (That same year, Cigna bought Express Scripts in another megadeal, shelling out $67 billion.) CVS's ownership of Caremark, the biggest PBM in the U.S., had spurred millions of member customers to get their scripts filled at CVS stores, a hold made even stronger with the Aetna deal. (Still, that deal is at the center of CVS's own current travails: Aetna's profitability has sagged because of rising health care costs.) Walgreens did eventually pivot its M&A more toward health care, but to little success. In fact, those deals have weakened it further and were the key reasons behind its stock's implosion. In 2013, in a move that ultimately hurt its reputation, Walgreens made a big investment in the health technology company Theranos, hoping to open dozens of its blood-testing clinics within its drugstores. But Theranos fell apart in scandal as its main product failed amid a fraud scandal. In 2020, Walgreens invested in VillageMD; the next year, it grabbed a controlling stake for $5.2 billion. It is now trying to off-load that network of primary medical care clinics. Also in 2022, under then-CEO Rosalind Brewer, previously of Walmart and Starbucks, VillageMD paid $9 billion for CityMD, another clinic chain, in another deal that has not paid off. Brewer abruptly left Walgreens in 2023, and Walgreens has unwound or is unwinding much of the M&A it has conducted in recent years. Wentworth, who had earlier been CEO of Express Scripts and had a long career as a pharmacy and health care executive, replaced Brewer. Though he didn't have much pure retail experience, he has made clear the caliber of Walgreen's drugstores had to be taken up a notch for the company to emerge from its slump. 'The stores are central to our strategy,' he told a health care conference in March 2024. Wentworth has so far concentrated on cost cutting, with an initial goal of hitting $1 billion in savings, and focused Walgreens on being better at its core pharmacy business. One early move was to announce those 1,200 store closings over three years (some 500 of them are slated to happen this year), on top of the hundreds it has closed in recent years, the better to focus on the 80% of its stores that do turn a profit. Neither Walgreens nor Sycamore has said whether Wentworth will stay on once the take-private deal is done. But it's telling that Wentworth was chosen as CEO despite his inexperience with retail. That suggested that Pessina, who will keep a 17% stake in Walgreens after the Sycamore acquisition, and the rest of the board valued Wentworth's PBM chops as a former PBM CEO himself, above all else. And indeed, those shrinking pharmacy reimbursements have been a major source of Walgreens' malaise. Leerink's Cherny has said that is Walgreens' biggest problem to solve. CVS, tapping its Caremark clout, recently found a promising solution to shrinking pharmacy margins. Starting this year, all commercial prescriptions filled at a CVS will be reimbursed at the cost of the drug plus a predetermined markup and a handling fee. This model is called 'CostVantage,' and Cherny says Walgreens could easily have its own version. 'It wouldn't be at all surprising if Walgreens became a fast follower,' he said. After all, Wentworth knows the PBM world intimately. As for Wentworth's lack of a retail background, this is where Sycamore's extensive expertise in that industry could be useful. Sycamore has a long history of buying distressed retailers and helping them optimize their store operations. It has done so for such retailers as Belk department stores, The Limited, Staples, and Talbots. Walgreens has already taken some encouraging steps on the retail side. It has begun to beef up its roster of store brands with 300 new products; it is also remodeling many drugstores and is offering faster delivery than before. On the pharmacy side, Walgreens is trying to squeeze out costs with initiatives like using automated robotic prescription filling. It hopes to have that service in place by year-end in more than 5,000 of its stores. On the other hand, Sycamore has never done a deal involving health care, raising some concerns about its ability to improve Walgreens' underlying business. Media reports have suggested that Sycamore may break Walgreens into three pieces—its international business, its health care, and its retail—essentially undoing almost all its M&A since the Boots deal. Sycamore, and by extension Walgreens, will be taking on an enormous amount of debt—$12 billion—to make this acquisition happen. (Bloomberg estimates Walgreens could be facing an additional, separate liability of $1.5 billion from the opioid litigation against it; the chain has been accused by a number of state governments and the Justice Department of making millions of illegal opioid prescriptions, accusations it has denied.) Given Rite Aid's recent bankruptcy, its second in consecutive years, because of the combination of deteriorating business and high debt, it's not surprising to hear some alarms about the deal's financing. But bankruptcy theories aside, the even higher debt load and service post transaction certainly mean that Walgreens will have an even smaller margin of error in the near future. 'They haven't really cared for the business internally, and that's led to the crunch they are in now,' says Saunders. It took a little over 10 years for the company to tumble from its Boots-merger heights to its current lows; its leadership probably doesn't have 10 more years to right the ship. 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