Expense Management Mary Ellen Adcock Group Vice President – Retail Operations
Restock Kroger Purpose: Feed the Human Spirit Vision: Serving America through food inspiration and uplift Data & Personalization Our Brands • • Redefine Digital Smart pricing • • Grocery CX Space Optimization • Create Shareholder Value Infrastructure & • Partner for technology upgrades Costs/COGS • Customer Value Alternative profit streams • Associate Experience High performing leaders • • Develop Investing in and retaining and teams • Talent store associates Free cash flow • Operating margins • Live Our Our Purpose & Our Promise Framework • Zero Hunger | Zero Waste Purpose • 53
65% to 2018 Cost Savings Goal Through Q2 Redefine Grocery CX Restock Kroger Plan Partner for Customer Value Develop Talent Live Our Purpose Create Shareholder Value 54 54
Checkout: Improving the CX & Productivity Scan, Bag, Go Self-Checkout Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2017 2018 *Labor Savings as a % improvement of Front End Labor PY 55
Shrink: Delivering Savings Shrink % Shrink % Prior Year Consecutive quarters of YoY improvement 1 10 bp bps 5 1 bps of shrink bps improvement = $10 million (pre-tax) to invest Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2017 2018 56
Cost of Goods: Delivering Savings Our Brands National Brand Partners Our Brands Indirect Sourcing 57
On Track to Achieve Our 3-Year Plan Redefine Grocery CX Restock Kroger Plan Partner for Customer Value 2018 2019 2020 Develop Talent Live Our Purpose Create Shareholder Value 58 58
Q&A Panel
Break
Develop Talent Tim Massa Chief People Officer
Restock Kroger Purpose: Feed the Human Spirit Vision: Serving America through food inspiration and uplift Data & Personalization Our Brands • • Redefine Digital Smart pricing • • Grocery CX Space Optimization • Create Shareholder Value Partner for Infrastructure & technology Alternative profit streams • • Customer Value upgrades Costs/COGS • Associate Experience High performing leaders and • • Develop Investing in and retaining teams • Talent store associates Free cash flow • Operating margins • Live Our Our Purpose & Our Promise Framework • Purpose Zero Hunger | Zero Waste • 62
Retaining Talent Improves CX and Lowers Costs 9.4% reduction in turnover P10 P11 P12 P13 P1 P2 P3 P4 P5 P6 P7 P8 Today 63
Improving the Associate Experience Enhanced Long-Term Benefits Cultivate Our Culture • Come for a job, stay for a career • Outpace industry in engagement 64
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Developing High Performing Leaders and Teams Kroger Leadership Academy Internal and External Talent Strategy 71
Purpose People Results WHY HOW WHAT Growth creates more opportunities to Feed the Human Spirit. 72
Investing In & Retaining Store Associates Significant investment in wages and training Leveraging associate insights to enable business results 73
$500 Million Wage Investments to Retain Talent 2020 11% 2018 2019 56% 33% Current Average Pay for Retail Hourly Associates = $14.47 per hour 74
Looking Forward • Upskilling Our Workforce • Leaders as Teachers • Digitally Enabled • Certifications and Performance-Based Incentives • Flexible Workforce • On-Demand Scheduling • Simplified Job Classifications • Third-Party Relationships 75
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Live Our Purpose Jessica Adelman Chief Corporate Affairs & Sustainability Officer
2018: The Year ESG Goes Mainstream “Society is demanding that companies, both public and private, serve a social purpose .” - BlackRock CEO Larry Fink 78
Focus Areas • Store execution: food rescue • Execution: waste diversion • Test & learn pilots • Test & learn pilots 81
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Sustainability Report Conforms to GRI Standard Aligned 2018 Sustainability Report (sustainability.Kroger.com) with Global Reporting Initiative (GRI) Sustainability Reporting Standards Zero Hunger | Zero Waste commitments align with several key United Nations Sustainable Development Goals SDG 2: Zero Hunger SDG 12: Responsible Consumption and Production 83
Reputation is Up – directly supporting Restock Kroger Kroger’s Top 100 Ranking: 2018: # 18 2017: # 21 2016: # 35 84
Kroger #6 on Fortune’s Change the World 2018 List “Supermarket chain Kroger is simultaneously working to eliminate food waste and feed the hungry, while its shareholders get fat: The stock is up 27% over the past year.” 85
Alternative Profit Streams Stuart Aitken GVP and CEO of 84.51°
Restock Kroger Purpose: Feed the Human Spirit Vision: Serving America through food inspiration and uplift Data & Personalization Our Brands • • Redefine Digital Smart pricing • • Grocery CX Space Optimization • Create Shareholder Value Infrastructure & technology Partner for • upgrades Alternative profit streams • Customer Value Costs/COGS • Associate Experience High performing leaders and • • Develop Investing in and retaining teams • Talent store associates Free cash flow • Operating margins • Live Our Our Purpose & Our Promise Framework • Purpose Zero Hunger | Zero Waste • 88
Unique Assets Give Us Right to Win ASSETS RIGHT TO WIN Immediacy and proximity in delivering a differentiated Our Stores & Distribution Network experience to customers 2,800 stores, 42 distribution centers, 38 plants Our Scale Economics of scale opportunities and unique platform $125B in annual sales & 11M customers in stores and to communicate with the customer fuel stations every day Our Data We know the customer better than anyone else & are 60MM households with unmatched granularity; able to personalize the experience with precision Customer-first approach & 84.51° model Customer Trust We are a trusted, transparent partner with customers, and can leverage our data to communicate relevant offers Our customers trust that we will safeguard their data & rewards in new channels and utilize it in their best interest 89
We’re Transforming the Growth Model $$$ REDEFINE ALTERNATIVE PROFIT GROCERY CX STREAMS Anything. Anytime. Anywhere. Partnerships, Services Data & Traffic 90
Strong Track Record of Alternative Profit Sources 16% CAGR KEY Ventures Media CPG Data Insights KPF 2015 2016 2017 2018 91
We Are Deliberate in Our Media Ecosystem Growth Plan Media On- Off- Loyalty In-Store Property Property Marketing 92
Alternative Profit Stream Glidepath Supports $400 Million by 2020 Restock Kroger 34% CAGR 28% CAGR 16% CAGR 2015 2016 2017 2018 2019 2020 2021 2022 93
Net Operating Profit Mix Will Continue to Transform $3.5B $3.1B Alternative Profit Fuel Base Supermarket 2014 2017 2020 94 Excludes one-times, C-Stores, and extra week in 2017 .
Alternative Profit Streams Support $400 Million by 2020 • History of alternative profit streams • Transforming operating profit mix • Unique assets give us right to win • Rigorous stage gate process • Reinventing retail growth model 95
Partner for Customer Value Mike Schlotman, Yael Cosset, Alex Tosolini, Gary Millerchip, Stuart Aitken
We’re Transforming the Growth Model $$$ REDEFINE ALTERNATIVE PROFIT GROCERY CX STREAMS Anything. Anytime. Anywhere. Partnerships, Services Data & Traffic Develop Live Our Talent Purpose 97
Unique Assets Give Us Right to Win ASSETS RIGHT TO WIN Our Stores & Immediacy , proximity Distribution Network Unique platform Our Scale Personalization Our Data Transparent & relevant Customer Trust 98
THE KROGER ECOSYSTEM “Anything. Anytime. Anywhere.” AND 99
Q&A Panel
Store Tour Mike Donnelly EVP and COO
Experience Redefining the Grocery CX 102
Rodney McMullen Chairman and CEO
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