The Kroger Co. (NYSE:KR) Q3 2022 Earnings Call Transcript

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Gary Millerchip: Yes. I think again, I’ll maybe just broaden it because again, I think it’s a little bit dangerous to pick on one element of the model for next year. I do think that fuel margins have had obviously a very good run. And generally, I think margins are improving over time, but there is there has been in the last 2 years, some major volatility in shocks in the market. I think it’s hard to see those being cycled. So you look at margins earlier in this year, and I think that’s likely to be a headwind next year in looking at the fuel profitability. But again, I think you mentioned LIFO, another example for us would be €“ as you look at our incentive plan, obviously, we’re having a very strong year versus our expectations, having raised our guidance every quarter.

So you get to more of a normalized incentive plan next year, assuming the budgets kind of your expected payout. We continue to take costs out of our business and find new ways to improve leverage in the model. It has been 5 years, as you know, journey for us. We believe supply chain and alternative profits are potential tailwinds next year as we continue to improve efficiency in supply chain and all profit continues to grow. So I think there is a lot of moving parts. And again, rather than sort of trying to bridge you to how all those play out. I think that’s going to be a balance of puts and takes. And obviously, we’re looking forward to sharing a lot more color when we get to March next year.

Rodney McMullen: Yes. I think when you look at Gary’s points overall, it’s one of the things that’s so important about our overall business model because we do have a lot of moving parts, and we’ve invested a ton of work and effort our whole team has over the last several years to reinvent the business model and make sure the business model can be successful in every economic environment. And to me, Gary’s point that he was sharing really highlight that as we look forward. Thanks, Ed.

Ed Kelly: Thank you.

Operator: Thank you. And the next question goes to Scott Mushkin of R5 Capital. Scott, please go ahead. Your line is open.

Scott Mushkin: Hey, guys. Thanks for taking my question. So the first thing I wanted to €“ so the first thing I wanted to get some answers to a little bit is the market share, you guys market share. It seems to have stabilized, maybe even growing a little bit. Do you agree? And what do you think is leading to that?

Rodney McMullen: Yes. If you look at market share, the trends continue to improve, and we feel good about where we are, but we’re not satisfied with where we are. We believe the work that we’re doing on Fresh is a key part of driving that. And obviously, just the continued personalization and making sure that we have a customer experience for its household to household type relationship and then our brands always shines when an economic environment gets a little tougher. So it’s really those things working together and then our store teams continuing to do a good job of improving on friendliness. And I make that comment based on what customers tell us how we’re doing, not just my opinion of how we’re doing.

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