Kroger Reveals $7.5B Share Buyback Program
Following The Kroger Co.’s decision that its proposed merger with Albertsons Cos., which was blocked this week by a federal court in Oregon and a state court in Washington, was “no longer in its best interests to pursue,” the grocer has revealed that it will resume share repurchases after a more than two-year pause.
Kroger’s board of directors has approved a new share repurchase program authorizing the repurchase of up to $7.5 billion of common stock. The new repurchase authorization replaces the company’s existing $1 billion authorization, which was approved in September 2022. Kroger plans to enter an accelerated share repurchase (ASR) agreement for the repurchase of about $5 billion of common stock.
“Our strong balance sheet and free cash flows position us to deliver on our commitment to grow the business and return capital to shareholders, maintaining capacity to invest in lower prices and higher associate wages,” said Kroger Chairman and CEO Rodney McMullen.
According to Kroger, it expects to continue to generate strong free cash flow and remains committed to its capital allocation priorities, among them maintaining its current investment grade debt rating, investing in the business to spur long-term sustainable net earnings growth, and returning excess free cash flow to shareholders through share repurchases and a growing dividend over time, subject to board approval.
The company also plans to hold an Investor Day event in late spring 2025 to discuss its strategic priorities, future growth prospects and long-term financial outlook.
In connection with the termination of the merger agreement, Kroger will begin redeeming the $4.7 billion of its senior notes issued this past Aug. 27, including a special mandatory redemption provision in accordance with their terms. The notes will be redeemed at a redemption price equal to 101% of their principal amount, plus accrued and unpaid interest to, but excluding, the special mandatory redemption date.
Additionally, the company has chosen to terminate its previously revealed offers to exchange any and all outstanding notes issued by Albertsons Cos. Inc., New Albertsons L.P., Safeway Inc., Albertsons LLC, Albertsons Safeway LLC and American Stores Co. LLC (collectively, the ACI Issuing Entities) for up to $7,441,608,000 aggregate principal amount of new notes to be issued by Kroger and cash, as well as to terminate the related solicitation of consents on behalf of the ACI Issuing Entities to adopt certain proposed amendments to the indentures governing the ACI Notes.
“The strength of our balance sheet and sustainability of our model allows us to pursue a variety of growth opportunities, including further investment in our store network through new stores and remodels, which will be an important part of our 8%–11% TSR [total shareholder return] model over time,” noted McMullen.
According to Kroger, its ongoing investments include $5 billion in lower prices since 2003, $2.4 billion in incremental wage increases, on top of benefits, since 2018; $3.6 billion-$3.8 billion in annual capital investments; and $2.3 billion in charitable giving since 2017.
On Dec. 11, following the courts’ rulings, Albertsons Cos. filed suit against Kroger for breach of contract.
Cincinnati-based Kroger serves more than 11 million customers daily through a digital shopping experience and retail food stores under a variety of banner names. The grocer employs 420,000 associates and is No. 4 on The PG 100, Progressive Grocer’s 2024 list of the top food and consumables retailers in North America.
As of June 15, Albertsons Cos. operated 2,269 retail food and drug stores with 1,725 pharmacies, 403 associated fuel centers, 22 dedicated distribution centers and 19 manufacturing facilities. The Boise, Idaho-based company operates stores across 34 states and the District of Columbia under more than 20 well-known banners. Albertsons is No. 9 on The PG 100.
