CINCINNATI — The Kroger Co. capped off fiscal 2024 with a mixed performance and finds itself early in fiscal 2025 with an interim chief executive officer at the helm after the exit of chairman and CEO Rodney McMullen earlier this week.

Cincinnati-based Kroger announced March 3 that McMullen had resigned following an investigation finding that he engaged in personal conduct that, while unrelated to the business, violated the company’s ethics policy. Lead board director Ronald Sargent was named as chairman and interim CEO and Mark Sutton as the new lead director.

With Kroger for over four decades, McMullen had served as CEO since 2014 and as chairman since 2015 — including during the planned $24.6 billion acquisition of Albertsons Cos. that underwent a more than two-year regulatory review before the transaction was blocked by courts and both companies terminated the deal in December 2024.

“I will be serving as the interim CEO as we search for a leader for our next phase of growth,” Sargent told analysts in a March 6 conference call on fiscal 2024 results. “The board has formed a search committee and has engaged a nationally recognized search firm. We look forward to updating you as we have more information. As a board member, I know Kroger’s strong leadership team well, and they support a unique culture that powers the company’s long-term success. We care for people and we love food, the most important elements of successful grocery retail.”

Because of the pending CEO search, Kroger has postponed its investor day planned for April and will update investors when the event has been rescheduled, Sargent said.

In response to an analyst question on the CEO search, Sargent said Kroger is currently updating its CEO selection criteria, a process the company does annually as part of succession planning.

“We are going to be looking at both internal candidates as well as external candidates,” he said. “But most importantly, we’re focused on identifying the right leader to drive progress growth and enhance shareholder value. I am proud to serve in this role for as long as needed, but I am absolutely confident that our board will select the right next CEO, whether from inside the company or outside.”

Merger costs impact bottom line

For fiscal 2024, Kroger saw net income rise to $2.67 billion, equal to $3.67 per share on the common stock, from $2.16 billion, or $2.96 per share, in fiscal 2023, which had 53 weeks. Excluding $581 million in adjustment items — primarily costs from the terminated merger with Albertsons — 2024 net earnings were $3.25 billion, or $4.47 per share, compared with $3.34 billion, or $4.56 per share, for 2023, not counting the 53rd week. Kroger’s 2024 adjusted earnings per share were a penny above Wall Street’s consensus estimate of $4.46.

Fourth-quarter net income declined to $634 million, or 90¢ per share, from $736 million, or $1.01 per share, a year earlier. Adjusted earnings were $800 million, or $1.14 per share, versus $835 million, or $1.34 per share, in the prior-year period, excluding the extra week. Analysts, on average, had forecast adjusted EPS of $1.11.

Kroger tallied top-line growth for the year and final quarter ended Feb. 1. Fiscal 2024 net sales totaled $147.12 billion, down 1.9% from $150.03 billion a year ago but up 1.8% excluding fuel sales, specialty pharmacy sales and, in 2023, $2.7 billion from the 53rd week. The company sold its Kroger Specialty Pharmacy business in October 2024, which generated $2 billion for the fiscal year versus $3.2 billion for all of 2023.

Net sales in the 2024 fourth quarter were $31.08 billion, down 7.4% year over year from $37.06 billion. Excluding sales from fuel, Kroger Specialty Pharmacy and the prior year’s extra week, net sales climbed 2.6%, Kroger noted.

Identical sales excluding fuel and adjustment items grew 1.5% for fiscal 2024, compared with a 0.9% uptick in 2023. The result reflected a lift in the fourth quarter, when identical sales rose 2.4% from a year-ago dip of 0.8%.

Digital sales (excluding the extra week) climbed 10% to more than $13 billion in fiscal 2024, including an 11% gain in the fourth quarter, when delivery sales rose 18%, driven by Kroger’s Ocado-automated customer fulfillment centers.

Kroger also expanded its Our Brands private label lineup in 2024. The supermarket giant launched more than 900 products, including 370 fresh items, such as the new Field & Vine berry brand, and meal bundles under the Simple Truth better-for-you brand. Health and wellness sales (including pharmacy) were strong as well, fueled by GLP-1 drugs and 11% growth in vaccinations, the company said.

 As of mid-day trading on March 6, Kroger’s stock price was up 2% to $63.80 per common share.

“Today, Kroger operates from a position of strength,” Sargent said. “We delivered strong financial results in 2024 and have positive momentum in our business. We’re confident in our plans for 2025 and our commitment to deliver total shareholder return of 8% to 11% over time. I will be especially focused on executing with speed and confidence, keeping our team working toward the priorities that create long-term growth. We’re delivering on our go-to-market strategy, providing families across America with fresh and affordable food.

“In my retail career, I understood that an outstanding customer experience comes from best-in-class store conditions, friendly associates and great products at low prices. That’s who Kroger is today, and that’s who we will be tomorrow.”

2025 outlook includes more store expansion

Looking ahead, Kroger projected fiscal 2025 identical sales growth of 2% to 3% and adjusted net diluted EPS of $4.60 to $4.80, within Wall Street’s forecast range of $4.58 to $4.88 before the earnings report.

“In terms of quarterly cadence, we expect identical sales without fuel to be consistent throughout the year, building slightly as the year progresses, as we continue to improve our volumes,” Todd Foley, interim chief financial officer, said in the call. “We expect first-quarter adjusted net earnings per diluted share to be similar to last year, and we expect Q2 through Q4 to be consistently above each quarter compared to the same periods last year.”

Foley said inflation rose throughout 2024 and was in line with Kroger’s expectations.

“As we look ahead to 2025, we expect inflation to be 1.5% to 2.5%, which does not include the effects from tariffs announced earlier this week,” he said. “External factors continue to pressure certain fresh commodities, including eggs. Notably, the avian flu resulted in an inflation of approximately 70% during the quarter. Inflationary pressures are not new to our business, and we’re confident in our ability to navigate any inflationary environment. We will remain focused on keeping prices low for our customers.”

David Kennerley, CFO of PepsiCo Europe, is slated to take the reins as Kroger’s new CFO on April 3. He will succeed the retiring Foley, who has been interim CFO since February 2024, when Kroger CFO Gary Millerchip left to join Costco Wholesale Corp. as CFO.

“David is joining us from PepsiCo Europe and brings broad and extensive financial experience,” Sargent said. “We are confident that David’s expertise and leadership will help us to continue to deliver on our strategic and financial priorities.”

Both Foley and Sargent cited store expansion as a key growth driver in 2024 and for 2025.