The Kroger Co.

Please note this event is being recorded. I would now like to turn the conference over to Rob Quast, Senior Director of Investor Relations. Please go ahead.

Good morning. Thank you for joining us for Kroger's second quarter 2023 earnings call. I am joined today by Kroger's Chairman and Chief Executive Officer, Rodney McMullen, and Chief Financial Officer, Gary Millichap. I want to remind you that today's discussions will include forward-looking statements. We want to caution you that such statements or predictions and actual events or results can differ materially. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings. The Kroger Company assumes no obligation to update that information. After our prepared remarks, we look forward to taking your questions. Given the breadth of information that will be covered on the call and our divestiture announcement earlier this morning, We will extend our Q&A session, if needed, to ensure that we can cover a broad range of topics from as many of you as we can. We still ask that you please limit yourself to one question and one follow-up question, if necessary. I will now turn the call over to Rodney.

Thank you, Rob. Good morning, everyone, and thank you for joining us today. Before we begin, I'd like to take a moment to outline the framework for our discussion this morning, given that we have several important topics to cover. I will begin by covering the consumer environment and how the strength of our value creation model is supporting earnings growth and generating strong free cash flow. Then Gary will cover our financial results and highlights as well as provide an update on our nationwide opioid settlement framework. Finally, I will conclude with some brief comments on the divestiture plan press release we issued earlier this morning. We are excited about sharing our plans for this important milestone, and we look forward to taking your questions during the Q&A segment of today's call. Now turning to our second quarter, Kroger continues to effectively navigate a challenged environment and delivered another quarter of consistent results. As economic uncertainty persists, the strength of our model is enabling us to deliver value for our customers, continue to invest in our associates, and deliver consistent shareholder return. Value remains top of mind for many of our customers as they are balancing several factors that are impacting their food at home spending. The effect of sustained inflation, reduced government benefits including SNAP, and higher interest rates have pressured customer spending, especially for those on a tight budget. To support our customers, we are delivering increased value through our robust Our Brands portfolio, personalized digital offers, fuel rewards, and loyalty discounts, including weekly specials and yellow tag promotions. Economic instability continues to impact customer segments differently. We are seeing this in their shopping behaviors. Higher income households continue to engage more deeply with us, enjoying our customer experience with zero compromise on convenience, quality, and value. These customers are especially valuable to our mix as they purchase bigger pack sizes, shop more fresh categories, and trade up to more premium R Brands products. On the other hand, Budget conscious households are facing external spending pressures. These customers are buying smaller pack sizes and at times prioritizing the lowest shelf price. These customers are building smaller baskets and switching to lower priced items to stretch their budgets. They are also exhibiting spending patterns that ebb and flow with payroll periods and SNAP benefit distributions. We expect these broader economic headwinds to continue pressuring customer spending in the second half of the year. While the environment is difficult, we are never satisfied with sales, and we are focused on driving more units in the back half of the year. Our teams are sharpening store execution, identifying basket add-ons, and adapting to customers' evolving needs. we saw an improvement in our budget-conscious household trends since last quarter as we expanded our assortment of everyday staples at lower price points. And as an example, we introduced new in-store displays where every item is below $3. Additionally, we continue to improve price position relative to key competitors, demonstrating our long-term commitment to provide customers with exceptional value. We are creating more engagement with customers through personalization, offering more targeted and effective promotions, and our seamless ecosystem is resonating with customer needs and allows us to drive increased loyalty. And customers are rewarding us for this work. The second quarter represented our ninth consecutive quarter of total household growth. And now I'll provide more detail on how our go-to-market strategy is delivering for our customers. We are reimagining our offerings throughout our portfolio of our brands. With more than 13,000 products available, customers can enjoy a wide range of high-quality alternatives to fit each customer's budget. Additionally, we are improving the profitability of our brands. Through our brand architect work, we are ensuring each brand plays a unique role on the shelf. Last year's introduction of our opening price point brand, Smartway, provides a great option for those prioritizing the lowest price at the shelf, and it is resonating with our customers. Turning to Seamless, strong growth in our pickup and delivery businesses led to another excellent quarter in digital. This growth was underscored by a rise in both households and traffic. Our digital team's relentless pursuit of improving the customer's experience is driving our success. We scaled our hands-free technology across the company to improve speed, and expanded pickup options with automated pods and lockers, improving productivity and providing customers with more flexibility. Our in-store associates are also playing a critical role in our success. This quarter, they reduced wait time, lowered costs to serve, and improved fill rates. Pickup has had a positive incremental contribution for some time. In multiple divisions now, our pickup business today is now profitable on a fully loaded basis. And by continuing to scale our operations, we have a clear path to sustainable profitability in pickup. Next, on personalization. Personalization enables us to meet our customers' unique needs and deliver value beyond a product's shelf price. Our best-in-class data science work powered by our loyalty data, is driving strong digital engagement. So far this year, customers have clipped more than 2 billion digital offers. To me, that's just an amazing number when you think about 2 billion. We've also increased our digitally engaged households by 1.2 million compared to last year. This growth is important to our model as digitally engaged households are more loyal, spend nearly three times more with us and help grow our alternative profit businesses like Kroger Precision Marketing. Now I'd like to share more about how our diversified business model continued to support earnings growth this quarter and gives us confidence in our abilities to navigate the environment ahead. Starting with our alternative profit businesses, Alternative profits had an impressive second quarter, led by strong growth in our retail media business, Kroger Precision Marketing. Our seamless ecosystem continues to drive data and traffic, which benefits this business. KPM applies these insights and its data science to build custom audiences and precisely measure return on ad spend delivering significant value to clients. This quarter, KPM announced a new in-house advertising platform which allows greater flexibility to serve clients and improve outcomes for brands. Grover Health is another important component of our business that allows us to help customers live better lives and strengthen our model. The terminated agreement with ESI has freed up some capacity in our pharmacies and our Kroger Health teams are doing a great job of utilizing that capacity. Our pharmacists are dedicating more time to patient care and delivering better patient experiences. We are also simplifying work for our teams and lowering costs by expanding our use of automation. We are improving patient communications through modernized tools, which is driving better patient adherence to care plans and supporting growth. We are encouraged by the momentum in our health and wellness business and believe this is an opportunity for further profitable growth over the next several years. Our amazing associates are providing customers a full, fresh, and friendly experience every day. We remain committed to supporting our associates through investment in wages, and over the last five years, we have raised wages by 30%. We are also committed to supporting our associates' development. I often say that our focus is to make Kroger a place where associates can come for a job and discover a career. Kroger has made significant investments to support this culture, and our teams have done a tremendous job creating training programs to help develop our future leaders. Their work was recently recognized with eight awards from the Brandon Hall Group, a leading human capital management firm. We are so proud of the work you are doing to help make Kroger an employer of choice. I am inspired every day to see how our associates bring our purpose to feed the human spirit. Our zero hunger, zero waste impact plan is a vital part of how we live our purpose in the communities we serve. Upon launching the plan in 2017, Kroger committed to donate 3 billion meals by 2025. We are so excited to share that we reached this ambitious target in the first quarter of this year, more than two years ahead of our goal. This quarter, we announced plans to accelerate our commitment to hunger relief. Upon completion of the merger with Albertsons, the combined company will donate 10 billion meals by 2030 to feed people struggling with hunger. To put that in perspective, it is enough food to feed every person in the cities of Seattle, Denver, Chicago, and Boston. every meal every day for nearly two years. This is one of many ways that this proposed merger will benefit the communities we serve. With that, now, I'll turn it over to Gary to take you through our financial results. Gary?