The Kroger Co.

are followed by one on your telephone keypad. Please note, this event is being recorded. I would now like to turn the conference over to Robert Quast, Senior Director, Investment Relations. Please go ahead.

Good morning. Thank you for joining us for Kroger's third quarter 2023 earnings call. I am joined today by Kroger's Chairman and Chief Executive Officer, Rodney McMullen, and Chief Financial Officer, Gary Millichap. Before we begin, I want to remind you that today's discussions will include forward-looking statements. We want to caution you that such statements are 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. In order to cover a broad range of topics from as many of you as we can, we 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 our discussion topics this morning. I will begin by covering the current retail environment and how the strength of Kroger's value creation model is supporting earnings growth, and generating strong free cash flow. Then Gary will cover our financial results and guidance for the remainder of the year. Finally, I will conclude with an update on our proposed merger with Albertsons before we open it up for questions. Now turning to our third quarter. Kroger's third quarter results highlight the strength and diversity of our business model in a challenged operating environment. as strong fuel performance and growth in our alternative profit businesses supported continued adjusted net earnings per diluted share growth. As consumer spending tightens, we are focused on providing customers with exceptional value. By maintaining our long-term commitment to lower prices, personalized promotions, and rewards, we are growing households and increasing loyalty, positioning Kroger for sustainable future growth. Customers are managing many economic factors that are pressuring their spending, including higher interest rates, reduced savings, and fewer government benefits, including SNAP. Although inflation is decelerating, customers are still adjusting to the impacts from eight consecutive quarters of broad and significant inflation. During the quarter, Kroger grew higher income households once again, as our attractive mix of quality, value, and convenience continues to drive engagement. By buying larger packs, more fresh items, and more premium R brand products, these households are more profitable. As we've seen over recent quarters, our customers are actively looking for value, and our budget conscious customers are under more significant spending pressure. We are also looking for ways to support customers with additional value, including in-store displays with everyday staples at low price points. We've seen a great response from all customers to these offers. But engagement from our budget-conscious households has been especially strong. Customers purchasing these offer items are making more trips and buying more units. not only recognizing the value with these displays, but the value across the entire store. To help more customers manage their budget, we are only deepening our commitment to deliver exceptional value for our customers. Our personalized promotions are an increasingly critical way for customers to save on items that matter most to them. We are applying analytics to Kroger's unmatched purchase data to strike the right balance between the depth and breadth of promotions. To ensure customers were able to enjoy a memorable Thanksgiving, for example, we created a meal bundle that served a group of 10 for less than $5 per person, which represents a lower price than last year. We have a long history of delivering value to our customers by providing a broad assortment of fresh foods at low prices Through our unique omni-channel shopping experience, we achieved our 10th consecutive quarter of total household growth and increased loyal households even faster, positioning Kroger for sustainable future growth. Now I'll provide more details about how our go-to-market strategy is delivering for our customers, starting with Seamless. Our digital business delivered a strong third quarter With double-digit growth in both our pickup and delivery businesses, multiple tell-wins are driving our sales momentum, including growth in both households and visits. Our new two-hour pickup service, available in more than one-third of our stores, also contributed to our success in the quarter. To become the online food retailer of choice, we are focused on delivering best-in-class fulfillment. improved key customer experience metrics in pickup, increasing fill rates, and reducing wait times during the quarter. This resulted in improved net promoter scores. Our customer fulfillment centers again led our delivery growth, where we continue to rapidly increase households. Our delivery customers enjoy the convenience of on-time, refrigerated delivery directly to their doorstep. with zero compromise on freshness, quality, and value. Turning to personalization, investments in our personalized capabilities ensure we are meeting elevated customer demand for savings and enables us to deploy promotional dollars more effectively. Digital offers have increased compared to last year, and our personalization capabilities have resulted in even more significant increase in redemptions. driving loyalty and increasing digitally engaged households this quarter by 13%. Digitally engaged households are incredibly valuable to our model as they are more loyal, spend nearly three times more with us, and accelerate growth in our alternative profit businesses. Now I'd like to share more about how our diversified business model supported earnings growth this quarter and gives us confidence in our ability to navigate the environment ahead. Starting with our alternative profit businesses, growth in alternative profit businesses remains strong in the third quarter, with balanced growth across the portfolio. The strength of our seamless ecosystem and elevated digital engagement is having a flywheel effect, creating the traffic and the data needed to drive growth in Kroger Precision Marketing higher margin profit stream recently we celebrated the sixth anniversary of KPM this quarter KPM made an important step in its journey to become the most trusted and transparent media company by activating ad buying platforms we are offering more self-service solutions to meet clients where they are today providing advertisers more direct access to custom Kroger audiences. This first iteration has already launched and KPM expects to expand to other buying platforms in the future. These new innovative features will help accelerate KPM's impressive growth by allowing advertisers to reduce waste and enhance measurement tools. Kroger Health had a strong quarter that exceeded our internal expectations and helped drive sales and profit growth. Our decision to terminate our agreement with Express Scripts reflects our commitment to making decisions that we believe are in the best long-term interests of our customers and shareholders. Our teams have done an excellent job retaining patience, and utilizing our pharmacist's extra capacity to devote more time to patient care, including growing our number of vaccinations. Gary will provide more on the financial impact of this later. During the quarter, we continue to see rapid growth in GLP-1 drugs in our retail pharmacies. While the long-term impacts of these drugs on customer buying habits are unknown, Kroger's food as medicine philosophy positions as well to support our customers' health and wellness goals. Our comprehensive approach includes healthcare services, professional dietitians, and proprietary tools like our nutrition rating app, Opt-Up, which are all designed to support healthy living and to do so holistically. While we pride ourselves on data and insights, The patient data in our pharmacy operations is separate from our customer loyalty data and is protected by privacy laws. We are committed to using our data in an appropriate manner while not jeopardizing customers' trust. For now, we have not seen any major macro shifts in customer eating habits or spending behaviors. Food trends are constantly evolving, and we are committed to offering products that meet our customers' needs. For customers looking to adopt healthier habits with or without the help of these drugs, we are well positioned to provide important health care services and healthy food options. At Kroger, our purpose is to feed the human spirit. And I'm so impressed by the many ways our associates bring this to life every day and the ways they support our customers and each other. We know when associates are connected to our purpose they feel connected to Kroger. Our annual Kroger Wellness Festival is just one example of living our purpose. This festival is one of the nation's largest health and wellness events, showcasing more than 150 experiences and food offerings. Sponsors and celebrities joined Kroger and hundreds of thousands of visitors to share our vision for better physical, mental, and emotional health for families. It was wonderful to see the level of support and participation in this important mission. Also this quarter, we released our annual ESG report, which highlighted Kroger's significant progress on our Zero Hunger, Zero Waste journey to expand access to affordable, fresh and healthy food and to reduce waste, especially food waste, across our footprint. Since we launched Zero Hunger, Zero Waste in 2017, Kroger has donated more than 3 billion meals to feed hungry families, including more than 1.3 billion to fight food insecurity and nearly 600 million pounds of surplus food to our food bank partners. I am so proud of our teams and their efforts to reach these incredible milestones. Our associates are the driving force behind our success. by delivering an outstanding customer experience and helping make the holidays even more special for our customers. We facilitate this through our long-standing commitment to invest in associate wages and benefits and training tools to advance their career growth. Feed Your Future, our continuing education benefit, is one of the important ways we make Kroger a place where associates come for a job and discover a career. This benefit provides up to $21,000 lifetime and has helped almost 6,000 associates this year alone, with approximately 90% of these participants being hourly. Our focus on development is contributing to strong improvements in retention, which includes associate continuity and a more consistent customer experience. With that, I'll turn it over to Gary to take you through our financial results.