Do you ever wonder about the financial health of the companies whose products you buy every day? It's a great question, and one that can tell you a lot about a company's stability and future prospects. Today, we're going to dive deep into a key aspect of The Kroger Co.'s financial standing: its debt. Understanding a company's debt levels is crucial for investors, analysts, and even curious consumers. So, let's embark on this financial exploration together!
Understanding Kroger's Debt: A Comprehensive Guide
Kroger, one of the largest supermarket chains in the United States, operates a vast network of stores. Like many large corporations, it utilizes debt as part of its capital structure. This debt can be used for various purposes, such as funding expansion, acquiring other businesses, or returning capital to shareholders. However, too much debt can signal financial risk. This guide will walk you through how to understand Kroger's debt.
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| How Much Debt Does Kroger Have |
Step 1: Identify the Key Financial Documents
To accurately assess Kroger's debt, the first and most crucial step is to locate their official financial reports. Where do you find this information?
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Investor Relations Website: Publicly traded companies like Kroger have dedicated investor relations sections on their corporate websites. This is typically the easiest and most reliable source. Look for sections like "Financials," "SEC Filings," or "Annual Reports."
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SEC EDGAR Database: The U.S. Securities and Exchange Commission (SEC) requires public companies to file their financial statements regularly. The EDGAR (Electronic Data Gathering, Analysis, and Retrieval) database is a public database where you can find all of Kroger's filings, including their Annual Reports (Form 10-K) and Quarterly Reports (Form 10-Q).
Step 2: Navigate to the Balance Sheet
Once you've accessed Kroger's financial reports, you'll want to find the Balance Sheet. The Balance Sheet provides a snapshot of a company's assets, liabilities, and equity at a specific point in time. Debt is a form of liability.
Sub-heading: Current vs. Non-Current Liabilities
On the balance sheet, debt is typically categorized into:
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Current Liabilities: These are obligations due within one year. For debt, this usually includes the "current portion of long-term debt."
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Non-Current (Long-Term) Liabilities: These are obligations due in more than one year. This is where you'll find the bulk of a company's long-term debt, including bonds, loans, and obligations under finance leases.
Step 3: Pinpoint the Debt Figures
QuickTip: Slow down when you hit numbers or data.
Now that you're on the balance sheet, look for specific line items related to debt. These will typically include:
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Total Debt: This is the aggregate amount of all debt, both short-term and long-term.
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Long-Term Debt (including obligations under finance leases): This is often the largest component and represents debt that matures beyond one year.
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Current Portion of Long-Term Debt: This represents the portion of long-term debt that is due within the next 12 months.
Step 4: Analyze Kroger's Recent Debt Levels (as of Q1 2025/latest available data)
Let's look at the most recent data available for Kroger's debt. As of their latest financial reports (May 24, 2025, or February 1, 2025, for fiscal year-end data), Kroger's debt figures are as follows:
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Total Debt: Kroger reported total debt of $25.208 billion for the quarter ending May 24, 2025. This figure has seen an increase compared to previous periods. For the fiscal year ending February 1, 2025, the total debt was reported as $25.082 billion.
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Long-Term Debt (including obligations under finance leases): As of May 24, 2025, Kroger's long-term debt (including obligations under finance leases) was $17.138 billion. For the fiscal year ending February 1, 2025, this figure was $17.714 billion. This shows a significant increase from the previous fiscal year (2024), where it was $12.028 billion.
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Current Portion of Long-Term Debt: As of May 24, 2025, the current portion of long-term debt was $807 million.
Sub-heading: Historical Context of Kroger's Debt
It's helpful to look at Kroger's debt over time to understand trends.
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Fiscal Year-End Total Debt:
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2025 (Feb 1): $25.082 billion
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2024 (Feb 3): $19.25 billion
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2023 (Jan 28): $20.554 billion
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2022 (Jan 29): $20.499 billion
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2021 (Jan 30): $20.587 billion
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It's evident that Kroger's total debt has fluctuated, with a notable increase in fiscal year 2025. This increase can often be attributed to various factors, such as capital investments, acquisitions (like the previously planned Albertsons merger), or share buybacks.
Step 5: Evaluate Debt Ratios for Deeper Insight
Raw debt figures are important, but their significance truly comes to light when viewed in relation to other financial metrics. Here are some key ratios to consider:
Sub-heading: Debt-to-Equity Ratio
The Debt-to-Equity (D/E) ratio compares a company's total debt to its shareholder equity. It indicates how much debt a company is using to finance its assets relative to the value of shareholders' equity.
QuickTip: Focus more on the ‘how’ than the ‘what’.
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Calculation: Total Debt / Shareowner's Equity
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Kroger's D/E Ratio: As of May 24, 2025, Kroger's Debt/Equity ratio was approximately 283.0%. For the fiscal year ending February 1, 2025, it was 302.7%. A higher ratio generally indicates higher financial risk, as the company relies more on debt than equity. However, what constitutes a "high" ratio can vary significantly by industry. Compared to some peers in the consumer staples sector, Kroger's D/E ratio is on the higher side.
Sub-heading: Net Total Debt to Adjusted EBITDA Ratio
This ratio is frequently used by companies and analysts to assess a company's ability to pay off its debt. It relates net debt (total debt minus cash and temporary cash investments) to earnings before interest, taxes, depreciation, and amortization (EBITDA).
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Kroger's Target and Current Ratio: Kroger has a target net total debt to adjusted EBITDA ratio range of 2.30 to 2.50. As of their latest reports (May 24, 2025), their net total debt to adjusted EBITDA ratio was 1.69. For the fiscal year ending February 1, 2025, it was 1.79. This indicates that Kroger is currently operating below its target range, which can be viewed positively as it suggests a healthier debt servicing capacity.
Sub-heading: Interest Coverage Ratio
This ratio measures a company's ability to meet its interest payments.
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Calculation: Earnings Before Interest and Taxes (EBIT) / Interest Expense
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Kroger's Interest Coverage: Kroger's interest payments on its debt are generally well covered by its EBIT. For example, their EBIT was $4.6 billion, and their interest coverage ratio was 8.8x.
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Kroger expects full-year net interest expense to be between $650 million and $675 million in 2025.
Step 6: Consider the Purpose of the Debt
It's not just about the amount of debt, but also why it was incurred. Companies take on debt for various strategic reasons:
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Capital Expenditures (CapEx): Investing in new stores, technology, or supply chain improvements. Kroger has significant capital expenditures planned, with projections of $3.6 billion to $3.8 billion for 2025.
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Acquisitions: Funding the purchase of other companies. Kroger's recently terminated merger attempt with Albertsons, while not finalized, would have significantly impacted their debt levels if it had gone through, and they even issued senior notes in anticipation of such a deal.
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Share Buybacks and Dividends: Returning value to shareholders. Kroger is committed to paying and increasing its quarterly dividend.
Step 7: Assess Financial Health and Outlook
Kroger generally aims to maintain an investment-grade debt rating, which indicates lower risk to lenders and often translates to lower borrowing costs. Their ability to generate strong free cash flow and their current net total debt to adjusted EBITDA ratio (below their target range) suggest a relatively strong financial position despite the considerable amount of debt.
However, the significant increase in total debt in fiscal year 2025 compared to previous years warrants attention. Investors should monitor how this impacts Kroger's financial ratios and its ability to manage its obligations in the future, especially considering current interest rate environments.
QuickTip: Reading regularly builds stronger recall.
10 Related FAQ Questions
How to calculate a company's total debt?
Answer: Total debt is found on a company's balance sheet under "Liabilities" and typically includes "Current portion of long-term debt" and "Long-term debt." Summing these two categories gives you the total debt.
How to interpret the Debt-to-Equity ratio?
Answer: The Debt-to-Equity ratio (Total Debt / Shareholder's Equity) indicates how much debt a company uses to finance its assets relative to the value of shareholders' equity. A higher ratio generally means more financial leverage and potentially higher risk, but the acceptable range varies by industry.
How to find Kroger's financial reports?
Answer: You can find Kroger's financial reports on their official investor relations website (ir.kroger.com) or by searching the U.S. Securities and Exchange Commission (SEC) EDGAR database for their Form 10-K (Annual Report) and Form 10-Q (Quarterly Report) filings.
How to determine if a company's debt level is healthy?
Answer: A healthy debt level depends on various factors, including industry, cash flow generation, and interest coverage. Generally, a company that can consistently meet its debt obligations, has a manageable debt-to-equity ratio, and maintains an investment-grade credit rating is considered to have a healthy debt level.
QuickTip: Take a pause every few paragraphs.
How to understand the difference between long-term and short-term debt?
Answer: Short-term (current) debt refers to obligations due within one year, while long-term (non-current) debt refers to obligations due in more than one year. Both are important components of a company's overall debt structure.
How to use the Net Total Debt to Adjusted EBITDA ratio?
Answer: This ratio (Net Debt / Adjusted EBITDA) assesses a company's ability to pay off its debt using its operating earnings. A lower ratio typically indicates a stronger ability to repay debt, and companies often have a target range for this metric.
How to know if Kroger's debt is increasing or decreasing over time?
Answer: To see if Kroger's debt is increasing or decreasing, review their total debt figures from annual and quarterly financial statements over several periods. Look for trends in the "Total Debt" or "Long-Term Debt" line items on their balance sheets.
How to assess the impact of interest rates on Kroger's debt?
Answer: Higher interest rates can increase Kroger's borrowing costs, affecting its net interest expense and potentially reducing its profitability. Companies with significant variable-rate debt are more sensitive to interest rate changes.
How to find Kroger's credit ratings?
Answer: Credit ratings for companies like Kroger are typically provided by credit rating agencies such as Standard & Poor's, Moody's, and Fitch. These ratings are often mentioned in investor presentations or financial news related to the company's debt offerings.
How to get a holistic view of Kroger's financial health beyond just debt?
Answer: To get a holistic view, examine other financial statements like the Income Statement (for profitability and revenue) and Cash Flow Statement (for cash generation). Also, analyze other financial ratios such as profitability margins, liquidity ratios (current ratio, quick ratio), and return on equity/assets.
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