Key Insights

• Kroger's Annual General Meeting to take place on 27th of June
• CEO William McMullen's total compensation includes salary of US$1.42m
• The total compensation is 45% higher than the average for the industry
• Kroger's EPS declined by 4.2% over the past three years while total shareholder return over the past three years was 41%

The share price of The Kroger Co. (NYSE:KR) has increased significantly over the past few years. However, the earnings growth has not kept up with the share price momentum, suggesting that some other factors may be driving the price direction. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 27th of June. It would also be an opportunity for them to influence management through exercising their voting power on company resolutions, including CEO and executive remuneration, which could impact on firm performance in the future. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.

How Does Total Compensation For William McMullen Compare With Other Companies In The Industry?

At the time of writing, our data shows that The Kroger Co. has a market capitalization of US$38b, and reported total annual CEO compensation of US$16m for the year to February 2024. That's a notable decrease of 18% on last year. We think total compensation is more important but our data shows that the CEO salary is lower, at US$1.4m.

In comparison with other companies in the American Consumer Retailing industry with market capitalizations over US$8.0b, the reported median total CEO compensation was US$11m. Accordingly, our analysis reveals that The Kroger Co. pays William McMullen north of the industry median. Furthermore, William McMullen directly owns US$195m worth of shares in the company, implying that they are deeply invested in the company's success.

Talking in terms of the industry, salary represented approximately 12% of total compensation out of all the companies we analyzed, while other remuneration made up 88% of the pie. Kroger sets aside a smaller share of compensation for salary, in comparison to the overall industry. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

A Look at The Kroger Co.'s Growth Numbers

Over the last three years, The Kroger Co. has shrunk its earnings per share by 4.2% per year. In the last year, its revenue is up 1.2%.

Overall this is not a very positive result for shareholders. The modest increase in revenue in the last year isn't enough to make us overlook the disappointing change in EPS. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Looking ahead, you might want to check this free visual report on analyst forecasts for the company's future earnings..

Has The Kroger Co. Been A Good Investment?

Boasting a total shareholder return of 41% over three years, The Kroger Co. has done well by shareholders. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

To Conclude...

While the return to shareholders does look promising, it's hard to ignore the lack of earnings growth and this makes us question whether these strong returns will continue. Shareholders should make the most of the coming opportunity to question the board on key concerns they may have and revisit their investment thesis with regards to the company.

CEO compensation can have a massive impact on performance, but it's just one element.

Arguably, business quality is much more important than CEO compensation levels.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.