CINCINNATI - Kroger Co. CEO Rodney McMullen took a million-dollar pay cut in 2016 as the Cincinnati-based grocery chain battled falling prices and a 13-year growth streak came to an end.
In a statement to Kroger shareholders, the company reported $10.2 million in total compensation for McMullen, down 10 percent from last year. The biggest factor in the decline was a huge dip in performance bonuses for the entire Kroger executive team.
“Kroger’s results in 2016 did not meet some of our business objectives,” said the document.
The company fell short on net operating profits and operating costs as a percentage of sales (excluding fuel). It also fell short on identical-store sales, which tracks revenue at stores that haven't opened, expanded or relocated for at least five full quarters. The company had grown ID sales for 52 consecutive quarters, until it posted a 0.7 percent decline in the fourth quarter.
“We believe this is the best measure of the real growth of our sales across the enterprise,” the proxy states. “A key driver of our model is strong ID Sales; it is the engine that fuels our growth.”
For much of the year, Kroger sales were restrained by deflation, as the price of meat, poultry, fish and dairy products drove food prices to their first annual decline since 1967. Later in the year, Kroger, Wal-Mart and other rivals launched price wars to compete against online retailers and European chains, Aldi and Lidl.
Kroger did not disclose whether the company met its goals on another performance incentive: ClickList. The company offered a 5 percent bonus “kicker” if it “achieved certain goals with respect to its ClickList expansion and operation.”
Last year, the company offered a similar bonus for improved performance at Kroger gas stations. But it didn’t disclose any specifics on whether it achieved the desired results in its online-ordering, in-store pick up program, saying the information was “competitively sensitive.”
McMullen’s bonus declined from $3 million in 2015 to $719,945 last year. He received an 18 percent increase in stock awards and option grants, but it wasn’t enough to make up for the lost bonus opportunity.
Other executives took a bonus beating too, as combined cash awards declined from $4 million in 2015 to $1 million for Kroger Chief Financial Officer Mike Schlotman and executive vice presidents Michael Donnelly and Christopher Hjelm.
Schlotman received total compensation of $4.4 million last year, down 25 percent from a year ago. Donnelly, who leads Kroger’s merchandising efforts, took a 24 percent reduction to $3.6 million. Hjelm, in charge of Kroger’s technology endeavors, saw his total compensation drop nearly 30 percent to $3.4 million.