Identical Sales
($ in millions)
| | | | | | | | | | | |
| | First Quarter Ended | |
| | May 21, | | Percentage | | May 22, | | Percentage | |
| | 2022 | | Change(1) | | 2021 | | Change(2) | |
Excluding Fuel | | $ | 38,148 | | 4.1 | % | $ | 36,644 | | (4.1) | % |
(1) | This column represents the percentage change in identical sales in the first quarter of 2022, compared to the first quarter of 2021. |
(2) | This column represents the percentage change in identical sales in the first quarter of 2021, compared to the first quarter of 2020. |
Gross Margin, LIFO and FIFO Gross Margin
We define gross margin as sales minus merchandise costs, including advertising, warehousing, and transportation. Rent expense, depreciation and amortization expense, and interest expense are not included in gross margin.
Our gross margin rate, as a percentage of sales, was 21.63% for the first quarter of 2022, compared to 22.64% for the first quarter of 2021. The decrease in rate in the first quarter of 2022, compared to the first quarter of 2021, resulted primarily from increased fuel sales, which have a lower gross margin rate, continued strategic investments in lower prices for our customers, a higher LIFO charge and increased transportation and warehousing costs, as a percentage of sales, partially offset by effective negotiations to achieve savings on the cost of products sold and the cycling of a write down related to a donation of personal protective equipment inventory from the prior year.
Our LIFO charge was $93 million in the first quarter of 2022, compared to $37 million in the first quarter of 2021. The increase in our LIFO charge reflects our expected annualized product cost inflation for 2022, compared to 2021, which was attributable to higher inflation in most categories.
Our FIFO gross margin rate, which excludes the LIFO charge, was 21.84% in the first quarter of 2022, compared to 22.73% in the first quarter of 2021. Our fuel sales lower our FIFO gross margin rate due to the very low FIFO gross margin rate, as a percentage of sales, of fuel sales compared to non-fuel sales. Excluding the effect of fuel, our FIFO gross margin rate decreased 26 basis points in the first quarter of 2022, compared to the first quarter of 2021. This decrease resulted primarily from continued strategic investments in lower prices for our customers and increased transportation and warehousing costs, as a percentage of sales, partially offset by effective negotiations to achieve savings on the cost of products sold and the cycling of a write down related to a donation of personal protective equipment inventory from the prior year.
Operating, General and Administrative Expenses
OG&A expenses consist primarily of employee-related costs such as wages, healthcare benefit costs, retirement plan costs, utilities, and credit card fees. Rent expense, depreciation and amortization expense, and interest expense are not included in OG&A.
OG&A expenses, as a percentage of sales, were 15.69% in the first quarter of 2022 and 17.98% in the first quarter of 2021. The decrease in the first quarter of 2022, compared to the first quarter of 2021, resulted primarily from the effect of sales leverage across fuel and supermarkets, which decreases our OG&A rate, as a percentage of sales, lower contributions to multi-employer pension plans, decreased incentive plan costs, the 2021 OG&A Adjusted Items and broad-based improvement from cost savings initiatives that drive administrative efficiencies, store productivity and sourcing cost reductions, partially offset by investments in our associates and the 2022 OG&A Adjusted Item.
Our fuel sales lower our OG&A rate, as a percentage of sales, due to the very low OG&A rate, as a percentage of sales, of fuel sales compared to non-fuel sales. Excluding the effect of fuel, the 2022 OG&A Adjusted Item and the 2021 OG&A Adjusted Items, our OG&A rate decreased 46 basis points in the first quarter of 2022, compared to the first quarter of 2021. This decrease resulted primarily from the effect of supermarket sales leverage, which decreases our OG&A rate, as a percentage of sales, lower contributions to multi-employer pension plans, decreased incentive plan costs and broad-based improvement from cost savings initiatives that drive administrative efficiencies, store productivity and sourcing cost reductions, partially offset by investments in our associates.