Good morning and thank you for joining us. Before we begin, I want to remind you that today’s discussion 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, but Kroger assumes no obligation to update that information.

Both our fourth quarter press release and our prepared remarks from this conference call will be available on our website at www.kroger.com.

Now I would like to introduce Mr. David Dillon, Chairman and Chief Executive Officer of Kroger.

Comments by: Dave Dillon
Thanks Carin and good morning everyone. We’re pleased you could join us to review Kroger’s fourth quarter and fiscal year 2007 financial results. With me today are Rodney McMullen, Kroger’s Vice Chairman and Mike Schlotman, Senior Vice President and Chief Financial Officer. Don McGeorge, Kroger’s President and Chief Operating Officer is off sick today – flu season is finally here.

I will begin with a recap of Kroger’s fourth quarter and fiscal year sales results and then provide our latest market share information. Rodney will review our fiscal year results and provide guidance for 2008. Then we’ll be happy to take your questions.

Fourth Quarter Recap
Total sales for the fourth quarter increased 2.2% to $17.2 billion. After adjusting for the extra week in the fourth quarter of 2006, total sales increased 10.2%.

Identical supermarket sales increased 8.2% with fuel and 5.3% without fuel, based on the same 12-week period in both years. Our strong identical sales growth continues to be broad-based across the Company’s geographic regions. The strongest departments were Grocery, Produce, Nutrition and Deli/Bakery.

Net earnings in the fourth quarter totaled $322.9 million, or $0.48 per diluted share. The LIFO charge in the fourth quarter was $0.05 per diluted share, resulting from higher than expected inflation, and was $0.02 per diluted share more than we anticipated when we reported our third quarter results to you back in December.

We continue to drive solid identical sales growth by improving service, value, product quality and selection for our customers. During the quarter, we continued to invest in lower prices for our customers, providing meaningful savings for them in this uncertain economic environment.

We ended the fiscal year with a strong quarter. The fourth quarter and full fiscal year highlight what Kroger’s strategy is designed to do: Deliver strong financial results today while we continue to invest in the future.

Rodney will discuss our fiscal year results in a few minutes. First, I will share our latest market share results with you.

Market Share
Increasing market share is a cornerstone of our strategy, and I am very pleased to report that for the third consecutive year, Kroger has shown impressive market share gains.

The market share figures we report are based on our own calculations and consider the potential for sales in each market from all retail outlets where customers can purchase products Kroger sells – including supercenters and other non-traditional retail formats such as dollar stores, drug stores, and warehouse clubs. Most third-party market share data providers only consider traditional formats.

Kroger serves customers in 44 major markets. We define a “major market” as one in which we operate nine or more stores. For 2007, Kroger held the number 1 or number 2 market share position in 39 of our 44 major markets. Our overall market share in these 44 major markets rose approximately 65 basis points during 2007, on a volume-weighted basis. Kroger’s share increased in 37 of those 44 major markets, declined in six, and remained unchanged in one.

Kroger competes against a total of 1,340 supercenters – an increase of 78 over last year. Supercenters have achieved at least a number 3 market share position in 36 of our major markets. Kroger’s overall market share in these 36 markets rose 95 basis points during 2007, on a volume-weighted basis. Our share increased in 31 of those 36 major markets, declined in four, and remained unchanged in one.

Of the 1,340 supercenters that I mentioned, 1,065 are operated by Wal-Mart. This is an increase of 65 over last year. That increase is the lowest in 7or 8 years. Wal-Mart supercenters have achieved at least a number 3 share position in 34 of the major markets where Kroger faces significant supercenter competition, compared with 32 last year. Kroger’s overall market share in these 34 markets rose over 80 basis points in 2007. Our share increased in 30 of those 34 major markets, declined in three, and remained unchanged in one.

Despite the growing number of competitors in the grocery business, we have increased our market share on top of strong gains in 2005 and 2006. During the last three fiscal years combined, Kroger’s share in our major markets has increased approximately 165 basis points. These consecutive year-over-year gains in market share are significant because they show that Kroger’s long-term strategy is working as we continue to deliver value to both our customers and our shareholders.

I want to thank our associates for their direct impact on increasing Kroger’s market share in so many of the markets we serve. They see first-hand what happens when new competition enters one of our markets and they understand what it takes to distinguish Kroger from the rest in the eyes of our customers.

While these latest market share numbers are impressive, we know there is more opportunity out there for our Company. Even with Kroger’s strong share in our 44 major markets, approximately 46% of the share in those markets continues to be held by competitors without our economies of scale. We estimate that their share has declined nearly 4% over the last four years.

Now I would like to turn to Rodney who will review our fiscal year and discuss our guidance for 2008. Rodney?

Comments by Rodney McMullen:
Thank you, Dave, and good morning everyone.

We delivered another quarter of strong results, thanks to the contributions of our associates in every area of our business. Our associates continue to execute our Customer 1st plan well as we continue to balance operating cost reductions with investments aimed at improving our customers’ overall shopping experience.

Fiscal 2007 Scorecard:
As Dave said, Kroger had a great year! For the full 2007 fiscal year, total sales increased 6.2% to $70.2 billion. Adjusting for the extra week in fiscal 2006, total sales increased 8.2%. Identical supermarket sales increased 6.9% with fuel and 5.3% without fuel, based on the same 52-week period in both years.

We delivered on the fiscal 2007 objectives we outlined for investors a year ago. Our original target for identical supermarket growth for the year, excluding fuel sales, was 3 – 5%. We raised the lower end of that range to 3.5% after the first quarter and raised it again to 4% after the second quarter. At the end of the third quarter, we said we expected identical supermarket sales growth of 5% for the full year, excluding fuel sales. Today, we reported full-year identical supermarket sales growth, without fuel, of 5.3% – exceeding all of our expectations throughout the year. On a two-year stacked basis, this marks the fifth consecutive quarter that we have reported identical supermarket sales, excluding fuel, of 10% or higher.

Kroger’s strong identical sales growth in 2007 was a key driver of our earnings per share growth, which is consistent with our business model. We originally expected to deliver earnings per share growth of $1.60 – $1.65 per diluted share for fiscal 2007. Today, we reported earnings of $1.69 per diluted share. This equates to 15% growth after adjusting for the extra week in fiscal 2006. This growth, plus Kroger’s dividend yield of slightly more than 1%, created strong value for shareholders.

I want to note that we exceeded our original fiscal 2007 earnings guidance despite a LIFO charge that was $104 million higher than our original expectations for the year. The higher than expected LIFO charge is a reflection of the current inflationary environment. Like many food retailers, we continue to experience product cost inflation across many core grocery and perishable categories at levels not seen in several years. We estimate that our product cost inflation during the fourth quarter was 3.8%, excluding fuel. While the LIFO charge is a non-cash expense that negatively impacts Kroger’s operating margin and reduces earnings, it does create cash tax savings for the Company. The impact of the higher LIFO charge on our fiscal 2007 earnings was mostly offset by higher than expected sales.

Operating Margin
Let me turn now to some other highlights of our fiscal 2007 results. Our operating margin, excluding fuel, declined 3 basis points from a year ago. Excluding the impact of the higher than expected LIFO charge, Kroger’s operating margin expanded 14 basis points for the year, which is consistent with our strategy.

The 14 basis point expansion is the result of a 19 basis point decline in Kroger’s non-fuel FIFO gross margin and a 33 basis point improvement in our non-fuel OG&A rate for fiscal 2007 in comparison to the prior year. Kroger’s FIFO gross margin decline on non-fuel sales primarily reflects our strategy of continued investments in lower prices for customers. Our supermarket selling gross margin on non-fuel sales declined 20 basis points on an annual basis, which was consistent with the fourth quarter decline of 18 basis points.

The improvement in our OG&A rate is due to strong identical sales leverage, increased productivity, and progress we have made in controlling our utility, health care, and pension expenses. These improvements continue to be offset by higher credit card fees.

Rent and depreciation expense, as a percent of non-fuel sales, were comparable to last year. However, note that fiscal 2006 contained 53 weeks of sales and only 52 weeks of depreciation expense due to the structure of our fiscal calendar. Fiscal 2007 contained 52 weeks of sales and 52 weeks of depreciation expense.

Capital Investment
At the beginning of fiscal 2007, we planned to invest approximately $1.9 - $2.1 billion in capital projects during the year, excluding acquisitions. Our actual capital expenditures for 2007 were $2.1 billion, excluding acquisitions, compared with $1.8 billion in fiscal 2006.

We completed 200 store remodels during the year and opened, expanded, relocated or acquired 102 supermarkets. In 2006, we remodeled 158 stores and opened, expanded, relocated or acquired 53 locations.

Another important element of our capital investment plan is our logistics network, a vital link between our stores and our customers. Over the last three years, we have invested more than $400 million in our logistics network, making it more efficient – and an industry leader in many areas. These investments have covered a wide range of projects, including transitioning three warehouses to automated systems and beginning installations of this same technology in others. Our investments in logistics generate an excellent return.

Debt
Total debt in 2007 was $8.1 billion, an increase of $1.1 billion from a year ago. On a rolling four-quarters basis, Kroger’s net total debt to EBITDA ratio was 2.0, compared with 1.9 during the same period last year. We expect to manage the use of our free cash flow to maintain a leverage ratio that supports our investment grade rating.

Share Repurchase and Dividends
During the year, Kroger repurchased 52.5 million shares of stock at an average price of $27.05 for a total investment of $1.4 billion. Over the past four quarters, Kroger has returned $1.6 billion to shareholders in share repurchases and dividends. At the current share price, we expect the $941 million remaining under our current authorization to be sufficient to fund repurchases throughout fiscal 2008.

Since January 2000, Kroger has reduced its net total debt to EBITDA ratio from 2.8 to 2.0, a reduction of 0.8 times EBITDA. During the same time frame, Kroger has invested $5.0 billion to repurchase 237.3 million shares of stock at an average price of $21.22 per share. The Company has also paid $341.5 million in cash dividends to shareholders since it initiated its dividend program in 2006. In 2007, our board approved a dividend increase from 6.5 cents to 7.5 cents per share, reflecting its confidence in Kroger’s strategic plan.

Kroger performed well in 2007. We delivered on the objectives we established at the beginning of year and improved our position relative to our major competitors in the four key areas of our Customer 1st plan: our people, our products, our prices and the overall shopping experience for our customers.

We continue to deliver results today while making investments for our future. These investments include:

• Lower prices and better service for our customers;
• A wide array of products that align with the changing needs of our customers;
• A strong commitment to investing capital in our store base – our store remodels are producing results above our expectations and the return on investment in our new stores continues to improve;
• A share repurchase program that continues to demonstrate our confidence in Kroger’s future.

Our strategic plan continues to serve customers, associates and shareholders well and we believe it will enable us to achieve our objectives in 2008.

Fiscal 2008 Guidance
Let’s now turn to our expectations for fiscal 2008. As Dave mentioned, we expect our strategy will work well even as economic and competitive landscapes continue to evolve.
For fiscal 2008, Kroger anticipates earnings of $1.83 - $1.90 per diluted share. As in 2007, we anticipate Kroger’s earnings per share growth will be driven by strong identical sales, a slight improvement in non-fuel operating margins, and fewer shares outstanding. Identical supermarket sales growth is expected to be in the range of 3 - 5%, excluding fuel sales. Shareholder return will be further enhanced by Kroger's dividend.

The range for identical sales and earnings guidance takes into account the current uncertainty about future economic conditions. The upper end of the range assumes current economic conditions will continue while the lower end assumes economic conditions weaken slightly. Our annual guidance assumes fuel margins similar to fiscal 2007. Due to the nature of the fuel business, there could be volatility from quarter to quarter, as we saw last year.

Our earnings per share and sales guidance is based on a stable labor environment. This year, we have labor negotiations covering store associates in Columbus, Indianapolis, Las Vegas, Louisville, Nashville, Phoenix and Portland. In every negotiation, we work to achieve competitive cost structures in each market while meeting our associates’ need for good wages and affordable health care.

While we do not give specific quarterly guidance, I do want to note that we anticipate earnings per share growth rates in the first and fourth quarters of 2008 will be higher than the annual growth rate and that the third quarter will be lower than the annual growth rate. This is important to remember when calculating your 2008 quarterly estimates. We filed an 8-K earlier today that outlines some of our additional expectations for fiscal 2008.

And though it is early, identical supermarket sales trends are tracking at the high end of our identical sales guidance range. There are signs that some discretionary spending is decreasing but our business model is well-suited for this environment.

Now I will turn it back to Dave for some closing remarks.

Comments by Dave Dillon:
Thanks, Rodney. I am very pleased with Kroger’s performance during the fourth quarter and the full year. We did better than we said we would do, as our results clearly indicate. Our results highlight Kroger’s ability to consistently deliver results in the near-term, and, at the same time, make meaningful investments in the future.

This year, Kroger is honored to celebrate our 125th anniversary. Our longevity is a testament to our ability to change along with our customers. We have been fortunate as a company to welcome change – decade after decade – and use it to benefit our customers, associates and shareholders. The success we have enjoyed along the way is a tribute to the hundreds of thousands of associates who work hard to set Kroger apart from the rest.

And while I have additional comments for our associates listening in today after we answer your questions, I want to take this opportunity to thank the entire Kroger team – every store, every division, every banner, every plant, every distribution center, every office and every operations center – for a terrific year.

Our growth has taken many forms over the years but there is one constant that has never changed – the commitment of our associates to deliver value to our customers and shareholders. Thank you.

Now, we would like to take a few moments to answer your questions.

Closing comments after Q&A:
Thank you. Before we sign off, I would like to share a few thoughts with our associates who have joined us today.

Once again, congratulations on a great year! I am particularly pleased with the gains that we continue to make in market share. Those numbers only move in a positive direction when customers choose us over our competition. Our increases in market share mean you are doing what you do so well: Making sure our customers want to return to our stores time and again.

Our performance during the quarter and the year points to another significant achievement you should all be proud of because it is the result of your individual contributions. You heard us mention that Kroger continues to make progress in our four key areas: our people, our products, our prices and the overall shopping experience for our customers. One example where you have a huge impact is in helping to keep our costs low. Kroger is able to invest these lower costs in lower prices for our customers because of the choices each of you make on the job every day.

Our families, friends and neighbors are making different choices in today’s economy than they did a year ago because household budgets are not as flexible. Your personal commitment makes our lower prices possible. We hope your friends and neighbors appreciate the help you provide – particularly when they need it the most.

That completes our call today. Thank you all for joining us.

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The remarks contain certain forward-looking statements about the future performance of the Company. These statements are based on management’s assumptions and beliefs in light of the information currently available to it. Such statements are indicated by words or phrases such as "will," "expect," and "anticipate." These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially. Our ability to achieve sales and earnings growth and earnings per share goals, and the timing of that achievement, may be affected by: labor disputes, particularly as the Company seeks to manage health care and pension costs; industry consolidation; pricing and promotional activities of existing and new competitors, including non-traditional competitors; our response to these actions; the state of the economy, including interest rates and the inflationary and deflationary trends in certain commodities; weather conditions; stock repurchases; the success of our future growth plans; goodwill impairment; and our ability to generate sales at desirable margins, as well as the success of our programs designed to increase our identical sales without fuel. Our ability to increase identical supermarket sales could be adversely affected by increased competition and sales shifts to other stores that we operate, as well as increases in sales of our corporate brand products. Our plans to use free cash flow to repurchase shares and to pay dividends (which will affect our leverage ratio) will depend on our ability to generate free cash flow, which will be affected by all of the factors identified above, and the extent to which those repurchases can be made and dividends be paid while still maintaining a solid investment grade rating. The extent to which shareholder return will be enhanced by Kroger’s dividend will depend upon the continuation of payment of a dividend and the amount thereof. The extent to which amounts remaining under our current share repurchase authorization will be sufficient to fund stock repurchases through fiscal 2008 will primarily be affected by our stock price and the Company’s judgment regarding the attractiveness of repurchasing Kroger stock when compared to alternative uses of funds. The effectiveness of our strategy will depend primarily on the reactions of our competitors and our customers as we continue to implement our strategy through investment in lower prices for our customers. We assume no obligation to update the information contained herein. Please refer to Kroger’s reports and filings with the Securities and Exchange Commission for a further discussion of these risks and uncertainties.

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