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

Before I turn the call over to Mr. Dillon, I want to take moment to remind you about our upcoming investor conference here in Cincinnati on October 10th and 11th. We look forward to seeing many of you at the conference.

Now I would like to introduce Mr. Dillon.

Comments by: Dave Dillon

Thanks Carin and good morning everyone. We’re pleased you could join us to review Kroger’s second quarter financial results. With me today are Rodney McMullen, Kroger’s Vice Chairman; Don McGeorge, Kroger’s President and Chief Operating Officer; and Mike Schlotman, Senior Vice President and Chief Financial Officer.

I’d like to begin this morning by briefly reviewing Kroger’s second quarter financial performance. Then I will provide an update on Kroger’s outlook for 2006. Rodney will share additional details about our second quarter results, and then we’ll be happy to take your questions.

Sales

Total sales for the second quarter increased 9.2% to $15.1 billion. Identical supermarket sales increased 7.9% with fuel and 6.0% without fuel. This is the twelfth consecutive quarter of positive identical supermarket sales, excluding fuel. As we have said, our business model is driven by identical sales growth and we are pleased to have achieved another strong quarter.

Growth continues to be broad-based across all divisions and all store departments. It was particularly strong in Grocery, Produce, Natural Foods, Deli/Bakery and Pharmacy. Our convenience stores had another strong quarter in fuel and non-fuel merchandise.

Net earnings were $209.0 million, or $0.29 per diluted share, for the second quarter. These results include $0.01 per diluted share related to stock option expense. Net earnings in the same period last year were $196.5 million, or $0.27 per diluted share.

We are pleased by this improved performance and believe it reflects our unique approach to serving our customers. Our results this quarter indicate we are realizing the benefits of our strategy, which includes listening to our customers and associates. We are investing our resources in what they tell us is most important, an approach that builds loyalty to Kroger.

These results also illustrate the balance our strategic plan requires: sales, earnings, focus on our customers and cost control. These results show our strategy is building sustainable sales and earnings growth, and value for our shareholders.

Year-to-date Results

In looking at Kroger’s performance during the first two quarters of fiscal 2006, total sales increased 8.6% to $34.6 billion. For the same period, identical supermarket sales, excluding fuel, increased 5.8%.

Net earnings for the first two quarters of fiscal 2006 were $515.4 million, or $0.71 per diluted share. These results include $0.03 per diluted share for stock option expense. They also include $0.03 per diluted share for legal reserves recorded in the first quarter. For the same period in fiscal 2005, net earnings were $490.7 million, or $0.67 per diluted share.

Guidance

Kroger’s results through the first half of 2006 indicate we are on track to exceed our original identical sales guidance and meet our earnings guidance for the year. We are affirming our guidance for earnings per share growth in 2006 of 6 – 8%, including the increase in legal reserves recorded during the first quarter, which essentially raised our guidance. Without this increase, Kroger’s projected earnings per share growth rate would be 9 to 11% for fiscal 2006.

As we often mention, strong identical sales are a key driver of our earnings per share growth. We originally forecasted identical supermarket sales growth, excluding fuel sales, in excess of 3.5% for fiscal 2006. When we reported our first quarter results, we raised that guidance to approximately 4.5% for the year.

Today – thanks to the dedicated efforts of our associates and their emphasis on placing the customer first – we are raising our identical sales guidance once again. We now anticipate identical supermarket sales of at least 4.0% for the balance of the year, or approximately 4.9% for the full year, excluding fuel.

I want to remind investors that in 2005, several markets experienced unexpected sales increases as a result of Hurricanes Katrina and Rita. As a result, it is difficult to forecast this year’s identical sales for the same period. Our entire organization remains very focused on driving sustainable identical sales growth.

Now I will ask Rodney to share some additional details on Kroger’s second quarter results. Rodney?

Comments by Rodney McMullen:

Thank you, Dave, and good morning everyone.

As Dave mentioned earlier, we believe our second quarter performance is a direct result of our strategy and reflects the consistent approach we have taken to managing our business: balancing investments aimed at improving our customers’ shopping experience with operating cost reductions.

I’d like to discuss how this strategy affected several indicators during the second quarter, starting with gross margin.

Gross Margin

FIFO gross margin was 23.47% of sales, a decrease of 112 basis points compared to the second quarter of 2005. Excluding the effect of retail fuel operations, FIFO gross margin declined 65 basis points from the prior year. In the past two quarters, we have introduced you to a metric we call “selling gross margin.” This is a term we use internally at Kroger to describe the Company’s gross margin before incurring expenses directly related to distributing and merchandising products on our store shelves, such as advertising, warehousing, transportation, and shrink.

Kroger’s second-quarter “selling gross margin” on non-fuel sales declined 65 basis points. During the quarter we made additional targeted investments in select markets to take advantage of market share opportunities. These investments account for a portion of the decline in our second-quarter “selling gross margin.”

Operating, general and administrative (OG&A)

OG&A declined 73 basis points to 17.50% of sales. Excluding the effect of retail fuel operations and stock option expense, OG&A declined 47 basis points. We’ve made good progress as an organization in controlling costs in an inflationary environment. I’d like to highlight three areas in particular: bag costs, transportation management and our collective efforts in controlling utility costs.

We saw a decrease in bag usage, thanks to the efforts of our front-line associates. With regard to transportation costs, we achieved higher sales with lower mileage by better utilizing our truck fleet. In terms of kilowatt hours, our team was successful in significantly reducing usage by installing energy-efficient lighting and introducing other improvements in stores to offset increasing utility costs. These three examples reduce costs and benefit the environment.

In fact, since 2000, Kroger has reduced its overall energy consumption per square foot by more than 19%. This is the kind of cost control that allows us to invest in improving the shopping experience and lowering prices for our customers.

Rent Expense

Rent expense in the second quarter was $153.4 million, an increase of $8.9 million over the prior year. Excluding closed-store activity, we continue to expect rent expense, as a percent of total sales, to decrease due to the emphasis our current strategy places on owning real estate.

Operating Margin

Kroger’s operating margin, on a GAAP basis, declined 17 basis points to 2.96% of sales. Excluding the effect of retail fuel sales and stock option expense, operating margin declined 5 basis points. On this same basis, recall that our first-quarter operating margin grew 32 basis points. This illustrates what we have told you to expect concerning our operating margin on a quarter-by-quarter basis – that it may fluctuate depending on the timing of our operating cost savings and our reinvestment of those savings in the customers’ shopping experience.

On a year-to-date basis, Kroger’s operating margin declined 15 basis points to 3.16% of sales. Excluding the effect of retail fuel sales, the first quarter increase in legal reserves, and stock option expense, operating margin increased 16 basis points. On this basis, for fiscal 2006, we still forecast slightly improving operating margins, resulting primarily from continued improvement in California.

Capital Investment

During the quarter, Kroger’s strong cash flow enabled us to invest in our store base, reduce debt, repurchase shares and pay a cash dividend.

In the second quarter, capital investment totaled $361.2 million, compared to $271.9 million a year ago. We are on track to invest approximately $1.7 - $1.9 billion in capital projects during fiscal year 2006, and we still anticipate total supermarket square footage growth of 1.5 – 2.0 % (before acquisitions and operational closings).

For the second quarter, total supermarket square footage grew 1.4% year over year, excluding acquisitions and operational closings. Our return on asset measures improved almost 80 basis points on a pre-tax basis. This is using the method Kroger has consistently used to calculate return on assets.

Debt Reduction

Net total debt was $6.3 billion, a reduction of $679.1 million from a year ago and a reduction of $2.5 billion since January 2000. Net total debt includes a reduction of $666.1 million to reflect temporary cash investments. Total debt was $7.0 billion, a reduction of $263.0 million from a year ago.

Our investment grade rating is very important to us. We have focused on improving our coverage ratios since merging with Fred Meyer in 1999. Our net debt to EBITDA ratio in the second quarter was 1.87. This is our best performance on this measure since our merger with Fred Meyer in 1999 and, in fact, our best since Kroger’s leveraged recapitalization in 1988.

Share Repurchase

During the second quarter, Kroger repurchased 7.6 million shares of stock at an average price of $21.40 for a total investment of $161.6 million. At the end of the second quarter, $389.3 million remained under the $500 million stock buyback announced in May 2006.

Since January 2000, Kroger has invested $3.3 billion to repurchase 170.0 million shares at an average price of $19.26 per share. That equates to approximately 19% of the Company. Kroger expects to continue to buy back stock in 2006 in accordance with the Company’s financial strategy of using one-third of free cash flow for debt reduction and two-thirds for share repurchase and cash dividend payments.

2007 Guidance

As Dave mentioned, we expect earnings per share growth of 6 – 8% in 2006. This range includes the first quarter charge of $0.03 per diluted share to increase our legal reserves, even though that additional legal expense was not expected when we gave our original guidance. Fiscal 2006 is also a 53-week year. As we look to fiscal 2007, we continue to anticipate earnings per share growth of 6 – 8 % on top of the 2006 base that I just described. In other words, the 6 – 8 % growth rate for 2007 should be applied after reducing fiscal 2006 earnings by a net of 2 cents per share. This net adjustment to 2006 earnings reflects the 5-cent benefit from the 53rd week offset by the 3 cents of additional legal expense.

This is the same guidance we communicated for 2007 earnings per share growth when we released year-end 2005 results in March. We wanted to clarify it to ensure consistency in the treatment of two unique items in our fiscal 2006 results – the additional legal accrual that occurred in the first quarter and the 53rd week that will occur in the fourth quarter.

Tax Rate

Our second quarter tax rate was 38.2% compared to 37.4% for the prior year. We now expect that our tax rate for fiscal 2006 will be 37.8%. This assumes that the Work Opportunity Tax Credit will be retroactively reinstated by year-end. This tax credit will not be reflected in our effective tax rate until it is approved.

Labor

Before I turn it back over to Dave, I’d like to comment briefly on labor. As I mentioned last quarter, we do not face the magnitude of contract negotiations this year that we did last year. Still, labor negotiations continue to be a challenge in the face of competitive pressures and rising pension and health care costs. In each contract negotiation, we work to reach a balanced agreement that meets our cost reduction or containment objectives while fulfilling our commitment to provide our associates with solid wages and benefits. This balance will allow Kroger to invest in our business to create new job opportunities for our existing associates and hire more people.

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

Comments by Dave Dillon:

Thanks, Rodney. Our second quarter results show we are on track to achieve our financial objectives for the year. In keeping with our strategic plan, our results this quarter demonstrate our ability to invest cost savings to enhance our customers’ overall shopping experience. We thank our associates for maintaining their focus on our customers.

We will now take your questions.

Closing comments after Q&A:

Thank you. Before we sign off today, I would like to make some additional comments to our associates who are listening in today. Rodney mentioned the progress we made this quarter in controlling energy costs in such a challenging environment. He specifically mentioned bag expense, trucking costs and energy usage. He could have also mentioned others.

Fortunately, we can point to thousands of individual efforts our associates make every day to benefit our customers. From taking a customer’s groceries to their car when they need a little extra help to the team of facility engineers who find the right lighting solutions, our people look for opportunities where they can individually make a difference toward placing our customers first.

Efforts like these – and thousands of others – make our business strategy work. On behalf of our customers, we deeply appreciate your work. Thank you.

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 “guidance,” “projected,” “expects,” “forecast,” “on track,” 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 goals 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. These same factors, as well as the extent to which we are able to improve results from our California operations, may affect our ability to improve margins. In addition any labor dispute, delays in opening new stores, or changes in the economic climate could cause us to fall short of our sales and earnings targets. Further, increases in sales of our corporate brand products and the “sister store” impact of our new store openings, could adversely affect identical store sales. Our capital expenditures could vary from our expectations if we are unsuccessful in acquiring suitable sites for new stores; development costs exceed those budgeted; or our logistics and technology or store projects are not completed on budget or in the time frame expected. Our ability to increase identical supermarket sales could be adversely affected by increased competition and sales shifts to other stores that we operate. Square footage growth during the year is dependent upon our ability to acquire desirable sites for construction of new facilities, as well as the timing of completion of projects. Any change in tax laws, the regulations related thereto, or the interpretation thereof by federal, state or local authorities could affect our expected tax rate. The extent to which our cash flow is sufficient to support our debt reduction and stock repurchases or cash dividend payment will depend on our ability to generate sales and to reduce costs and manage our gross margin, as well as our ability to manage our working capital. Our ability to achieve our long-term goal of using one-third of cash flow for debt reduction and two-thirds for stock repurchase or payment of a cash dividend depends primarily on the price at which our stock trades and the availability of debt to repurchase. The success of our financial objectives in 2006 may be affected by actions taken by our competition; cost increases that are not passed on to customers; and an inability to generate sales at desirable margins. 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.