KROGER REPORTS FOURTH QUARTER AND FULL YEAR 2009 RESULTS

CINCINNATI, Ohio, March 9, 2010 – The Kroger Co. (NYSE: KR) today reported total sales, including fuel, increased 7.2% to $18.6 billion in the fourth quarter of fiscal 2009 compared with $17.3 billion for the same period last year. Excluding fuel sales, in the fourth quarter total sales increased 2.0% and identical supermarket sales increased 1.2% over the prior year.

Net earnings for the fourth quarter, which ended on January 30, 2010, totaled $255.4 million, or $0.39 per diluted share. Net earnings in the same period last year were $349.2 million, or $0.53 per diluted share.

“The Kroger team delivered solid fourth quarter results for both our customers and our shareholders during what continues to be a difficult operating environment. We are strengthening Kroger’s overall competitive position by increasing the number of households that are loyal to Kroger and earning a greater share of their business,” said David B. Dillon, Kroger’s chairman and chief executive officer.

Details of Fourth Quarter Results
Including Kroger’s retail fuel operations, FIFO gross margin (Table 1) was 22.48% of sales, a decrease of 214 basis points compared to the fourth quarter last year. Excluding retail fuel operations, FIFO gross margin decreased 112 basis points. Supermarket selling gross margin on non-fuel sales decreased 126 basis points.

The Company recorded a $1.3 million LIFO charge during the quarter, a decrease of $39.6 million from the same period in the prior year. Excluding retail fuel operations, the LIFO charge decreased 25 basis points as a percent of sales compared to the same period last year.

Including Kroger’s retail fuel operations, operating, general, and administrative (OG&A) costs were 16.98% of sales, a decrease of 73 basis points compared to the fourth quarter last year. Excluding retail fuel operations, OG&A increased 10 basis points compared with the same period last year as a result of higher health care and labor costs, and credit card fees. This increase was partially offset by lower utility costs, improvements in labor productivity and lower incentive pay.

Financial Strategy
Capital investment, excluding acquisitions and purchases of leased facilities, totaled $458.9 million for the fourth quarter, compared with $434.0 million for the same period last year.

Net total debt (Table 5) was $7.5 billion, a decrease of $217.5 million from a year ago. On a rolling four-quarters basis, Kroger's net total debt to EBITDA ratio, adjusted for the southern California asset impairment charges in the third quarter, was 1.97 compared with 1.88 during the same period last year.

During the fourth quarter, Kroger repurchased 4.2 million shares of stock at an average price of $21.08 per share for a total investment of $88.0 million. At the end of the quarter, $337.1 million remained under the $1 billion stock repurchase program announced in January 2008.

Fiscal Year 2009 Results
For fiscal year 2009, total sales increased 0.8% to $76.7 billion compared with fiscal 2008. Excluding fuel sales, total sales for fiscal 2009 increased 2.9%, and identical supermarket sales rose 2.1% compared with the prior fiscal year.

Net earnings for fiscal 2009 were $70.0 million, or $0.11 per diluted share. Current year results include the effect of the southern California asset impairment charges in the third quarter. Excluding these items, net earnings for fiscal 2009 would have been $1.12 billion, or $1.71 per diluted share (Table 6).

Net earnings in fiscal 2008 were $1.25 billion, or $1.89 per diluted share. Fiscal 2008 results include expenses for damage and disruption caused by Hurricane Ike in the third quarter. Excluding these hurricane-related expenses, fiscal year 2008 net earnings were $1.27 billion or $1.91 per diluted share (Table 6).

During 2009, Kroger invested $2.15 billion in capital projects, excluding acquisitions and purchases of leased facilities. The Company repurchased 10.3 million shares of stock at an average price of $21.25 per share for a total investment of $218.3 million. Kroger also paid $237.6 million in cash dividends.

“Throughout 2009, Kroger successfully achieved identical sales growth, one of the key objectives of our business model,” Mr. Dillon said. “Through the efforts of all of our associates, we continue to widen the gap between Kroger’s identical sales growth trends and those of most of our competitors. We believe this has extremely positive implications for our associates, customers and shareholders both now and as we grow our business.”

Fiscal Year 2010 Guidance
For fiscal year 2010, Kroger anticipates identical supermarket sales growth, excluding fuel, of 2% to 3%. Net earnings are expected to range from $1.60 to $1.80 per diluted share. Kroger’s quarterly dividend enhances total shareholder return by approximately 1.5% to 2.0%.

Kroger believes several factors that influenced its business in the last half of 2009 will continue at least through the first half of 2010. Inflation or deflation in product and operating costs, the competitive environment, fluctuating fuel margins, and the pace of the economic recovery are uncertain and cause Kroger to be cautious about its fiscal year 2010 forecast. We expect trends in these areas to influence the Company’s results throughout fiscal year 2010.

“During a year that proved to be extremely trying, Kroger successfully achieved positive identical sales growth, increased the number of households loyal to Kroger stores, and generated strong tonnage growth. In addition, we reduced debt, increased the dividend we pay shareholders and prudently invested capital to keep our stores fresh and innovative,” Mr. Dillon said. “Kroger’s strategy generates value in good times and bad. We believe Kroger will continue to be in the best position to deliver shareholder value now and as the economy improves.”

Kroger, the nation’s largest traditional grocery retailer, employs more than 334,000 associates who serve customers in 2,468 supermarkets and multi-department stores in 31 states under two dozen local banner names including Kroger, City Market, Dillons, Jay C, Food 4 Less, Fred Meyer, Fry’s, King Soopers, QFC, Ralphs and Smith’s. The Company also operates 777 convenience stores, 374 fine jewelry stores, 893 supermarket fuel centers and 40 food processing plants in the U.S. Kroger, headquartered in Cincinnati, Ohio, focuses its charitable efforts on supporting hunger relief, health and wellness initiatives, and local organizations in the communities it serves. For more information about Kroger, please visit www.kroger.com.

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Note: Fuel sales have historically had a low FIFO gross margin rate and OG&A rate as compared to corresponding rates on non-fuel sales. As a result, Kroger discloses such rates, both including and excluding the effect of retail fuel operations.

This press release contains 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 such as “anticipates,” “expected,” “believe,” and “enhances.” Increased competition, economic conditions, interest rates, goodwill impairment, the success of programs designed to increase our identical supermarket sales without fuel, and labor disputes, particularly as the Company seeks to manage increases in health care and pension costs, could materially affect our expected identical supermarket sales growth, earnings per share, and earnings per share growth. Earnings per share and earnings per share growth also will be affected by the number of shares outstanding and volatility in the Company’s fuel margins. Earnings and sales also may be affected by climate change and adverse weather conditions, particularly to the extent that hurricanes, tornadoes, floods, and other conditions disrupt our operations or those of our suppliers; create shortages in the availability or increases in the cost of products that we sell in our stores or materials and ingredients we use in our manufacturing facilities; or raise the cost of supplying energy to our various operations, including the cost of transportation. The extent to which our quarterly dividend enhances shareholder return will depend on the continued declaration of a quarterly dividend by our Board, and the amount of such dividend, as well as the price at which our stock trades. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially. 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.

Note: Kroger's quarterly conference call with investors will be broadcast live online at 10 a.m. (ET) today at www.kroger.com and www.streetevents.com. An on-demand replay of the webcast will be available from approximately 1 p.m. (ET) today through March 19, 2010.

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