KROGER REPORTS STRONG FOURTH QUARTER AND FULL YEAR RESULTS
Identical Supermarket Sales During The Quarter Increased 5.3% without Fuel
Company Delivers Record Earning Per Share In Fiscal 2007

CINCINNATI, Ohio, March 11, 2008 – The Kroger Co. (NYSE: KR) today reported total sales increased 2.2% to $17.2 billion for the fourth quarter ended February 2, 2008. Adjusting for the extra week in the fourth quarter of the previous year, 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.

“As Kroger’s strong fourth quarter results show, we continue to drive solid identical sales growth by improving service, value, product quality and selection for our customers,” said David B. Dillon, Kroger chairman and chief executive officer. “During the quarter, we continued to invest in lower prices for our customers, providing meaningful savings for them in this uncertain economic environment.”

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 the Company anticipated at the end of the third quarter.

Net earnings in the same period last year were $384.8 million, or $0.54 per diluted share. Results from the fourth quarter 2006 included a $0.03 per diluted share benefit from adjustments to certain deferred tax balances and an estimated $0.07 per diluted share from an extra week.

Other highlights of the fourth quarter 2007 included:

• FIFO gross margin was 23.56% of sales, a decline of 92 basis points compared to the fourth quarter last year. Excluding the effect of retail fuel operations, FIFO gross margin declined 23 basis points.
• Operating, general and administrative (OG&A) costs were 16.81% of sales, a decline of 84 basis points compared to the fourth quarter last year. Excluding the effect of retail fuel operations, OG&A declined 33 basis points.
• Kroger repurchased 10.1 million shares of stock at an average price of $26.64 per share for a total investment of $269 million. At the end of the fourth quarter, $941 million remained under the $1 billion stock repurchase program announced in January 2008.

Fiscal Year 2007 Results

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.

Net earnings for fiscal 2007 were $1.18 billion, or $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.

Net earnings in fiscal 2006, on a GAAP basis, were $1.11 billion, or $1.54 per diluted share.

Other highlights of the fiscal year included:

• Total debt 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 (Table 5) to EBITDA ratio was 2.0, compared with 1.9 during the same period last year.
• Capital investment totaled $2.1 billion, excluding acquisitions, compared with $1.8 billion in fiscal 2006.
• Kroger repurchased 52.5 million shares of stock at an average price of $27.05 per share 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.

Kroger also made significant gains in market share during fiscal 2007. In the major markets where Kroger serves customers, the Company's overall market share rose approximately 65 basis points, with share gains in 37 of its 44 major markets, based on the Company’s calculations. These increases are on top of strong market share gains in 2005 and 2006. During the last three fiscal years combined, Kroger’s share in its major markets has increased approximately 165 basis points.

“Our performance last year and our three consecutive years of increases in market share show that Kroger’s strategy is working as we continue to deliver value to both our customers and our shareholders,” Mr. Dillon said.

Fiscal 2008 Guidance

For fiscal 2008, Kroger anticipates earnings of $1.83 - $1.90 per diluted share. The Company said it expects that 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. Both sales and earnings guidance are based on a stable labor environment.

"Kroger's fourth quarter and fiscal year results can be tied directly to the efforts of our associates in every aspect of our business," Mr. Dillon said. "The contribution of all of our associates is fundamental to our success in 2008 as we continue to execute our Customer 1st strategy. Kroger’s business model and the diversity of our product offerings are well-suited for what continues to be a challenging economic and competitive environment.”

Kroger, one of the nation’s largest retail grocery chains, is honored to celebrate its 125th anniversary in 2008. The Company’s more than 310,000 associates serve customers in 2,486 supermarkets and multi-department stores in 31 states under two dozen local banners including Kroger, Ralphs, Fred Meyer, Food 4 Less, Fry’s, King Soopers, Smith’s, Dillons, QFC and City Market. Kroger associates also serve customers in 782 convenience stores, 394 fine jewelry stores and 696 supermarket fuel centers the Company operates. The Company also operates 42 food processing plants in the U.S. Headquartered in Cincinnati, Ohio, Kroger focuses its charitable efforts on supporting hunger relief, health and wellness initiatives, and local schools and grassroots organizations in the communities it serves. For more information about the Company, please visit our web site at www.kroger.com.

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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 the words “anticipates,” “will,” and “expected.”  Increased competition, weather and 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. These same factors could affect the extent to which our strategic plan is successful.  Earnings per share and earnings per share growth also will be affected by the number of shares outstanding, our success in reducing the number of shares outstanding, and volatility in the Company’s fuel margins.  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.  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 via the Internet at 10 a.m. (ET) on March 11, 2007 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 25, 2007.

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View 4th Quarter 2007 Reports - PDF Format:
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF CASH FLOWS
SUPPLEMENTAL SALES INFORMATION
RECONCILIATION OF TOTAL DEBT TO NET TOTAL DEBT

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