KROGER REPORTS 30% INCREASE IN EARNINGS PER SHARE, BEFORE ONE-TIME ITEMS, FOR FOURTH QUARTER

CINCINNATI, OH, March 15, 2001 -- The Kroger Co. (NYSE: KR) today reported final earnings per diluted share of $0.48, excluding one-time items, for the fourth quarter ended February 3, 2001. These results represent an increase of 30% from earnings of $0.37 per diluted share in the fourth quarter of fiscal 1999.

Including one-time items of $14.8 million after tax, Kroger earned $0.44 per diluted share in the fourth quarter of 2000.

Total sales in the fourth quarter of fiscal 2000 increased 12.9% to $12.7 billion. After adjusting for an extra week in the fourth quarter of fiscal 2000, food store sales increased 5.1% and total sales rose 4.7% over the fourth quarter of fiscal 1999.

Without the effect of the extra week in the quarter, identical food store sales grew 1.5%, while comparable food store sales, which include relocations and expansions, rose 1.9%. (Identical and comparable sales include stores that changed names during the past year.)

EBITDA (earnings before interest, taxes, depreciation, amortization, LIFO and one-time items) for the fourth quarter of 2000 totaled $1.04 billion, an increase of 20.6% from the fourth quarter of 1999.

"Our sales and earnings growth in the fourth quarter were driven by strong results in Kroger's core supermarket business and our manufacturing facilities," said Joseph A. Pichler, Kroger chairman and chief executive officer. "The market share for corporate brands such as Private Selection is growing in every region, generating incremental sales and enhanced profit margins. Kroger's manufacturing operations capped another outstanding year, and we continue to realize the benefits of new merchandising programs and our technology investments."

Among the financial highlights of the fourth quarter:
• FIFO gross profit margin, without one-time expenses, increased 18 basis points to 27.41% due to merger synergies, increased corporate-brand sales and savings from centralized purchasing.
• Operating, general and administrative (OG&A) costs, without one-time expenses, declined 22 basis points to 17.95% as improvements in productivity and safety offset increases in utility and health care costs.
• Estimated combined synergy savings reached an annual run rate of $330 million - an incremental gain of $36 million from the third quarter and well above Kroger's original goal of $260 million for all of fiscal 2000.

During the fourth quarter of 2000, Kroger opened, expanded, relocated or acquired 20 food stores. Overall square footage, including the effect of acquisitions and operational closings, increased 4.0% over the prior year. Capital expenditures for the quarter totaled $380 million, including acquisitions. On this basis, capital expenditures for fiscal 2000 were $1.7 billion.

Mr. Pichler said Kroger continued to make solid progress in reducing net working capital. Net working capital totaled $476 million, a decrease of $183 million from the end of the fourth quarter of fiscal 1999.

For fiscal 2000, Kroger reported earnings per diluted share of $1.34, before extraordinary and one-time items, an increase of 21% from restated earnings of $1.11 per diluted share for fiscal 1999. After adjusting for the 53rd week in fiscal 2000, earnings were $1.31 per diluted share, an increase of 18%. Total sales increased 8.0% to $49.0 billion. After adjusting for the 53rd week in fiscal 2000, total sales increased 6.0% from the prior year. EBITDA for the year rose 13.2% to $3.5 billion. Without the effect of the extra week, EBITDA for fiscal 2000 increased 11.1%.

Kroger's strong free cash flow from operations enabled the Company to reduce debt and repurchase shares in an aggregate amount of more than $1 billion in fiscal 2000.

Kroger repurchased nearly 6.7 million shares of its common stock during the fourth quarter at an average price of $25.14 per share, for a total investment of approximately $168 million. During fiscal 2000, the Company repurchased 27.4 million shares of its stock at an aggregate cost of $581 million, or an average price of $21.20 per share.

Net total debt at the end of fiscal 2000 was $8.27 billion, a decline of $476 million from the end of fiscal 1999. Net total debt was 2.34 times EBITDA, as compared to 2.80 times in the fourth quarter of 1999. The Company's goal is to reduce debt to 2 times EBITDA.

Mr. Pichler said Kroger remains comfortable with achieving annual earnings per share growth of 16-18% through fiscal 2002 (which ends February 1, 2003) from an adjusted base of $1.31 per share in 2000.

Looking beyond fiscal 2002, Kroger expects to achieve sustainable earnings per share growth of 15% annually, excluding major acquisitions, he said.

"We are very excited about Kroger's growth prospects. Most of the merger integration has been completed and we expect to achieve our goal of $380 million in synergy savings by the end of fiscal 2001. We have identified 12 additional initiatives that we believe will continue to drive sales and reduce OG&A expenses. We believe that the 15% earnings per share growth rate will enable Kroger to increase market share, while producing solid returns for our investors. Kroger is committed to reducing working capital and achieving a superior return on assets as we have done in the past," he said.

Comparisons to the prior year in the text and accompanying tables reflect restated results to be filed with the SEC.

Headquartered in Cincinnati, Ohio, Kroger is one of the nation's largest retail grocery chains. At the end of the fourth quarter, the Company operated 2,354 supermarkets and multi-department stores in 31 states under nearly two dozen banners, including Kroger, Fred Meyer, Ralphs, Smith's, King Soopers, Dillon, Fry's, City Market, Food 4 Less and Quality Food Centers. Kroger also operates 789 convenience stores, 398 fine jewelry stores, 77 supermarket fuel centers and 42 food processing plants.

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. We assume no obligation to update the information contained herein. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements including, but not limited to, material adverse changes in the business or financial condition of Kroger and other factors affecting the businesses of the Company. Our ability to achieve earnings per share growth targets could be adversely affected by a general downturn in the economy or increased competitive pressures resulting in reductions in sales or margins. Other factors that could affect our future performance are described in filings with the Securities and Exchange Commission.

Note: Kroger's fourth-quarter conference call with investors will be broadcast live via the Internet at 10 a.m. (EST) on March 15, 2001 at www.kroger.com and www.streetevents.com. An on-demand replay of the webcast will be available from 2 p.m. (EST) on March 15, 2001 through March 22, 2001.

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