KROGER REPORTS STRONG SALES AND IMPROVED EARNINGS FOR FIRST QUARTER OF FISCAL 2005
Identical Supermarket Sales, Including Southern California, Rose 3.8% With Fuel and 2.4% Without Fuel; Company Raises Earnings Estimate for 2005

CINCINNATI, OH, June 21, 2005 -- The Kroger Co. (NYSE: KR) today reported net earnings of $294.3 million, or $0.40 per fully diluted share, for the first quarter ended May 21, 2005. Net earnings in the year-ago period were $262.8 million, or $0.35 per fully diluted share.

Total sales for the first quarter of fiscal 2005 increased 6.2% to $17.9 billion. Identical supermarket sales increased 3.8% with fuel and 2.4% without fuel.

"Kroger's associates are focused on providing our customers with high levels of service, selection and value. That was the key to our performance in the first quarter," said David B. Dillon, Kroger chairman and chief executive officer. "We're targeting the areas of our business that our customers have told us are most important to them. Whether it's speeding up the checkout process, making sure our stores have the right products in stock, or rewarding our best customers with special savings, we're committed to making sure that every decision we make positively influences the way our customers feel about Kroger."

He said Kroger's emphasis on placing the "customer first" generated increased customer traffic and higher average transaction size in identical supermarkets during the first quarter. Kroger's identical supermarket sales, excluding fuel and strike-affected stores, have shown sequential improvement for eight of the past nine quarters.

Other highlights of the first quarter:
• FIFO gross margin was 25.19% of sales, a reduction of 82 basis points from the first quarter of 2004. Excluding the effect of fuel, FIFO gross margin declined 40 basis points - in line with Kroger's expectations - as the Company continued to invest in lower prices for customers.
• Operating, general and administrative (OG&A) costs declined 62 basis points to 18.39% of sales. Excluding fuel, OG&A declined 29 basis points. OG&A at the supermarket divisions, excluding Ralphs and the effect of fuel, fell nine basis points.
• Capital investment totaled $400.6 million, compared to $456.7 million a year ago.
• Kroger repurchased 9.5 million shares of stock at an average price of $16.06 for a total investment of $153 million. There is approximately $208 million remaining under the $500 million stock buyback announced last September. Since January 2000, Kroger has invested $2.9 billion to repurchase 150.3 million shares - equivalent to approximately 17% of the Company. Kroger continues to buy back stock.
• Total debt was $7.5 billion, a reduction of $508.7 million from a year ago.

Mr. Dillon said Kroger continues to rebuild its business in southern California. Identical supermarket sales without fuel at both Ralphs and Food 4 Less were positive in the first quarter and, on a combined basis, increased 1.3% over the prior-year period. Earnings before interest, taxes, depreciation and amortization (EBITDA) at Ralphs and Food 4 Less were in line with Kroger's expectations.

"We're pleased with our progress in southern California, particularly in light of the significant challenges we have faced. Our Ralphs and Food 4 Less associates are embracing the plan and are delivering against our strategy. We're seeing solid improvement," he said.

Kroger Raises Earnings Estimate for 2005
On the strength of its first-quarter financial performance, Kroger today raised its earnings estimate for fiscal 2005. Kroger said it now expects earnings for the full year to exceed $1.24 per fully diluted share, an increase of $0.03 from guidance provided in March. Kroger expects its 2005 earnings per share growth to be fueled by continued progress in southern California, improved results from the balance of the Company, lower interest expense, and fewer shares outstanding as a result of stock buybacks.

"We're off to a good start ts) 793 convenience stores, 432 fine jewelry stores, 552 supermarket fuel centers and 42 food processing plants. For more information about Kroger, please visit our web site at www.kroger.com.

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 word "expects." These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially. Results anticipated in forward-looking statements regarding earnings could be adversely affected by increased competition, weather and economic conditions, interest rates, goodwill impairment, our ability to generate sales at desirable margins, and future labor disputes, particularly as the Company seeks to manage health care and pension costs. 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. (EDT) on June 21, 2005 at www.kroger.com and www.streetevents.com. An on-demand replay of the webcast will be available from 2 p.m. (EDT) on June 21, 2005 through July 1, 2005.

View 1st Quarter 2005 Reports - PDF Format:
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF CASH FLOWS
SUPPLEMENTAL SALES INFORMATION

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