KROGER ANNOUNCES RESULTS FOR THIRD QUARTER OF FISCAL 2004
Identical Food-Store Sales Increased 3.2% with Fuel and 1.8% without Fuel

CINCINNATI, OH, December 7, 2004 -- The Kroger Co. (NYSE: KR) today said total sales increased 5.9% to $12.9 billion for the third quarter ended November 6, 2004. Identical food-store sales, including fuel, increased 3.2% and, excluding fuel, increased 1.8%. Ralphs and Food 4 Less stores in southern California together accounted for 0.1% of this increase.

Net earnings totaled $142.7 million, or $0.19 per fully diluted share, compared to $110.2 million, or $0.15 per diluted share, for the third quarter of 2003.

“We are very pleased with our sales performance in the third quarter. Kroger’s identical food-store sales showed strong improvement over the second quarter,” said David B. Dillon, Kroger chairman and chief executive officer. “Our continued focus on fulfilling our customers’ needs is an important part of our strategy to increase earnings through strong, sustainable identical food-store sales growth.”

Also in the third quarter:
• FIFO gross margin was 25.16%, a reduction of 67 basis points from the third quarter of 2003. FIFO gross margin at the supermarket divisions not affected by work stoppages, and excluding the effect of fuel, declined by 31 basis points.
• Operating, general and administrative costs declined 52 basis points to 18.98%. OG&A at the supermarket divisions not affected by work stoppages, and excluding the effect of fuel, increased 23 basis points. Incentive plan and employee benefit costs accounted for most of the increase.
• Major labor contracts covering approximately 20,000 associates in Seattle, Cincinnati, and at Food 4 Less in southern California were ratified without a work stoppage as Kroger continued to make progress toward its goal of labor cost competitiveness.

Kroger opened, expanded, relocated or acquired 30 food stores; remodeled 33 stores; and closed 20 stores in the quarter. Total food store square footage increased 1.2% over the prior year. Capital expenditures totaled $429 million.

For 2004, the Company now expects capital investment to be in the range of $1.7 - $1.8 billion, excluding acquisitions. This represents a decline of $200-$300 million from the upper end of Kroger’s original estimate for the year.

Total debt at the end of the third quarter was $7.8 billion, a decrease of $607.0 million compared to a year ago.

Kroger repurchased approximately 5.4 million shares of stock during the third quarter at an average price of $15.18 for a total investment of $82.6 million. There is approximately $422.1 million remaining under the new $500 million stock buyback announced in September. Since January 2000, Kroger has invested $2.7 billion to repurchase 136.7 million shares. The Company continues to buy back stock.

For the first three quarters of fiscal 2004, sales increased 4.9% to $42.7 billion. Net earnings were $548.0 million, or $0.73 per diluted share. For the first three quarters of fiscal 2003, net earnings were $652.0 million, or $0.86 per diluted share.

“Thanks to the hard work and tremendous contributions of the entire organization, Kroger has made considerable progress in a number of key areas during 2004. But there is still much work to be done. We will continue to focus on becoming more competitive in every aspect of our business so that we can provide a shopping experience that makes our customers want to return,” Mr. Dillon said.

Headquartered in Cincinnati, Ohio, Kroger is one of the nation’s largest retail grocery chains. At the end of the third quarter of fiscal 2004, the Company operated (either directly or through its subsidiaries) 2,531 supermarkets and multi-department stores in 32 states under two dozen banners including Kroger, Ralphs, Fred Meyer, Food 4 Less, King Soopers, Smith’s, Fry’s, Fry’s Marketplace, Dillons, QFC and City Market. Kroger also operated (either directly or through subsidiaries, franchise agreements, or operating agreements) 792 convenience stores, 439 fine jewelry stores, 520 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 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 “expects” or “will.” The forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially. 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 projects are not completed on budget or in the time frame expected. The extent to which Kroger continues to focus on becoming more competitive may be affected by increased costs incurred; our inability to achieve productivity improvements and shrink reduction; failure of our technology projects to achieve desired results; our desire to maintain an appropriate balance between sales and earnings; and labor disputes. 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.

View 3rd Quarter 2004 Reports - PDF Format:
CONSOLIDATED STATEMENTS OF EARNINGS
CONSOLIDATED STATEMENTS OF EARNINGS OTHER ITEMS
PREVIOUSLY REPORTED ESTIMATED EFFECT OF LABOR DISPUTES
CONSOLIDATED BALANCE SHEET
CONSOLIDATED STATEMENTS OF CASH FLOWS
SUPPLEMENTAL SALES INFORMATION

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