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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 16, 2025

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-303

The Kroger Co.

(Exact name of registrant as specified in its charter)


Ohio		31-0345740
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1014 Vine Street, Cincinnati, Ohio 45202

(Address of principal executive offices)

(Zip Code)

(513) 762-4000

(Registrant’s telephone number, including area code)

Unchanged

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common, $1.00 Par Value	KR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒.

There were 662,678,212 shares of Common Stock ($1 par value) outstanding as of September 16, 2025.

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements.

THE KROGER CO.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	Second Quarter Ended				Two Quarters Ended
	August 16,		August 17,		August 16,		August 17,
(In millions, except per share amounts)	2025		2024		2025		2024
Sales	$	33,940	$	33,912	$	79,058	$	79,181

Operating expenses
Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below		26,130		26,261		60,681		61,385
Operating, general and administrative		5,967		5,886		13,890		13,490
Rent		202		199		473		469
Depreciation and amortization		778		751		1,829		1,728

Operating profit		863		815		2,185		2,109

Other income (expense)
Net interest expense (see Note 2)		(144)		(84)		(343)		(207)
Non-service component of company-sponsored pension plan (expense) benefits		(3)		3		(4)		6
Gain (loss) on investments		56		(121)		37		(105)

Net earnings before income tax expense		772		613		1,875		1,803

Income tax expense		162		148		397		382

Net earnings including noncontrolling interests		610		465		1,478		1,421
Net income (loss) attributable to noncontrolling interests		1		(1)		3		8

Net earnings attributable to The Kroger Co.	$	609	$	466	$	1,475	$	1,413

Net earnings attributable to The Kroger Co. per basic common share	$	0.91	$	0.64	$	2.22	$	1.94

Average number of common shares used in basic calculation		662		723		661		722

Net earnings attributable to The Kroger Co. per diluted common share	$	0.91	$	0.64	$	2.20	$	1.93

Average number of common shares used in diluted calculation		665		727		664		728

The accompanying notes are an integral part of the Consolidated Financial Statements.

THE KROGER CO.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Second Quarter Ended				Two Quarters Ended
	August 16,		August 17,		August 16,		August 17,
(In millions)	2025		2024		2025		2024
Net earnings including noncontrolling interests	$	610	$	465	$	1,478	$	1,421

Other comprehensive income (loss)
Change in pension and other postretirement defined benefit plans, net of income tax⁽¹⁾		2		—		1		(2)
Unrealized gains and losses on cash flow hedging activities, net of income tax⁽²⁾		(1)		(123)		—		(53)
Amortization of unrealized gains and losses on cash flow hedging activities, net of income tax⁽³⁾		3		2		5		4

Total other comprehensive income (loss)		4		(121)		6		(51)

Comprehensive income		614		344		1,484		1,370
Comprehensive income (loss) attributable to noncontrolling interests		1		(1)		3		8
Comprehensive income attributable to The Kroger Co.	$	613	$	345	$	1,481	$	1,362

(1)	Amount is net of tax of $(1) for the second quarter of 2024. Amount is net of tax of $(1) for the first two quarters of 2024.

(2)	Amount is net of tax of $(1) for the second quarter of 2025 and $(37) for the second quarter of 2024. Amount is net of tax of $(16) for the first two quarters of 2024.

(3)	Amount is net of tax of $1 for the first two quarters of 2025 and 2024.

The accompanying notes are an integral part of the Consolidated Financial Statements.

THE KROGER CO.

CONSOLIDATED BALANCE SHEETS

(unaudited)


	August 16,		February 1,
(In millions, except par amounts)	2025		2025
ASSETS
Current assets
Cash and temporary cash investments	$	4,883	$	3,959
Store deposits in-transit		1,133		1,312
Receivables		2,211		2,195
FIFO inventory		9,349		9,442
LIFO reserve		(2,506)		(2,404)
Prepaid and other current assets		735		769
Total current assets		15,805		15,273

Property, plant and equipment, net		25,947		25,703
Operating lease assets		6,812		6,839
Intangibles, net		866		834
Goodwill		2,674		2,674
Other assets		1,486		1,293

Total Assets	$	53,590	$	52,616

LIABILITIES
Current liabilities
Current portion of long-term debt including obligations under finance leases	$	827	$	272
Current portion of operating lease liabilities		673		599
Accounts payable		10,183		10,124
Accrued salaries and wages		1,315		1,330
Other current liabilities		3,701		3,615
Total current liabilities		16,699		15,940

Long-term debt including obligations under finance leases		17,132		17,633
Noncurrent operating lease liabilities		6,546		6,578
Deferred income taxes		1,387		1,417
Pension and postretirement benefit obligations		376		387
Other long-term liabilities		2,173		2,380

Total Liabilities		44,313		44,335

Commitments and contingencies (see Note 5)

SHAREOWNERS’ EQUITY

Preferred shares, $100 par per share, 5 shares authorized and unissued		—		—
Common shares, $1 par per share, 2,000 shares authorized; 1,918 shares issued in 2025 and 2024		1,918		1,918
Additional paid-in capital		3,174		3,087
Accumulated other comprehensive loss		(615)		(621)
Accumulated earnings		29,754		28,724
Common shares in treasury, at cost, 1,255 shares in 2025 and 1,258 shares in 2024		(24,949)		(24,823)

Total Shareowners’ Equity - The Kroger Co.		9,282		8,285
Noncontrolling interests		(5)		(4)

Total Equity		9,277		8,281

Total Liabilities and Equity	$	53,590	$	52,616

The accompanying notes are an integral part of the Consolidated Financial Statements.

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Two Quarters Ended
	August 16,		August 17,
(In millions)	2025		2024
Cash Flows from Operating Activities:
Net earnings including noncontrolling interests	$	1,478	$	1,421
Adjustments to reconcile net earnings including noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization		1,829		1,728
Asset impairment and store closure charges		114		31
Operating lease asset amortization		318		327
LIFO charge		102		62
Share-based employee compensation		83		89
Deferred income taxes		(31)		(31)
Gain on sale of assets		(6)		(9)
(Gain) loss on investments		(37)		105
Other		(29)		10
Changes in operating assets and liabilities:
Store deposits in-transit		179		124
Receivables		(12)		(256)
Inventories		92		271
Prepaid and other current assets		(91)		(202)
Accounts payable		(14)		176
Accrued expenses		181		(74)
Income taxes receivable and payable		6		95
Operating lease liabilities		(291)		(296)
Other		(183)		(107)

Net cash provided by operating activities		3,688		3,464

Cash Flows from Investing Activities:
Payments for property and equipment, including payments for lease buyouts		(1,968)		(2,179)
Proceeds from sale of assets		36		309
Other		(175)		(35)

Net cash used by investing activities		(2,107)		(1,905)

Cash Flows from Financing Activities:
Payments on long-term debt including obligations under finance leases		(122)		(99)
Dividends paid		(422)		(420)
Proceeds from issuance of capital stock		163		93
Treasury stock purchases		(203)		(116)
Other		(73)		(100)

Net cash used by financing activities		(657)		(642)

Net increase in cash and temporary cash investments		924		917

Cash and temporary cash investments:
Beginning of year		3,959		1,883
End of period	$	4,883	$	2,800

Reconciliation of capital investments:
Payments for property and equipment, including payments for lease buyouts	$	(1,968)	$	(2,179)
Payments for lease buyouts		11		46
Changes in construction-in-progress payables		(73)		57
Total capital investments, excluding lease buyouts	$	(2,030)	$	(2,076)

Disclosure of cash flow information:
Cash paid during the year for net interest	$	370	$	192
Cash paid during the year for income taxes	$	415	$	197

The accompanying notes are an integral part of the Consolidated Financial Statements.

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS’ EQUITY

(unaudited)


									Accumulated
				Additional					Other
	Common Stock			Paid-In		Treasury Stock			Comprehensive		Accumulated		Noncontrolling
(In millions, except per share amounts)	Shares	Amount		Capital		Shares	Amount		Income (Loss)		Earnings		Interest		Total
Balances at February 3, 2024	1,918	$	1,918	$	3,922	1,198	$	(20,682)	$	(489)	$	26,946	$	(14)	$	11,601
Issuance of common stock:
Stock options exercised	—		—		—	(3)		85		—		—		—		85
Restricted stock issued	—		—		(76)	(1)		33		—		—		—		(43)
Treasury stock activity:
Stock options exchanged	—		—		—	2		(103)		—		—		—		(103)
Share-based employee compensation	—		—		57	—		—		—		—		—		57
Other comprehensive income net of tax of $22	—		—		—	—		—		70		—		—		70
Other	—		—		81	—		(81)		—		—		—		—
Cash dividends declared ($0.29 per common share)	—		—		—	—		—		—		(210)		—		(210)
Net earnings including noncontrolling interests	—		—		—	—		—		—		947		9		956

Balances at May 25, 2024	1,918	$	1,918	$	3,984	1,196	$	(20,748)	$	(419)	$	27,683	$	(5)	$	12,413
Issuance of common stock:
Stock options exercised	—		—		—	—		8		—		—		—		8
Restricted stock issued	—		—		(96)	(2)		56		—		—		—		(40)
Treasury stock activity:
Stock options exchanged	—		—		—	—		(13)		—		—		—		(13)
Share-based employee compensation	—		—		32	—		—		—		—		—		32
Other comprehensive income net of tax of $(38)	—		—		—	—		—		(121)		—		—		(121)
Other	—		—		67	—		(67)		—		—		—		—
Cash dividends declared ($0.32 per common share)	—		—		—	—		—		—		(232)		—		(232)
Net earnings (loss) including noncontrolling interests	—		—		—	—		—		—		466		(1)		465

Balances at August 17, 2024	1,918	$	1,918	$	3,987	1,194	$	(20,764)	$	(540)	$	27,917	$	(6)	$	12,512
Issuance of common stock:
Stock options exercised	—		—		—	—		13		—		—		—		13
Restricted stock issued	—		—		(2)	—		3		—		—		—		1
Treasury stock activity:
Stock options exchanged	—		—		—	—		(9)		—		—		—		(9)
Share-based employee compensation	—		—		44	—		—		—		—		—		44
Other comprehensive income net of income tax of $(14)	—		—		—	—		—		(49)		—		—		(49)
Other	—		—		9	—		(9)		—		—		1		1
Cash dividends declared ($0.32 per common share)	—		—		—	—		—		—		(236)		—		(236)
Net earnings (loss) including noncontrolling interests	—		—		—	—		—		—		618		(1)		617

Balances at November 9, 2024	1,918	$	1,918	$	4,038	1,194	$	(20,766)	$	(589)	$	28,299	$	(6)	$	12,894
Issuance of common stock:
Stock options exercised	—		—		—	—		21		—		—		—		21
Restricted stock issued	—		—		(2)	—		—		—		—		—		(2)
Treasury stock activity:
Treasury stock purchases, at cost	—		—		(1,000)	64		(4,038)		—		—		—		(5,038)
Stock options exchanged	—		—		—	—		(31)		—		—		—		(31)
Share-based employee compensation	—		—		42	—		—		—		—		—		42
Other comprehensive income net of income tax of $(11)	—		—		—	—		—		(32)		—		—		(32)
Other	—		—		9	—		(9)		—		—		2		2
Cash dividends declared ($0.32 per common share)	—		—		—	—		—		—		(209)		—		(209)
Net earnings including noncontrolling interests	—		—		—	—		—		—		634		—		634

Balances at February 1, 2025	1,918	$	1,918	$	3,087	1,258	$	(24,823)	$	(621)	$	28,724	$	(4)	$	8,281

The accompanying notes are an integral part of the Consolidated Financial Statements.

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS’ EQUITY

(unaudited)


									Accumulated
				Additional					Other
	Common Stock			Paid-In		Treasury Stock			Comprehensive		Accumulated		Noncontrolling
(In millions, except per share amounts)	Shares	Amount		Capital		Shares	Amount		Income (Loss)		Earnings		Interest		Total
Balances at February 1, 2025	1,918	$	1,918	$	3,087	1,258	$	(24,823)	$	(621)	$	28,724	$	(4)	$	8,281
Issuance of common stock:
Stock options exercised	—		—		—	(4)		145		—		—		—		145
Restricted stock issued	—		—		(65)	(1)		32		—		—		—		(33)
Treasury stock activity:
Stock options exchanged	—		—		—	4		(181)		—		—		—		(181)
Share-based employee compensation	—		—		38	—		—		—		—		—		38
Other comprehensive income net of tax of $2	—		—		—	—		—		2		—		—		2
Other	—		—		99	—		(99)		—		2		(3)		(1)
Cash dividends declared ($0.32 per common share)	—		—		—	—		—		—		(211)		—		(211)
Net earnings including noncontrolling interests	—		—		—	—		—		—		866		2		868

Balances at May 24, 2025	1,918	$	1,918	$	3,159	1,257	$	(24,926)	$	(619)	$	29,381	$	(5)	$	8,908
Issuance of common stock:
Stock options exercised	—		—		—	(1)		18		—		—		—		18
Restricted stock issued	—		—		(103)	(1)		54		—		—		—		(49)
Treasury stock activity:
Stock options exchanged	—		—		—	—		(22)		—		—		—		(22)
Share-based employee compensation	—		—		45	—		—		—		—		—		45
Other comprehensive income net of tax of $(1)	—		—		—	—		—		4		—		—		4
Other	—		—		73	—		(73)		—		(2)		(1)		(3)
Cash dividends declared ($0.35 per common share)	—		—		—	—		—		—		(234)		—		(234)
Net earnings including noncontrolling interests	—		—		—	—		—		—		609		1		610

Balances at August 16, 2025	1,918	$	1,918	$	3,174	1,255	$	(24,949)	$	(615)	$	29,754	$	(5)	$	9,277

The accompanying notes are an integral part of the Consolidated Financial Statements.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

All amounts in the Notes to the Unaudited Consolidated Financial Statements are in millions except per share amounts.

1.	ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying financial statements include the consolidated accounts of The Kroger Co., its wholly-owned subsidiaries and other consolidated entities. The February 1, 2025 balance sheet was derived from audited financial statements and, due to its summary nature, does not include all disclosures required by generally accepted accounting principles (“GAAP”). Significant intercompany transactions and balances have been eliminated. References to the “Company” in these Consolidated Financial Statements mean the consolidated company.

In the opinion of management, the accompanying unaudited Consolidated Financial Statements include adjustments, all of which are of a normal, recurring nature that are necessary for a fair statement of results of operations for such periods but should not be considered as indicative of results for a full year. The financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted, pursuant to SEC regulations. Accordingly, the accompanying Consolidated Financial Statements should be read in conjunction with the financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2025.

The unaudited information in the Consolidated Financial Statements for the second quarters ended August 16, 2025 and August 17, 2024 includes the results of operations of the Company for the 12 and 28-week periods then ended.

Fair Value Measurements

Fair value measurements are classified and disclosed in one of the following three categories:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities;

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable;

Level 3 – Unobservable pricing inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company records cash and temporary cash investments, store deposits in-transit, receivables, prepaid and other current assets, accounts payable, accrued salaries and wages and other current liabilities at approximated fair value. Certain other investments and derivatives are recorded as Level 1, 2 or 3 instruments.

The fair value of certain financial instruments, measured using Level 1 inputs, was $220 and $183 as of August 16, 2025 and February 1, 2025, respectively, and is included in “Other assets” in the Company’s Consolidated Balance Sheets. An unrealized gain for these Level 1 investments of approximately $37 and an unrealized loss of approximately $73 for the first two quarters of 2025 and 2024, respectively, is included in “Gain (loss) on investments” in the Company’s Consolidated Statements of Operations. An unrealized gain for these Level 1 investments of approximately $56 and $12 for the second quarters of 2025 and 2024, respectively, is included in “Gain (loss) on investments” in the Company’s Consolidated Statements of Operations.

In the first quarter of 2024, the Company fully exited its position in a Level 1 equity investment, receiving proceeds totaling approximately $303, resulting in a realized gain of $23, which is included in “Gain (loss) on investments” in the Company’s Consolidated Statements of Operations.

The Company's forward-starting interest rate swaps are considered Level 2 instruments. The Company values these forward-starting interest rate swaps using observable forward yield curves. These forward yield curves are classified as Level 2 inputs.

Refer to Note 2 for the disclosure of debt instrument fair values.

Accounts Payable Financing Arrangement

The Company has an agreement with a third party to provide an accounts payable tracking system which facilitates participating suppliers’ ability to finance payment obligations from the Company with designated third-party financial institutions. Participating suppliers may, at their sole discretion, make offers to finance one or more payment obligations of the Company prior to their scheduled due dates at a discounted price to participating financial institutions. The Company’s obligations to its suppliers, including amounts due and scheduled payment dates, are not affected by suppliers’ decisions to finance amounts under this arrangement. The payment term that the Company has with participating suppliers under these programs is approximately 90 days. Outstanding obligations under these financing arrangements are included in “Accounts payable” in the Company’s Consolidated Balance Sheets for $266 and $294 as of August 16, 2025 and February 1, 2025, respectively.

2.	DEBT OBLIGATIONS

Long-term debt consists of:


	August 16,		February 1,
	2025		2025
1.70% to 8.00% Senior Notes due through 2064	$	14,859	$	14,854
Other		1,087		1,055

Total debt, excluding obligations under finance leases		15,946		15,909
Less current portion		(620)		(104)

Total long-term debt, excluding obligations under finance leases	$	15,326	$	15,805

The fair value of the Company’s long-term debt, including current maturities, was estimated based on the quoted market prices for the same or similar issues adjusted for illiquidity based on available market evidence. If quoted market prices were not available, the fair value was based upon the net present value of the future cash flow using the forward interest rate yield curve in effect at August 16, 2025 and February 1, 2025. At August 16, 2025, the fair value of total debt was $14,886 compared to a carrying value of $15,946. At February 1, 2025, the fair value of total debt was $14,648 compared to a carrying value of $15,909.

In the second quarter of 2024, the Company terminated five forward-starting interest rate swaps with a maturity date of August 1, 2027 and an aggregate notional amount totaling $5,350. These forward-starting interest rate swaps were hedging the variability in future benchmark interest payments attributable to changing interest rates on the forecasted issuance of fixed-rate debt that was issued in the third quarter of 2024. A notional amount of $2,350 of these forward-starting interest rate swaps was designated as a cash-flow hedge as defined by GAAP. Accordingly, the unamortized gain of $48, $36 net of tax, was deferred in accumulated other comprehensive income and is amortized to earnings as the interest payments are made. The remainder of the notional amount of $3,000 of the forward-starting interest rate swaps was not designated as a cash-flow hedge. Accordingly, the changes in the fair value of these forward-starting interest rate swaps not designated as cash-flow hedges were recognized through net earnings. In the second quarter of 2024, the Company recognized a realized loss of $133 related to these forward-starting interest rate swaps that is included in “Gain (loss) on investments” in the Company’s Consolidated Statements of Operations. During the first two quarters of 2024, the Company recognized a realized loss of $55 related to these forward-starting interest rate swaps that is included in “Gain (loss) on investments” in the Company’s Consolidated Statements of Operations.

In the second quarter of 2024, the Company entered into two 10-year treasury lock agreements with an aggregate notional amount of $2,100 and a weighted-average interest rate of 3.91% and two 30-year treasury lock agreements with an aggregate notional amount of $3,250 and a weighted-average interest rate of 4.11%. These treasury locks were an agreement used to hedge the U.S. Treasury benchmark interest rate associated with future interest payments on the forecasted issuance of fixed-rate debt that was issued in the third quarter of 2024. These treasury locks were designated as cash-flow hedges as defined by GAAP. Accordingly, the changes in fair value of these treasury locks are recorded to accumulated other comprehensive income and reclassified into net earnings when the hedged transaction affects net earnings.

Cash paid for interest expense related to long-term debt including obligations under finance leases was $485 and $265 for the first two quarters of 2025 and 2024, respectively. Interest income of approximately $52 and $38 for the second quarters of 2025 and 2024, respectively, is included in “Net interest expense” in the Company’s Consolidated Statements of Operations. Interest income of approximately $115 and $73 for the first two quarters of 2025 and 2024, respectively, is included in “Net interest expense” in the Company’s Consolidated Statements of Operations.

As of August 16, 2025, and February 1, 2025, Other debt consisted primarily of a financial obligation related to a sale transaction for properties that did not qualify for sale-leaseback accounting treatment in 2021.

3.	BENEFIT PLANS

The following table provides the components of net periodic benefit cost (benefit) for the company-sponsored defined benefit pension plans and other postretirement benefit plans for the second quarters of 2025 and 2024:


	Second Quarter Ended
	Pension Benefits				Other Benefits
	August 16,		August 17,		August 16,		August 17,
	2025		2024		2025		2024
Components of net periodic benefit cost (benefit):
Service cost	$	2	$	1	$	1	$	1
Interest cost		31		30		2		2
Expected return on plan assets		(32)		(34)		—		—
Amortization of:
Prior service cost		—		—		(1)		(1)
Actuarial loss (gain)		3		2		—		(2)

Net periodic benefit cost (benefit)	$	4	$	(1)	$	2	$	—

The following table provides the components of net periodic benefit cost (benefit) for the company-sponsored defined benefit pension plans and other post-retirement benefit plans for the first two quarters of 2025 and 2024:


	Two Quarters Ended
	Pension Benefits				Other Benefits
	August 16,		August 17,		August 16,		August 17,
	2025		2024		2025		2024
Components of net periodic benefit cost (benefit):
Service cost	$	4	$	3	$	2	$	2
Interest cost		71		71		6		5
Expected return on plan assets		(74)		(79)		—		—
Amortization of:				0				0
Prior service cost		—		—		(2)		(2)
Actuarial loss (gain)		7		5		(4)		(6)

Net periodic benefit cost (benefit)	$	8	$	—	$	2	$	(1)

The Company is not required to make any contributions to its company-sponsored pension plans in 2025 but may make contributions to the extent such contributions are beneficial to the Company. The Company did not make any significant contributions to its company-sponsored pension plans in the first two quarters of 2025 or 2024.

The Company contributed $175 and $177 to employee 401(k) retirement savings accounts in the first two quarters of 2025 and 2024, respectively.

4.	EARNINGS PER COMMON SHARE

Net earnings attributable to The Kroger Co. per basic common share equals net earnings attributable to The Kroger Co. less income allocated to participating securities divided by the weighted-average number of common shares outstanding. Net earnings attributable to The Kroger Co. per diluted common share equals net earnings attributable to The Kroger Co. less income allocated to participating securities divided by the weighted-average number of common shares outstanding, after giving effect to dilutive stock options. The following table provides a reconciliation of net earnings attributable to The Kroger Co. and shares used in calculating net earnings attributable to The Kroger Co. per basic common share to those used in calculating net earnings attributable to The Kroger Co. per diluted common share:


	Second Quarter Ended					Second Quarter Ended
	August 16, 2025					August 17, 2024
				Per					Per
	Earnings		Shares	Share		Earnings		Shares	Share
	(Numerator)		(Denominator)	Amount		(Numerator)		(Denominator)	Amount
Net earnings attributable to The Kroger Co. per basic common share	$	604	662	$	0.91	$	463	723	$	0.64
Dilutive effect of stock options			3					4

Net earnings attributable to The Kroger Co. per diluted common share	$	604	665	$	0.91	$	463	727	$	0.64


	Two Quarters Ended					Two Quarters Ended
	August 16, 2025					August 17, 2024
				Per					Per
	Earnings		Shares	Share		Earnings		Shares	Share
	(Numerator)		(Denominator)	Amount		(Numerator)		(Denominator)	Amount
Net earnings attributable to The Kroger Co. per basic common share	$	1,464	661	$	2.22	$	1,403	722	$	1.94
Dilutive effect of stock options			3					6

Net earnings attributable to The Kroger Co. per diluted common share	$	1,464	664	$	2.20	$	1,403	728	$	1.93

The Company had combined undistributed and distributed earnings to participating securities totaling $5 and $3 in the second quarters of 2025 and 2024, respectively. For the first two quarters of 2025 and 2024, the Company had combined undistributed and distributed earnings to participating securities of $11 and $10, respectively.

The Company had options outstanding for approximately 1 million and 4 million shares during the second quarters of 2025 and 2024, respectively, that were excluded from the computations of net earnings per diluted common share because their inclusion would have had an anti-dilutive effect on net earnings per share. The Company had options outstanding for approximately 1 million and 3 million shares during the first two quarters of 2025 and 2024, respectively, that were excluded from the computations of net earnings per diluted common share because their inclusion would have had an anti-dilutive effect on net earnings per share.

5.	COMMITMENTS AND CONTINGENCIES

The Company continuously evaluates contingencies based upon the best available evidence.

The Company believes that allowances for loss have been provided to the extent necessary and that its assessment of contingencies is reasonable. To the extent that resolution of contingencies results in amounts that vary from the Company’s estimates, future earnings will be charged or credited.

The principal contingencies are described below:

Insurance — The Company’s workers’ compensation risks are self-insured in most states. In addition, other workers’ compensation risks and certain levels of insured general liability risks are based on retrospective premium plans, deductible plans and self-insured retention plans. The liability for workers’ compensation risks is accounted for on a present value basis. Actual claim settlements and expenses incident thereto may differ from the provisions for loss. Property risks have been underwritten by a subsidiary and are all reinsured with unrelated insurance companies. Operating divisions and subsidiaries have paid premiums, and the insurance subsidiary has provided loss allowances, based upon actuarially determined estimates.

Litigation — Various claims and lawsuits arising in the normal course of business, including personal injury, contract disputes, employment discrimination, wage and hour and other regulatory claims are pending against the Company. Some of these suits purport or have been determined to be class actions and/or seek substantial damages. Although it is not possible at this time to evaluate the merits of all of these claims and lawsuits, nor their likelihood of success, the Company is of the belief that any resulting liability will not have a material effect on the Company’s financial position, results of operations, or cash flows.

The Company continually evaluates its exposure to loss contingencies arising from pending or threatened litigation and believes it has made provisions where it is reasonably possible to estimate and when an adverse outcome is probable. Nonetheless, assessing and predicting the outcomes of these matters involves substantial uncertainties. Management currently believes that the aggregate range of loss for the Company’s exposure is not material to the Company. It remains possible that despite management’s current belief, material differences in actual outcomes or changes in management’s evaluation or predictions could arise that could have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.

Opioids

The Company is one of dozens of companies that have been named in various lawsuits alleging that defendants contributed to create a public nuisance through the distribution and dispensing of opioids.

On September 8, 2023, the Company announced that it reached an agreement in principle with plaintiffs to settle the majority of opioid claims that have been or could be brought against Kroger by states in which they operate, subdivisions, and Native American tribes. Along with the execution of certain non-monetary conditions, the Company agreed to pay up to $1,200 to states and subdivisions and $36 to Native American tribes in funding for abatement efforts, and approximately $177 to cover attorneys’ fees and costs. The exact payment amount will depend on several factors, including the extent to which states take action to foreclose opioid lawsuits by political subdivisions (e.g., by passing laws barring or limiting opioid lawsuits by political subdivisions), and the extent to which additional political subdivisions in participating states file additional opioid lawsuits against the Company. The settlement provides for the full resolution of all claims on behalf of participating states, subdivisions and Native American tribes and is not an admission of any wrongdoing or liability. Certain opioid-related cases against the Company will remain pending in the multidistrict litigation and in various state courts, including those brought by non-participating states and subdivisions and private parties such as hospitals and third-party payors. The Company continues to defend these cases.

As a result, the Company concluded that the agreement in principle for the settlement of opioid claims was probable, and for which the related loss was reasonably estimable. Accordingly, in 2023, the Company recognized opioid settlement charges of $1,413, $1,113 net of tax, relating to the nationwide opioid settlement framework. This charge was included in “Operating, general and administrative” in the Company’s Consolidated Statement of Operations.

The agreement described above includes payments of approximately $1,236 and $177, in equal installments over 11 years and 6 years, respectively. In 2024, the Company made its first annual payment for $138 into an escrow account, which was recorded in “Prepaid and other current assets” in the Company’s Consolidated Balance Sheets. This payment was subsequently released from escrow on February 20, 2025. The Company made its second annual payment of $138 on March 5, 2025. This payment was recorded in “Other” within “Changes in operating assets and liabilities” in the Company’s Consolidated Statement of Cash Flows.

In 2024, certain states and subdivisions confirmed their participation or lack of participation in the agreement described above, which resulted in immaterial changes to the settlement amount and timing of payments. On October 31, 2024, the Company determined that there is sufficient participation in the settlement by states and subdivisions and elected to proceed with the settlement. The settlement with states and subdivisions became effective on December 30, 2024, and the settlement with Native American tribes is currently anticipated to become effective by September 30, 2025. The Company also entered into and finalized separate agreements with certain states and their subdivisions in 2024 and 2025 that resulted in immaterial changes to the settlement amount and timing of payments.

As of August 16, 2025, the Company recorded $137 and $982 of the estimated settlement liability in “Other current liabilities” and “Other long-term liabilities,” respectively, in the Company’s Consolidated Balance Sheets related to these opioid settlements. As of February 1, 2025, the Company recorded $279 and $1,139 of the estimated settlement liability in “Other current liabilities” and “Other long-term liabilities,” respectively, in the Company’s Consolidated Balance Sheets related to these opioid settlements.

The foregoing settlements are not admissions of wrongdoing or liability by the Company and the Company will continue to vigorously defend against any other claims and lawsuits relating to opioids that the settlements do not resolve, including private plaintiff litigation. The Company continues to believe it has strong legal defenses and appellate arguments in those cases.

Because of the many uncertainties associated with any settlement arrangement or other resolution of opioid-related litigation matters, and because the Company continues to actively defend ongoing litigation for which it believes it has defenses and assertions that have merit, the Company is not able to reasonably estimate the range of ultimate possible loss for all opioid-related litigation matters at this time.

Termination of the Merger with Albertsons Companies, Inc.

As previously disclosed, on October 13, 2022, the Company entered into a merger agreement (the “Merger Agreement”) with Albertsons Companies, Inc. (“Albertsons”) pursuant to which the Company would have acquired Albertsons. On February 26, 2024, the Federal Trade Commission instituted an administrative proceeding to prohibit the merger and filed suit in the United States District Court for the District of Oregon requesting a preliminary injunction to block the merger. On December 10, 2024, the court issued a preliminary injunction enjoining the consummation of the merger.

On December 10, 2024, Albertsons sued the Company in the Delaware Court of Chancery for alleged breaches of the Merger Agreement and the implied covenant of good faith and fair dealing. Albertsons seeks payment of a $600 termination fee that Albertsons alleges it is owed under the Merger Agreement, as well as additional damages, including expenses paid by Albertsons in connection with the Merger and the lost premium Albertsons alleges is owed to its shareholders, as well as other relief.

On December 11, 2024, the Company delivered a notice to Albertsons terminating the Merger Agreement, which notified Albertsons that a prior termination letter sent by Albertsons to Kroger on December 10, 2024 was not an effective termination. In connection with the notice, Kroger notified Albertsons that Kroger has no obligation to pay the $600 termination fee because Albertsons failed to perform and comply in all material respects with its covenants under the Merger Agreement.

On March 17, 2025, the Company filed an answer denying the allegations in Albertsons’s complaint and filed counterclaims that seek recovery for breaches of the Merger Agreement by Albertsons.

Assignments — The Company is contingently liable for leases that have been assigned to various third parties in connection with facility closings and dispositions. The Company could be required to satisfy the obligations under the leases if any of the assignees are unable to fulfill their lease obligations. Due to the wide distribution of the Company’s assignments among third parties, and various other remedies available, the Company believes the likelihood that it will be required to assume a material amount of these obligations is remote.

6.	ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table represents the changes in AOCI by component for the first two quarters of 2025 and 2024:


			Pension and
	Cash Flow		Postretirement
	Hedging		Defined Benefit
	Activities⁽¹⁾		Plans⁽¹⁾		Total⁽¹⁾
Balance at February 3, 2024	$	60	$	(549)	$	(489)
OCI before reclassifications⁽²⁾		(53)		—		(53)
Amounts reclassified out of AOCI⁽³⁾		4		(2)		2
Net current-period OCI		(49)		(2)		(51)
Balance at August 17, 2024	$	11	$	(551)	$	(540)

Balance at February 1, 2025	$	(35)	$	(586)	$	(621)
Amounts reclassified out of AOCI⁽³⁾		5		1		6
Net current-period OCI		5		1		6
Balance at August 16, 2025	$	(30)	$	(585)	$	(615)

(1)	All amounts are net of tax.

(2)	Net of tax of $(16) for cash flow hedging activities for the first two quarters of 2024.

(3)	Net of tax of $1 for cash flow hedging activities and $(1) for pension and postretirement defined benefit plans for the first two quarters of 2024. Net of tax of $1 for cash flow hedging activities for the first two quarters of 2025.

The following table represents the items reclassified out of AOCI and the related tax effects for the first two quarters of 2025 and 2024:


	Second Quarter Ended				Two Quarters Ended
	August 16,		August 17,		August 16,		August 17,
	2025		2024		2025		2024
Cash flow hedging activity items:
Amortization of gains and losses on cash flow hedging activities⁽¹⁾	$	3	$	2	$	6	$	5
Tax expense		—		—		(1)		(1)
Net of tax		3		2		5		4

Pension and postretirement defined benefit plan items:
Amortization of amounts included in net periodic pension cost⁽²⁾		2		(1)		1		(3)
Tax expense		—		1		—		1
Net of tax		2		—		1		(2)
Total reclassifications, net of tax	$	5	$	2	$	6	$	2

(1)	Reclassified from AOCI into interest expense.

(2)	Reclassified from AOCI into non-service component of company-sponsored pension plan costs. These components are included in the computation of net periodic pension cost (see Note 3 for additional details).

7.	LEASES AND LEASE-FINANCED TRANSACTIONS

On May 17, 2018, the Company entered into a Partnership Framework Agreement with Ocado International Holdings Limited and Ocado Group plc (“Ocado”), which has since been amended. Under this agreement, Ocado will partner with the Company in the U.S., enhancing the Company’s digital and robotics capabilities in its distribution networks. In accordance with GAAP, the Company determined the arrangement with Ocado contains a lease of the robotic equipment used to fulfill customer orders. The Company elected to combine the lease and non-lease elements in the contract. As a result, the Company will account for all payments to Ocado as lease payments. During the second quarter of 2025, Ocado drew down the entire $152 from its letter of credit under the Amended and Restated Partnership Framework Agreement. The Company recorded finance lease assets of $23 for the portion of the payment allocated to commenced leases. The remaining payment amount is treated as prepaid rent and is recorded in “Other assets” in the Company’s Consolidated Balance Sheet and in “Other” within “Cash Flows from Investing Activities” in the Company’s Consolidated Statement of Cash Flows. As of August 16, 2025 and February 1, 2025, the Company had $907 and $926, respectively, of net finance lease assets included within “Property, plant and equipment, net” in the Company’s Consolidated Balance Sheets related to the Company's agreement with Ocado. As of August 16, 2025 and February 1, 2025, the Company had $111 and $104, respectively, of current finance lease liabilities recorded within “Current portion of long-term debt including obligations under finance leases" and $746 and $781, respectively, of non-current finance lease liabilities recorded within “Long-term debt including obligations under finance leases” in the Company’s Consolidated Balance Sheets.

The Company is currently undertaking a comprehensive review of its eCommerce operations and reviewing all aspects of this business to drive growth by both improving the customer experience while improving profitability. The outcome of this review could have a material effect on the Company’s Consolidated Financial Statements.

8.	SEGMENT REPORTING

The Company operates supermarkets, multi-department stores and fulfillment centers throughout the United States. The Company’s retail operations, which represent 99% of the Company’s consolidated sales, are its only reportable segment. The retail operations’ segment revenues are predominately earned as consumer products are sold to customers in our stores, fuel centers and via the Company’s eCommerce business. The Company aggregates its operating divisions into one reportable segment due to the operating divisions having similar economic characteristics with similar long-term financial performance. In addition, the Company’s operating divisions offer customers similar products, have similar distribution methods, operate in similar regulatory environments, purchase the majority of the merchandise for retail sale from similar (and in many cases identical) vendors on a coordinated basis from a centralized location, serve similar types of customers, and are allocated capital from a centralized location. Operating divisions are organized primarily on a geographical basis so the operating division management team can be responsive to local needs of the operating division and can execute company strategic plans and initiatives throughout the locations in their operating division. This geographical separation is the primary differentiation between these retail operating divisions. The geographical basis of organization reflects how the business is managed and how the Company’s Interim Chief Executive Officer, who acts as the Company’s chief operating decision maker (“CODM”), assesses performance internally. All of the Company’s operations are domestic.

The Company’s CODM assesses performance and allocates resources for the retail operations segment using segment FIFO earnings before net interest expense, income tax expense and depreciation and amortization (“EBITDA”). The Company defines FIFO EBITDA as EBITDA excluding the LIFO charge. The Company’s CODM also uses segment FIFO EBITDA to measure the operational effectiveness of the Company’s financial model, compare the performance of core operating results between periods, against budget and against competitors and evaluate whether to invest capital in the retail operations segment or in other parts of the Company, such as for share repurchases or dividend payments. The Company’s CODM is not provided asset information by reportable segment as asset information is provided to the CODM on a consolidated basis.

The following table presents the Company’s retail operations segment revenue, measure of segment profit or loss, significant segment expenses and reconciliation of retail operations segment FIFO EBITDA to consolidated net earnings before income tax expense and retail operations segment sales to consolidated sales for the second quarter and first two quarters of 2025 and 2024:


	Second Quarter Ended				Two Quarters Ended
	August 16,		August 17,		August 16,		August 17,
	2025		2024		2025		2024
Retail operations segment sales	$	33,670	$	32,942	$	78,451	$	76,951
Retail operations segment expenses:
Merchandise costs⁽¹⁾		23,596		23,010		54,921		53,888
Expenses in gross⁽²⁾		2,470		2,535		5,653		5,852
Operating, general, and administrative		5,883		5,765		13,692		13,206
Rent		200		196		468		462
Retail operations segment FIFO EBITDA	$	1,521	$	1,436	$	3,717	$	3,543

Reconciliation of net earnings before income tax expense:
Retail operations segment FIFO EBITDA	$	1,521	$	1,436	$	3,717	$	3,543
Depreciation and amortization		(778)		(751)		(1,829)		(1,728)
LIFO charge		(62)		(21)		(102)		(62)
Other FIFO EBITDA⁽³⁾		182		151		399		356
Net interest expense		(144)		(84)		(343)		(207)
Non-service component of company-sponsored pension plan (expense) benefits		(3)		3		(4)		6
Gain (loss) on investments		56		(121)		37		(105)
Consolidated net earnings before income tax expense	$	772	$	613	$	1,875	$	1,803

Reconciliation of sales:
Retail operations segment sales	$	33,670	$	32,942	$	78,451	$	76,951
Other sales⁽³⁾		270		970		607		2,230
Consolidated sales	$	33,940	$	33,912	$	79,058	$	79,181

(1)	Merchandise costs include product costs, net of discounts and allowances, and food production costs.

(2)	Expenses in gross include advertising costs, warehousing costs, including receiving and inspection costs, and transportation costs.

(3)	Other sales and other FIFO EBITDA primarily include other operating segments that are not part of the retail operations segment such as third-party media revenue, data analytic services, specialty pharmacy and in-store health clinics.

9.	INCOME TAXES

The effective income tax rate was 21.0% for the second quarter of 2025 and 24.1% for the second quarter of 2024. The effective income tax rate was 21.2% for both the first two quarters of 2025 and 2024. The effective income tax rate for the second quarter of 2025 equaled the federal statutory rate due to the effect of state income taxes being fully offset by the utilization of tax credits and deductions including the benefit from share-based payments. The effective income tax rate for the first two quarters of 2025 differed from the federal statutory rate due to the effect of state income taxes, partially offset by the utilization of tax credits and deductions including the benefit from share-based payments. The effective income tax rate for the second quarter of 2024 differed from the federal statutory rate due to the effect of state income taxes, partially offset by the utilization of tax credits and deductions. The effective tax rate for the first two quarters of 2024 differed from the federal statutory rate due to the effect of state income taxes, partially offset by a tax benefit related to classifying Kroger Specialty Pharmacy as held for sale and the utilization of tax credits and deductions.

10.

RECENTLY ISSUED ACCOUNTING STANDARDS

In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” The guidance requires disclosures about specific expense categories, including but not limited to, purchases of inventory, employee compensation, depreciation, amortization and selling expenses. The ASU is effective for annual reporting periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. The Company is currently assessing the effect that adoption of this guidance will have on its Consolidated Financial Statements.

In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This guidance amends existing income tax disclosure guidance, primarily requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation. The ASU is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted and can be applied on either a prospective or retroactive basis. The adoption of the standard is not expected to have a material effect on the Company’s Consolidated Financial Statements.

11.

SUBSEQUENT EVENT

TBD

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following analysis should be read in conjunction with the Consolidated Financial Statements.

CAUTIONARY STATEMENT

This discussion and analysis contains certain forward-looking statements about our future performance. 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 “accelerate,” “achieve,” “affect,” “anticipate,” “believe,” “committed,” “confident,” “continue,” “could,” “drive,” “enable,” “ensure,” “estimate,” “expect,” “future,” “goals,” “initiatives,” “maintain,” “may,” “model,” “plan,” “position,” “strategy,” “target,” “trend,” and “will,” and similar words or phrases. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially. These include the specific risk factors identified in “Risk Factors” in our Annual Report on Form 10-K for our last fiscal year and any subsequent filings, as well as those identified in this Form 10-Q.

Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. These include:

●

The extent to which our sources of liquidity are sufficient to meet our requirements may be affected by the state of the financial markets and the effect that such condition has on our ability to issue commercial paper at acceptable rates. Our ability to borrow under our committed lines of credit, including our bank credit facilities, could be impaired if one or more of our lenders under those lines is unwilling or unable to honor its contractual obligation to lend to us, or in the event that global pandemics, natural disasters or weather conditions interfere with the ability of our lenders to lend to us. Our ability to refinance maturing debt may be affected by the state of the financial markets.

●

Our ability to achieve sales, earnings and incremental FIFO operating profit goals may be affected by: labor negotiations; potential work stoppages; changes in the unemployment rate; pressures in the labor market; changes in government-funded benefit programs; changes in the types and numbers of businesses that compete with us; pricing and promotional activities of existing and new competitors, and the aggressiveness of that competition; our response to these actions; the state of the economy, including interest rates, the inflationary, disinflationary and/or deflationary trends and such trends in certain commodities, products and/or operating costs; the geopolitical environment including wars and conflicts; unstable political situations and social unrest; changes in tariffs; the effect that fuel costs have on consumer spending; volatility of fuel margins; manufacturing commodity costs; supply constraints; diesel fuel costs related to our logistics operations; trends in consumer spending; the extent to which our customers exercise caution in their purchasing in response to economic conditions; the uncertainty of economic growth or recession; stock repurchases; changes in the regulatory environment in which we operate, along with changes in federal policy and at regulatory agencies; our ability to retain pharmacy sales from third-party payors; consolidation in the healthcare industry, including pharmacy benefit managers; our ability to negotiate modifications to multi-employer pension plans; natural disasters or adverse weather conditions; the effect of public health crises or other significant catastrophic events; the potential costs and risks associated with potential cyber-attacks or data security breaches; the success of our future growth plans; the ability to execute our growth strategy and value creation model, including continued cost savings, growth of our alternative profit businesses, and our ability to better serve our customers and to generate customer loyalty and sustainable growth through our strategic pillars of Fresh, Our Brands, personalization, and eCommerce; the outcome of litigation matters, including those relating to the terminated transaction with Albertsons; and the risks relating to or arising from our opioid litigation settlements, including the risk of litigation relating to persons, entities, or jurisdictions that do not participate in those settlements.

●

Our ability to achieve these goals may also be affected by our ability to manage the factors identified above. Our ability to execute our financial strategy may be affected by our ability to generate cash flow.

●

Our adjusted effective tax rate may differ from the expected rate due to changes in tax laws and policies, the status of pending items with various taxing authorities and the deductibility of certain expenses.

Statements elsewhere in this report and below regarding our expectations, projections, beliefs, intentions or strategies are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. While we believe that the statements are accurate, uncertainties about the general economy, our labor relations, our ability to execute our plans on a timely basis and other uncertainties described in this report and other reports that we file with the Securities and Exchange Commission could cause actual results to differ materially. We assume no obligation to update the information contained in this report unless required by applicable law.

OUR VALUE CREATION MODEL – DELIVERING CONSISTENT AND ATTRACTIVE TOTAL SHAREHOLDER RETURN

Kroger’s proven value creation model is allowing us to deliver today and invest for the future. The foundation of our value creation model is our omnichannel retail business, including fuel and health and wellness. By executing on our go-to- market strategy built on the four pillars of Fresh, Our Brands, Personalization and eCommerce, we are creating a shopping experience that builds loyalty and grows sales. Our retail business generates traffic and data which accelerates growth in our high operating margin alternative profit businesses, like retail media. In turn, the value generated from these businesses enables us to reinvest back into our retail business.

We are focused on enhancing our pillars and delivering an exceptional customer experience to accelerate this flywheel effect. By expanding our store network and improving our eCommerce capabilities, we expect to grow households and increase sales. Our model provides various ways to generate net earnings growth.

This will be achieved by:

●

Growing identical sales without fuel. Our plan involves maximizing growth opportunities in our retail business and is supported by continued strategic investments in our associates and greater value for our customers to ensure we deliver a full, fresh and friendly experience for every customer, every time. In an effort to serve more households, we will invest in major storing projects that allow us to increase both in store and eCommerce sales. As more and more customers incorporate eCommerce into their permanent routines, we expect eCommerce sales to grow at a double-digit rate – a faster pace than other food at home sales – over time; and

●

Expanding operating margin through long-term initiatives in gross margin, growing alternative profit businesses and productivity and cost savings initiatives that are focused on simplifying our business and modernizing our ways of working. Together, these will enable us to improve operating margin, while balancing strategic price investments for customers and investments in associates to improve customer experience.

We expect to continue to generate strong free cash flow and are committed to being disciplined with capital deployment in support of our value creation model and stated capital allocation priorities. Our first priority is to invest in the business through attractive high return opportunities that drive long-term sustainable net earnings growth. We are committed to maintaining our current investment grade debt rating and our net total debt to adjusted EBITDA ratio target range of 2.30 to 2.50. We also expect to continue to grow our dividend over time and return excess cash to shareholders via stock repurchases, subject to Board approval.

We expect our value creation model will result in total shareholder return within our target range of 8% to 11% over time.

EXECUTIVE SUMMARY

Kroger delivered another quarter of strong results, which demonstrates the clear and measurable progress we’ve made on our priorities – to simplify our organization, to improve the customer experience and to focus on work that creates the most value. Sales growth has been strong, led by pharmacy, eCommerce and Fresh, and we are encouraged by the improvement in grocery volumes. We are executing better in our stores and we are more focused on our core business and our core customer. We are moving with speed and we are simplifying the company.

We continue to believe that our strategy focusing on Fresh, Our Brands and eCommerce will continue to resonate with customers and our resilient model positions us well to navigate the current environment. We are focused on investments that will grow our core business and maximize return on invested capital over time, while remaining committed to maintaining our current investment grade rating, growing our dividend, subject to board approval, and returning excess capital to shareholders. We are confident that by executing on these key priorities, we will generate long-term growth and attractive shareholder returns.

The following table provides highlights of our financial performance:

Financial Performance Data

($ in millions, except per share amounts)


	Second Quarter Ended								Two Quarters Ended
	August 16,			Percentage		August 17,			August 16,			Percentage		August 17,
	2025			Change		2024			2025			Change		2024
Sales	$	33,940		0.1	%	$	33,912		$	79,058		(0.2)	%	$	79,181
Sales without fuel	$	30,671		1.3	%	$	30,276		$	71,449		1.2	%	$	70,587
Identical sales excluding fuel and Adjusted Items⁽¹⁾		3.4	%	N/A			1.2	%		3.3	%	N/A			0.8	%
FIFO gross margin rate, excluding rent, depreciation and amortization, fuel and Adjusted Items, bps increase		0.39		N/A			0.42			0.62		N/A			0.14
OG&A rate, excluding fuel and Adjusted Items, bps increase (decrease)		(0.05)		N/A			0.65			0.34		N/A			0.40
Operating profit	$	863		5.9	%	$	815		$	2,185		3.6	%	$	2,109
Adjusted FIFO operating profit	$	1,091		10.9	%	$	984		$	2,610		5.1	%	$	2,483
Net earnings attributable to The Kroger Co.	$	609		30.7	%	$	466		$	1,475		4.4	%	$	1,413
Adjusted net earnings attributable to The Kroger Co.	$	695		2.1	%	$	681

KROGER CO 10-Q