KROGER REPORTS THIRD QUARTER RESULTS
Identical Supermarket Sales Rose 7.7% with Fuel and 5.7% without Fuel
Company Raises Fiscal 2007 Identical Sales and Earnings Guidance

CINCINNATI, Ohio, December 11, 2007 – The Kroger Co. (NYSE: KR) today reported total sales increased 9.8% to $16.1 billion for the third quarter that ended November 10, 2007. Identical supermarket sales increased 7.7% with fuel and 5.7% without fuel. This is the tenth consecutive quarter Kroger has reported identical supermarket sales increases, excluding fuel, in excess of 3%.

Net earnings in the third quarter totaled $253.8 million, or $0.37 per diluted share. These results include a benefit from the resolution of certain tax issues. Most of this benefit was offset by lower margins from retail fuel operations and the Company’s decision to accelerate certain initiatives that are part of Kroger’s Customer 1st strategy.

Net earnings in the same period last year were $214.7 million, or $0.30 per diluted share.

"Our earnings performance this quarter was solid. Our strategy continues to deliver earnings growth in a variety of economic and competitive conditions, which underscores the core strength of Kroger's business model,” said David B. Dillon, Kroger chairman and chief executive officer. “Kroger’s strong sales performance in the third quarter is the direct result of our associates’ efforts to focus on our customers. Our business model positions us well to serve the diverse needs of our customers.”

Highlights of the third quarter included:

• FIFO gross margin decreased 110 basis points to 23.38% of sales (Table 1). Excluding the effect of retail fuel operations (Table 4), FIFO gross margin declined 34 basis points.
• Operating, general and administrative (OG&A) costs as a percentage of sales declined 78 basis points to 17.49%. Excluding the effect of retail fuel operations, OG&A declined 49 basis points (Table 4).
• Capital investment totaled $555.3 million, excluding acquisitions, compared to $415.0 million a year ago.
• Kroger repurchased 16.5 million shares of stock at an average price of $26.77 for a total investment of $442.1 million. At the end of the third quarter, $201.6 million remained under the $1 billion stock repurchase program announced in June 2007.
• On a rolling four-quarters basis, Kroger’s net total debt (Table 5) to EBITDA ratio was 1.97, compared with 2.03 during the same period last year.

Fiscal 2007 Year-to-Date Results
During the first three quarters of fiscal 2007, total sales increased 7.6% to $53.0 billion. For the same period, identical supermarket sales, excluding fuel, increased 5.3%.

The Company’s operating margin for the first three quarters of fiscal 2007 increased 3 basis points. Excluding fuel and first quarter charges for labor unrest in 2007 and certain legal expenses in 2006, Kroger’s operating margin for the first three quarters of fiscal 2007 increased 7 basis points.

Net earnings for the first three quarters of fiscal 2007 were $857.6 million, or $1.22 per diluted share. Net earnings for the same period in fiscal 2006 were $730.1 million, or $1.01 per diluted share.

Guidance
Based on year-to-date financial results and current trends, Kroger now expects identical supermarket sales growth of approximately 5% for the full year, excluding fuel sales. The Company expects earnings per diluted share to slightly exceed the range previously given of $1.64 – $1.67. This earnings guidance includes the lower tax rate due to the resolution of certain tax issues this quarter, and a higher estimated LIFO charge of $130 million, which is $80 million more than the Company originally anticipated for fiscal 2007. In addition, Kroger’s dividend currently adds slightly over 1% to shareholder return.

"Our year-to-date performance positions us to deliver slightly expanding operating margin, low double-digit earnings per share growth and strong identical sales growth in fiscal 2007,” Mr. Dillon said. “Kroger continues to deliver financial results in the near-term while maintaining our focus on investing for the future. Our associates' focus on building customer loyalty through service, product, and value initiatives remains key to Kroger's future earnings growth."

Looking beyond fiscal 2007, the Company confirmed that it expects identical supermarket sales growth in the 3 – 5% range with a slightly improving operating margin, excluding the effect of retail fuel operations.

Kroger is one of the nation’s largest retail grocery chains. The Company’s more than 300,000 associates serve customers in 2,487 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, 405 fine jewelry stores and 678 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 word “expects.” Increased competition, weather and economic conditions, interest rates, goodwill impairment, the success of programs designed to increase our identical supermarket sales without fuel, the impact our other stores located in proximity to existing stores (the “sister store” impact) have on sales at those existing stores, and labor disputes, particularly as the Company seeks to manage increases in health care and pension costs, could materially affect our identical supermarket sales growth and earnings per share. Earnings per share also will be affected by the number of shares outstanding and our success in reducing the number of shares outstanding. Our estimate of LIFO charge could be different than anticipated if the mix of our products sold or product cost inflation changes. Our ability to increase our operating margins is dependent primarily on our ability to increase identical sales, pass along product cost increases, and our ability to reduce shrink, distribution costs, and advertising expenses as a rate of sales. 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 December 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 December 21, 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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