KROGER CO (Form: 10-Q, Received: 06/30/2015 11:43:18)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended May 23, 2015

o 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

(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, OH 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)

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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes x No o

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

Large accelerated filer x		Accelerated filer o

Non-accelerated filer o		Smaller reporting company o
(do not check if a smaller reporting company)

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

There were 485,711,614 shares of Common Stock ($1 par value) outstanding as of June 26, 2015.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

THE KROGER CO.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

(unaudited)

	First Quarter Ended
	May 23,		May 24,
	2015		2014
Sales	$	33,051	$	32,961
Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below	25,760		26,065
Operating, general and administrative	5,354		5,168
Rent	215		217
Depreciation and amortization	620		581

Operating profit	1,102		930
Interest expense	148		147

Earnings before income tax expense	954		783
Income tax expense	330		274

Net earnings including noncontrolling interests	624		509
Net earnings attributable to noncontrolling interests	5		8

Net earnings attributable to The Kroger Co.	$	619	$	501

Net earnings attributable to The Kroger Co. per basic common share	$	1.27	$	0.99

Average number of common shares used in basic calculation	484		501

Net earnings attributable to The Kroger Co. per diluted common share	$	1.25	$	0.98

Average number of common shares used in diluted calculation	492		507

Dividends declared per common share	$	0.185	$	0.165

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

THE KROGER CO.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions and unaudited)

	First Quarter Ended
	May 23, 2015		May 24, 2014
Net earnings including noncontrolling interests	$	624	$	509

Other comprehensive income (loss)
Unrealized gains and losses on available for sale securities, net of income tax(1)	3		(1		)
Amortization of amounts included in net periodic pension expense, net of income tax(2)	16		8
Unrealized gains on cash flow hedging activities, net of income tax(3)	20		¾

Total other comprehensive income	39		7

Comprehensive income	663		516
Comprehensive income attributable to noncontrolling interests	5		8
Comprehensive income attributable to The Kroger Co.	$	658	$	508

(1) Amount is net of tax of $1 for the first quarter of 2015 and $(1) for the first quarter of 2014.

(2) Amount is net of tax of $9 for the first quarter of 2015 and $4 for the first quarter of 2014.

(3) Amount is net of tax of $12 for the first quarter of 2015.

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

THE KROGER CO.

CONSOLIDATED BALANCE SHEETS

(in millions, except per share amounts)

(unaudited)

	May 23,			January 31,
	2015			2015
ASSETS
Current assets
Cash and temporary cash investments	$	252		$	268
Store deposits in-transit	962			988
Receivables	1,218			1,266
FIFO inventory	6,995			6,933
LIFO reserve	(1,273		)	(1,245		)
Prepaid and other current assets	429			701
Total current assets	8,583			8,911

Property, plant and equipment, net	18,212			17,912
Intangibles, net	743			757
Goodwill	2,304			2,304
Other assets	626			613

Total Assets	$	30,468		$	30,497

LIABILITIES
Current liabilities
Current portion of long-term debt including obligations under capital leases and financing obligations	$	1,591		$	1,885
Trade accounts payable	5,431			5,052
Accrued salaries and wages	1,146			1,291
Deferred income taxes	286			287
Other current liabilities	2,864			2,888
Total current liabilities	11,318			11,403

Long-term debt including obligations under capital leases and financing obligations
Face-value of long-term debt including obligations under capital leases and financing obligations	9,717			9,712
Adjustment to reflect fair-value interest rate hedges	(1		)	¾
Long-term debt including obligations under capital leases and financing obligations	9,716			9,712

Deferred income taxes	1,180			1,209
Pension and postretirement benefit obligations	1,458			1,463
Other long-term liabilities	1,260			1,268

Total Liabilities	24,932			25,055

Commitments and contingencies (see Note 8)

SHAREOWNERS’ EQUITY

Preferred shares, $100 per share, 5 shares authorized and unissued	¾			¾
Common shares, $1 par per share, 1,000 shares authorized; 959 shares issued in 2015 and 2014	959			959
Additional paid-in capital	3,826			3,707
Accumulated other comprehensive loss	(773		)	(812		)
Accumulated earnings	12,895			12,367
Common shares in treasury, at cost, 478 shares in 2015 and 472 shares in 2014	(11,350		)	(10,809		)

Total Shareowners’ Equity — The Kroger Co.	5,557			5,412
Noncontrolling interests	(21		)	30

Total Equity	5,536			5,442

Total Liabilities and Equity	$	30,468		$	30,497

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

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions and unaudited)

	Quarter Ended
	May 23, 2015			May 24, 2014
Cash Flows from Operating Activities:
Net earnings including noncontrolling interests	$	624		$	509
Adjustments to reconcile net earnings including noncontrolling interests to net cash provided by operating activities:
Depreciation and amortization	620			581
LIFO charge	28			28
Stock-based employee compensation	52			40
Expense for Company-sponsored pension plans	30			12
Deferred income taxes	(52		)	(56		)
Other	34			24
Changes in operating assets and liabilities net of effects from acquisitions of businesses:
Store deposits in-transit	26			21
Receivables	43			20
Inventories	(62		)	(25		)
Prepaid and other current assets	249			288
Trade accounts payable	380			375
Accrued expenses	(237		)	(111		)
Income taxes receivable and payable	10			(28		)
Other	10			73

Net cash provided by operating activities	1,755			1,751

Cash Flows from Investing Activities:
Payments for property and equipment, including payments for lease buyouts	(879		)	(730		)
Proceeds from sale of assets	4			9
Other	17			18
Net cash used by investing activities	(858		)	(703		)

Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt	4			17
Payments on long-term debt	(13		)	(14		)
Net payments of commercial paper	(285		)	(5		)
Dividends paid	(91		)	(84		)
Excess tax benefits on stock-based awards	37			12
Proceeds from issuance of capital stock	46			33
Treasury stock purchases	(585		)	(1,143		)
Investment in the remaining equity of a noncontrolling interest	(26		)	—

Net cash used by financing activities	(913		)	(1,184		)

Net decrease in cash and temporary cash investments	(16		)	(136		)

Cash and temporary cash investments:
Beginning of year	268			401
End of quarter	$	252		$	265

Reconciliation of capital investments:
Payments for property and equipment, including payments for lease buyouts	$	(879	)	$	(730	)
Payments for lease buyouts	16			17
Changes in construction-in-progress payables	(52		)	4
Total capital investments, excluding lease buyouts	$	(915	)	$	(709	)

Disclosure of cash flow information:
Cash paid during the quarter for interest	$	156		$	134
Cash paid during the quarter for income taxes	$	321		$	351

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

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS’ EQUITY

(in millions, except per share amounts)

(unaudited)

												Accumulated
				Additional								Other
	Common Stock			Paid-In			Treasury Stock					Comprehensive			Accumulated			Noncontrolling
	Shares	Amount		Capital			Shares		Amount			Gain (Loss)			Earnings			Interest			Total
Balances at February 1, 2014	959	$	959	$	3,549		451		$	(9,641	)	$	(464	)	$	10,981		$	11		$	5,395
Issuance of common stock:
Stock options exercised	—	—		—			(2	)	33			—			—			—			33
Restricted stock issued	—	—		(9		)	—		4			—			—			—			(5		)
Treasury stock activity:
Treasury stock purchases, at cost	—	—		—			24		(1,094		)	—			—			—			(1,094		)
Stock options exchanged	—	—		—			1		(49		)	—			—			—			(49		)
Share-based employee compensation	—	—		40			—		—			—			—			—			40
Other comprehensive gain net of income tax of $3	—	—		—			—		—			7			—			—			7
Other	—	—		15			—		1			—			—			2			18
Cash dividends declared ($0.165 per common share)	—	—		—			—		—			—			(84		)	—			(84		)
Net earnings including noncontrolling interests	—	—		—			—		—			—			501			8			509

Balances at May 24, 2014	959	$	959	$	3,595		474		$	(10,746	)	$	(457	)	$	11,398		$	21		$	4,770

Balances at January 31, 2015	959	$	959	$	3,707		472		$	(10,809	)	$	(812	)	$	12,367		$	30		$	5,442
Issuance of common stock:
Stock options exercised	—	—		—			(2	)	46			—			—			—			46
Restricted stock issued	—	—		(11		)	—		(1		)	—			—			—			(12		)
Treasury stock activity:
Treasury stock purchases, at cost	—	—		—			7		(498		)	—			—			—			(498		)
Stock options exchanged	—	—		—			1		(87		)	—			—			—			(87		)
Share-based employee compensation	—	—		52			—		—			—			—			—			52
Other comprehensive gain net of income tax of $22	—	—		—			—		—			39			—			—			39
Investment in the remaining equity of a noncontrolling interest	—	—		40			—		—			—			—			(57		)	(17		)
Other	—	—		38			—		(1		)	—			—			1			38
Cash dividends declared ($0.185 per common share)	—	—		—			—		—			—			(91		)	—			(91		)
Net earnings including noncontrolling interests	—	—		—			—		—			—			619			5			624

Balances at May 23, 2015	959	$	959	$	3,826		478		$	(11,350	)	$	(773	)	$	12,895		$	(21	)	$	5,536

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

N OTES TO U NAUDITED C ONSOLIDATED F INANCIAL S TATEMENTS

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

1. A CCOUNTING P OLICIES

Basis of Presentation and Principles of Consolidation

The accompanying financial statements include the consolidated accounts of The Kroger Co., its wholly-owned subsidiaries, and the Variable Interest Entities (“VIEs”) in which the Company is the primary beneficiary. The January 31, 2015 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 all normal, recurring adjustments that are necessary for a fair presentation 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 January 31, 2015.

The unaudited information in the Consolidated Financial Statements for the first quarters ended May 23, 2015 and May 24, 2014, includes the results of operations of the Company for the 16-week periods then ended.

The net increase (decrease) in book overdrafts previously reported in financing activities in the Consolidated Statements of Cash Flows is now reported within operating activities. Prior year amounts have been revised to the current year presentation. These revisions were not material to the prior years.

Refer to Note 6 for an additional change to the Consolidated Balance Sheets for a recently adopted accounting standard regarding the presentation of debt issuance costs.

2. M ERGER

On August 18, 2014, the Company closed its merger with Vitacost.com, Inc. (“Vitacost.com”) and there have not been any changes in the Company’s preliminary purchase price allocation in the first quarter of 2015.

Pro forma results of operations, assuming the transaction had taken place at the beginning of 2013, are included in the following table. The pro forma information includes historical results of operations of Vitacost.com and adjustments for interest expense that would have been incurred due to financing the merger, depreciation and amortization of the assets acquired and excludes the pre-merger transaction related expenses incurred by Vitacost.com and the Company. The pro forma information does not include efficiencies, cost reductions or synergies expected to result from the merger. The unaudited pro forma financial information is not necessarily indicative of the results that actually would have occurred had the merger been completed at the beginning of the 2013.

	First Quarter Ended May 24, 2014
Sales	$	33,092
Net earnings including noncontrolling interests	502
Net earnings attributable to noncontrolling interests	8

Net earnings attributable to The Kroger Co.	$	494

3. D EBT O BLIGATIONS

Long-term debt consists of:

	May 23,			January 31,
	2015			2015
0.76% to 8.00% Senior notes due through 2043	$	9,229		$	9,224
5.00% to 12.75% Mortgages due in varying amounts through 2027	71			73
0.37% to 0.46% Commercial paper due through June 2015	990			1,275
Other	456			454

Total debt, excluding capital leases and financing obligations	10,746			11,026

Less current portion	(1,549		)	(1,844		)

Total long-term debt, excluding capital leases and financing obligations	$	9,197		$	9,182

4 . B ENEFIT P LANS

The following table provides the components of net periodic benefit costs for the Company-sponsored pension plans and other post-retirement benefits for the first quarters of 2015 and 2014.

	First Quarter
	Pension Benefits						Other Benefits
	2015			2014			2015			2014
Components of net periodic benefit cost:
Service cost	$	19		$	14		$	4		$	4
Interest cost	51			56			3			4
Expected return on plan assets	(71		)	(74		)	—			—
Amortization of:
Prior service cost	—			—			(4		)	(2		)
Actuarial loss	31			16			(2		)	(2		)

Net periodic benefit expense	$	30		$	12		$	1		$	4

The Company contributed $5 to its Company-sponsored defined benefit pension plans in the first quarter of 2015. The Company is not required and does not expect to make any additional contributions in 2015.

The Company contributed $62 and $56 to employee 401(k) retirement savings accounts in the first quarters of 2015 and 2014, respectively.

During the first quarter of 2014, the Company incurred a charge of $56 (after-tax) due to commitments and withdrawal liabilities arising from the restructuring of certain multi-employer pension plan obligations.

The Company also contributes to various multi-employer pension plans based on obligations arising from most of its collective bargaining agreements. These plans provide retirement benefits to participants based on their service to contributing employers. The Company recognizes expense in connection with these plans as contributions are funded.

5. E ARNINGS P ER C OMMON S HARE

Net earnings attributable to The Kroger Co. per basic common share equal 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:

	First Quarter Ended					First Quarter Ended
	May 23, 2015					May 24, 2014
	Earnings (Numerator)		Shares (Denominator)	Per Share Amount		Earnings (Numerator)		Shares (Denominator)	Per Share Amount
Net earnings attributable to The Kroger Co. per basic common share	$	613	484	$	1.27	$	497	501	$	0.99
Dilutive effect of stock options			8					6

Net earnings attributable to The Kroger Co. per diluted common share	$	613	492	$	1.25	$	497	507	$	0.98

The Company had undistributed and distributed earnings to participating securities totaling $6 and $4 for the first quarters of 2015 and 2014, respectively.

The Company had options outstanding for approximately 65 thousand and 2 million shares during the first quarters of 2015 and 2014, respectively, that were excluded from the computation of earnings per diluted common share because their inclusion would have had an anti-dilutive effect on earnings per share.

6. R ECENTLY A DOPTED A CCOUNTING S TANDARDS

In April 2015, the Financial Accounting Standards Board (“FASB”) amended Accounting Standards Codification 835, “Interest-Imputation of Interest.” The amendment simplifies the presentation of debt issuance costs related to a recognized debt liability by requiring it be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This amendment became effective for the Company beginning February 1, 2015, and was adopted retrospectively in accordance with the standard. The adoption of this amendment resulted in amounts previously reported in other assets to now be reported within long-term debt including obligations under capital leases and financing obligations in the Consolidated Balance Sheets. These amounts were not material to the prior year. The adoption of this amendment did not have an effect on the Company’s Consolidated Statements of Operations.

7. R ECENTLY I SSUED A CCOUNTING S TANDARDS

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” which provides guidance for revenue recognition. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This guidance will be effective for the Company in the first quarter of its fiscal year ending January 27, 2018. Early adoption is not permitted. The Company is currently in the process of evaluating the effect of adoption of this ASU on the Company’s Consolidated Financial Statements.

In April 2015, the FASB issued ASU 2015-04, “Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets.” This amendment permits an entity to measure defined benefit plan assets and obligations using the month end that is closest to the entity’s fiscal year end for all plans. This guidance will be effective for the Company in its fiscal year ending January 28, 2017. The implementation of this amendment will not have an effect on the Company’s Consolidated Statements of Operations and will not have a significant effect on the Company’s Consolidated Balance Sheets.

In April 2015, the FASB issued ASU 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” This amendment removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share. This guidance will be effective for the Company in its fiscal year ending January 28, 2017. The implementation of this amendment will have an effect on the Company’s Notes to the Consolidated Financial Statements and will not have an effect on the Company’s Consolidated Statements of Operations or Consolidated Balance Sheets.

8. C OMMITMENTS AND C ONTINGENCIES

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.

Litigation — Various claims and lawsuits arising in the normal course of business, including suits charging violations of certain antitrust, wage and hour, or civil rights laws, as well as product liability cases, are pending against the Company. Some of these suits purport or have been determined to be class actions and/or seek substantial damages. Any damages that may be awarded in antitrust cases will be automatically trebled. 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 where an adverse outcome is probable. Nonetheless, assessing and predicting the outcomes of these matters involve 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.

9. F AIR V ALUE M EASUREMENTS

GAAP establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of the fair value hierarchy defined in the standards are as follows:

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.

For items carried at (or adjusted to) fair value in the consolidated financial statements, the following tables summarize the fair value of these instruments at May 23, 2015 and January 31, 2015:

May 23, 2015 Fair Value Measurements Using

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total
Trading Securities	$	47	$	—		$	—	$	47
Available-for-Sale Securities	40		—			—		40
Warrants	—		29			—		29
Long-Lived Assets	—		—			3		3
Interest Rate Hedges	—		(1		)	—		(1		)
Total	$	87	$	28		$	3	$	118

January 31, 2015 Fair Value Measurements Using

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total
Trading Securities	$	47	$	—		$	—	$	47
Available-for-Sale Securities	36		—			—		36
Warrants	—		26			—		26
Long-Lived Assets	—		—			22		22
Interest Rate Hedges	—		(39		)	—		(39		)
Total	$	83	$	(13	)	$	22	$	92

In the first quarter of 2015, unrealized gains on the Level 1 available-for-sale securities totaled $4.

The Company values warrants using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model is classified as a Level 2 input.

The Company values interest rate hedges using observable forward yield curves. These forward yield curves are classified as Level 2 inputs.

Fair value measurements of non-financial assets and non-financial liabilities are primarily used in the impairment analysis of goodwill, other intangible assets, long-lived assets, and in the valuation of store lease exit costs. The Company reviews goodwill and other intangible assets for impairment annually, during the fourth quarter of each fiscal year, and as circumstances indicate the possibility of impairment. See Note 3 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2015 for further discussion related to the Company’s carrying value of goodwill. Long-lived assets and store lease exit costs were measured at fair value on a nonrecurring basis using Level 3 inputs as defined in the fair value hierarchy. See Note 1 to the Consolidated Financial Statements in the Annual Report on Form 10-K for the fiscal year ended January 31, 2015 for further discussion of the Company’s policies regarding the valuation of long-lived assets and store lease exit costs. For the first quarter of 2015, long-lived assets with a carrying amount of $25 were written down to their fair value of $3 resulting in an impairment charge of $22. For the first quarter of 2014, long-lived assets with a carrying amount of $14 were written down to their fair value of $6 resulting in an impairment charge of $8. In fiscal year 2014, long-lived assets with a carrying amount of $59 were written down to their fair value of $22, resulting in an impairment charge of $37.

Fair Value of Other Financial Instruments

Current and Long-term Debt

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 May 23, 2015 and January 31, 2015. At May 23, 2015, the fair value of total debt was $11,643 compared to a carrying value of $10,746. At January 31, 2015, the fair value of total debt was $12,319 compared to a carrying value of $11,026.

Cash and Temporary Cash Investments, Store Deposits In-Transit, Receivables, Prepaid and Other Current Assets, Trade Accounts Payable, Accrued Salaries and Wages and Other Current Liabilities

The carrying amounts of these items approximated fair value.

Other Assets

The fair values of these investments were estimated based on quoted market prices for those or similar investments, or estimated cash flows, if appropriate. At May 23, 2015 and January 31, 2015, the carrying and fair value of long-term investments for which fair value is determinable was $140 and $133, respectively. At May 23, 2015 and January 31, 2015, the carrying value of notes receivable for which fair value is determinable was $104 and $98, respectively.

10. A CCUMULATED O THER C OMPREHENSIVE I NCOME (L OSS )

The following table represents the changes in AOCI by component for the first quarters of 2014 and 2015:

	Cash Flow Hedging Activities(1)			Available for sale Securities(1)			Pension and Postretirement Defined Benefit Plans(1)			Total(1)
Balance at February 1, 2014	$	(25	)	$	12		$	(451	)	$	(464	)
OCI before reclassifications(2)	—			(1		)	—			(1		)
Amounts reclassified out of AOCI(3)	—			—			8			8
Net current-period OCI	—			(1		)	8			7
Balance at May 24, 2014	$	(25	)	$	11		$	(443	)	$	(457	)

Balance at January 31, 2015	$	(49	)	$	17		$	(780	)	$	(812	)
OCI before reclassifications(2)	20			3			—			23
Amounts reclassified out of AOCI(3)	—			—			16			16
Net current-period OCI	20			3			16			39
Balance at May 23, 2015	$	(29	)	$	20		$	(764	)	$	(773	)

(1) All amounts are net of tax.

(2) Net of tax of $(1) for available for sale securities for the first quarter of 2014 and $12 and $1 for cash flow hedging activities and available for sale securities, respectively, for the first quarter of 2015.

(3) Net of tax of $4 for pension and postretirement defined benefit plans for the first quarter of 2014 and $9 for pension and postretirement defined benefit plans for the first quarter of 2015.

The following table represents the items reclassified out of AOCI and the related tax effects for the first quarters of 2015 and 2014:

	First Quarter Ended May 23, 2015			First Quarter Ended May 24, 2014
Pension and postretirement defined benefit plan items
Amortization of amounts included in net periodic pension expense(1)	25			12
Tax expense	(9		)	(4		)
Net of tax	16			8
Total reclassifications, net of tax	$	16		$	8

(1) Reclassified from AOCI into merchandise costs and operating, general and administrative expense. These components are included in the computation of net periodic pension expense (see Note 4 to the Company’s Consolidated Financial Statements for additional details).

11. S UBSEQUENT E VENT

On June 25, 2015, the Company’s Board of Directors approved a two-for-one stock split of The Kroger Co.’s common shares in the form of a 100% stock dividend. Shareholders of record at the close of business on July 6, 2015 will receive one additional common share, with a par value of $1 per share, for each common share owned on that date. The additional shares are expected to be distributed on or about July 13, 2015.

All numbers of shares outstanding and per share amounts in the Consolidated Financial Statements and Notes to Unaudited Consolidated Financial Statements are presented on a pre-split basis. Subsequent to the distribution date, all historical numbers of shares outstanding and per share amounts presented in future financial statements will be retroactively adjusted.

Pro-forma unaudited earnings per share are as follows, giving retroactive effect to the stock split:

	First Quarter Ended					First Quarter Ended
	May 23, 2015					May 24, 2014
As reported:	Earnings (Numerator)		Shares (Denominator)	Per Share Amount		Earnings (Numerator)		Shares (Denominator)	Per Share Amount
Net earnings attributable to The Kroger Co. per basic common share	$	613	484	$	1.27	$	497	501	$	0.99
Dilutive effect of stock options			8					6

Net earnings attributable to The Kroger Co. per diluted common share	$	613	492	$	1.25	$	497	507	$	0.98

	First Quarter Ended					First Quarter Ended
	May 23, 2015					May 24, 2014
Pro-forma:	Earnings (Numerator)		Shares (Denominator)	Per Share Amount		Earnings (Numerator)		Shares (Denominator)	Per Share Amount
Net earnings attributable to The Kroger Co. per basic common share	$	613	969	$	0.63	$	497	1,002	$	0.50
Dilutive effect of stock options			14					12

Net earnings attributable to The Kroger Co. per diluted common share	$	613	983	$	0.62	$	497	1,014	$	0.49

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.

O VERVIEW

First quarter 2015 total sales were $33.1 billion compared with $33.0 billion for the same period of 2014. This increase was attributable to identical supermarket sales increases and increased fuel gallon sales, partially offset by a decrease in the average retail fuel price. Identical supermarket sales, excluding fuel, increased 5.7% in the first quarter of 2015, compared to the first quarter of 2014, primarily due to an increase in the number of households shopping with us, an increase in visits per household and product cost inflation. Every supermarket store department and every operating division had positive identical sales. This continues our trend of positive identical supermarket sales growth for 46 consecutive quarters. Our Customer 1 st Strategy continues to deliver solid results.

For the first quarter of 2015, net earnings totaled $619 million, or $1.25 per diluted share, compared to $501 million, or $0.98 per diluted share for the same period of 2014. Net earnings for the first quarter of 2014 included a $0.11 per diluted share charge due to commitments and withdrawal liabilities arising from the restructuring of certain multiemployer pension plan obligations to help stabilize associates’ future benefits (“pension plan agreements”). Excluding the pension plan agreements, adjusted net earnings totaled $557 million, or $1.09 per diluted share, for the first quarter of 2014. The pension plan agreements resulted in an increase in operating, general and administrative (“OG&A”) expense of $87 million ($56 million after-tax) in the first quarter of 2014. We believe adjusted net earnings and adjusted net earnings per diluted share present a more accurate year-over-year comparison of our financial results because the pension plan agreements were not the result of our normal operations. The increase in net earnings for the first quarter of 2015, compared to the adjusted net earnings for the first quarter of 2014, resulted primarily from an increase in non-fuel First-In, First Out (“FIFO”) operating profit, partially offset by increased tax expense and a slight decrease in earnings from our fuel operations.

Based on the strength of our results for the first quarter of 2015, we have increased both the lower and upper ranges of our guidance for identical supermarket sales for fiscal year 2015. Please refer to the “Outlook” section for more information on our expectations.

RESULTS OF OPERATIONS

Net Earnings

Net earnings totaled $619 million for the first quarter of 2015, an increase of 23.6% from net earnings of $501 million for the first quarter of 2014. Net earnings for the first quarter of 2015 increased 11.1% from adjusted net earnings of $557 million for the first quarter of 2014, excluding the pension plan agreements. The increase in net earnings for the first quarter of 2015, compared to the first quarter of 2014, resulted primarily from an increase in non-fuel FIFO operating profit, partially offset by increased tax expense and a slight decrease in earnings from our fuel operations. The increase in non-fuel FIFO operating profit for the first quarter of 2015, compared to the first quarter of 2014, resulted primarily from the benefit of increased supermarket sales, the 2014 charge due to the pension plan agreements, productivity improvements and effective cost controls, partially offset by continued investments in lower prices for our customers and increases in company sponsored pension, credit card, incentive plan, healthcare benefit and shrink costs. Included in continued investments in lower prices for our customers is the cost of our Pharmacy programs, which experienced high levels of inflation that were not fully passed on to the customer in the first quarter of 2015. The slight decrease in our net earnings from our fuel operations for the first quarter of 2015, compared to the first quarter of 2014, resulted primarily from a decrease in the average margin per gallon of fuel sold, partially offset by an increase in fuel gallons sold.

Net earnings of $1.25 per diluted share for the first quarter of 2015 represented an increase of 27.6% over net earnings of $0.98 per diluted share for the first quarter of 2014. Net earnings per diluted share for the first quarter of 2015 increased 14.7% from adjusted net earnings per diluted share of $1.09 for the first quarter of 2014, excluding the pension plan agreements. Net earnings per diluted share increased in the first quarter of 2015, compared to the first quarter of 2014, due to increased net earnings and the repurchase of common shares resulting in lower weighted average shares outstanding.

Management believes adjusted net earnings (and adjusted net earnings per diluted share) are useful metrics to investors and analysts because they more accurately reflect our day-to-day business operations than do the generally accepted accounting principle (“GAAP”) measures of net earnings and net earnings per diluted share. Adjusted net earnings (and adjusted net earnings per diluted share) are non-generally accepted accounting principle (“non-GAAP”) financial measures and should not be considered alternatives to net earnings (and net earnings per diluted share) or any other GAAP measure of performance. Adjusted net earnings (and adjusted net earnings per diluted share) should not be viewed in isolation or considered substitutes for our financial results as reported in accordance with GAAP. Management uses adjusted net earnings (and adjusted net earnings per diluted share) in evaluating our results of operations as it believes these measures are more meaningful indicators of operating performance since, as adjusted, those earnings relate more directly to our day-to-day operations. Management also uses adjusted net earnings (and adjusted net earnings per diluted share) as a performance metric for management incentive programs, and to measure our progress against internal budgets and targets.

The following table provides a reconciliation of net earnings attributable to The Kroger Co. to net earnings attributable to The Kroger Co. excluding the pension plan agreements and a reconciliation of net earnings attributable to The Kroger Co. per diluted common share to net earnings attributable to The Kroger Co. per diluted common share excluding the pension plan agreements, for the first quarters of 2015 and 2014:

Net Earnings per Diluted Share excluding the Adjusted Item

(in millions, except per share amounts)

	First Quarter Ended
	May 23, 2015		May 24, 2014
Net earnings attributable to The Kroger Co.	$	619	$	501
Adjustments for pension plan agreements(1) (2)	—		56

Net earnings attributable to The Kroger Co. excluding the adjusted item above	$	619	$	557

Net earnings attributable to The Kroger Co. per diluted common share	$	1.25	$	0.98
Adjustments for pension plan agreements (3)	—		0.11

Net earnings attributable to The Kroger Co. per diluted common share excluding the adjusted item above	$	1.25	$	1.09

Average number of common shares used in diluted calculation	492		507

(1) The amounts presented represent the after-tax effect of each adjustment.

(2) The pre-tax charge for the pension plan agreements was $87.

(3) The amounts presented represent the net earnings per diluted common share effect of each adjustment.

Sales

Total Sales

($ in millions)

	First Quarter
	2015		Percentage Increase(2)		2014		Percentage Increase(3)
Total supermarket sales without fuel	$	27,356	5.8	%	$	25,858	11.3	%
Fuel sales	4,573		(26.0	)%	6,183		3.6	%
Other sales(1)	1,122		22.0	%	920		14.4	%

Total sales	$	33,051	0.3	%	$	32,961	9.9	%

(1) Other sales primarily relate to sales at convenience stores, excluding fuel; jewelry stores; manufacturing plants to outside customers; variable interest entities; a specialty pharmacy; in-store health clinics; sales on digital coupon services; and online sales by Vitacost.com.

(2) This column represents the percentage increase in the first quarter of 2015, compared to the first quarter of 2014.

(3) This column represents the percentage increase in the first quarter of 2014, compared to the first quarter of 2013.

Total sales increased in the first quarter of 2015, compared to the first quarter of 2014, by 0.3%. The increase in total sales for the first quarter of 2015, compared to the first quarter of 2014, was primarily due to our increase in total supermarket sales without fuel, partially offset by a decrease in fuel sales due to a decrease in the average retail fuel price of 31.4%. The increase in total supermarket sales without fuel for the first quarter of 2015, compared to first quarter of 2014, was primarily due to our identical supermarket sales increase, excluding fuel, of 5.7%. Identical supermarket sales, excluding fuel, for the first quarter of 2015, compared to the first quarter of 2014, increased primarily due to an increase in the number of households shopping with us, an increase in visits per household and product cost inflation. Total fuel sales decreased 26.0% in the first quarter of 2015, compared to the first quarter of 2014, primarily due to a decrease in the average retail fuel price of 31.4%, partially offset by an increase in fuel gallons sold of 7.8%. The decrease in the average retail fuel price was caused by a decrease in the product cost of fuel.

We define a supermarket as identical when it has been in operation without expansion or relocation for five full quarters. Although identical supermarket sales is a relatively standard term, numerous methods exist for calculating identical supermarket sales growth. As a result, the method used by our management to calculate identical supermarket sales may differ from methods other companies use to calculate identical supermarket sales. We urge you to understand the methods used by other companies to calculate identical supermarket sales before comparing our identical supermarket sales to those of other such companies. Fuel discounts received at our fuel centers and earned based on in-store purchases are included in all of the identical supermarket sales results calculations illustrated below and reduce our identical supermarket sales results. Differences between total supermarket sales and identical supermarket sales primarily relate to changes in supermarket square footage. Identical supermarket sales include sales from all departments at identical Fred Meyer multi-department stores. Our identical supermarket sales results are summarized in the table below. We used the identical supermarket dollar figures presented below to calculate percentage changes for the first quarter of 2015.

Identical Supermarket Sales

($ in millions)

	First Quarter
	2015		Percentage Increase(1)		2014		Percentage Increase(2)
Including fuel centers	$	29,701	0.6	%	$	29,521	4.2	%
Excluding fuel centers	$	26,200	5.7	%	$	24,786	4.6	%

(1) This column represents the percentage increase in identical supermarket sales in the first quarter of 2015, compared to the first quarter of 2014.

(2) This column represents the percentage increase in identical supermarket sales in the first quarter of 2014, compared to the first quarter of 2013. The identical supermarket sales increase for 2014 included Harris Teeter sales for stores that are identical as if they were part of Kroger in 2013.

Gross Margin and FIFO Gross Margin

Our gross margin rate, as a percentage of sales, was 22.06% for the first quarter of 2015, as compared to 20.92% for the first quarter of 2014. The increase in the gross margin rate, as a percentage of sales, in the first quarter of 2015, compared to the first quarter of 2014, resulted primarily from a decrease in retail fuel sales and reductions in transportation and advertising costs, as a percentage of sales, partially offset by continued investments in lower prices for our customers and increased shrink costs, as a percentage of sales

We calculate FIFO gross margin as sales less merchandise costs, including advertising, warehousing, and transportation expenses, but excluding the Last-In, First-Out (“LIFO”) charge. Merchandise costs exclude depreciation and rent expenses. Our LIFO charge was $28 million for the first quarters of both 2015 and 2014. FIFO gross margin is a non-GAAP financial measure and should not be considered as an alternative to gross margin or any other GAAP measure of performance. FIFO gross margin should not be reviewed in isolation or considered as a substitute for our financial results as reported in accordance with GAAP. FIFO gross margin is an important measure used by management to evaluate merchandising and operational effectiveness. Management believes FIFO gross margin is a useful metric to investors and analysts because it measures our day-to-day merchandising and operational effectiveness.

Our FIFO gross margin rate was 22.14% for the first quarter of 2015, as compared to 21.01% for the first quarter of 2014. Our retail fuel operations lower our FIFO gross margin rate, as a percentage of sales, due to the very low FIFO gross margin rate on retail fuel sales as compared to non-fuel sales. Excluding the effect of retail fuel operations, our FIFO gross margin rate decreased seven basis points in the first quarter of 2015, compared to the first quarter of 2014. The decrease in FIFO gross margin rate, excluding fuel, in the first quarter of 2015, compared to the first quarter of 2014, resulted primarily from continued investments in lower prices for our customers and increased shrink costs, as a percentage of sales, offset partially by reductions in transportation and advertising costs, as a percentage of sales.

Operating, General and Administrative Expenses

OG&A expenses consist primarily of employee-related costs such as wages, healthcare benefit costs, retirement plan costs, utilities, and credit card fees. Rent expense, depreciation and amortization expense, and interest expense are not included in OG&A.

OG&A expenses, as a percentage of sales, increased 52 basis points to 16.20% for the first quarter of 2015 from 15.68% for the first quarter of 2014. The increase in OG&A rate in the first quarter of 2015, compared to the first quarter of 2014, resulted primarily from a decrease in retail fuel sales and increases in company sponsored pension, credit card, healthcare benefit and incentive plan costs, as a percentage of sales, partially offset by increased supermarket sales, the 2014 charge due to the pension plan agreements, productivity improvements and effective cost controls. Our retail fuel operations lower our OG&A rate, as a percentage of sales, due to the very low OG&A rate, as a percentage of sales, of retail fuel sales compared to non-fuel sales. Excluding the effect of retail fuel and the pension plan agreements, our OG&A rate decreased 11 basis points in the first quarter of 2015, compared to the first quarter of 2014. The decrease in the adjusted OG&A rate, excluding fuel and the pension plan agreements, in the first quarter of 2015, compared to the first quarter of 2014, resulted primarily from increased supermarket sales, productivity improvements and effective cost controls, partially offset by increases in company sponsored pension, credit card, healthcare benefit and incentive plan costs, as a percentage of sales.

Rent Expense

Rent expense was $215 million in the first quarter of 2015 compared to $217 million in the first quarter of 2014. Rent expense, as a percentage of sales, was 0.65% in the first quarter of 2015, compared to 0.66% in the first quarter of 2014. Rent expense, as a percentage of sales, decreased one basis point in the first quarter of 2015, compared to the first quarter of 2014. The decrease in rent expense, as a percentage of sales, is due to our continued emphasis on owning rather than leasing, whenever possible, and the benefit of increased supermarket sales.

Depreciation and Amortization Expense

Depreciation and amortization expense was $620 million, or 1.88% of total sales, for the first quarter of 2015 compared to $581 million, or 1.76% of total sales, for the first quarter of 2014. The increase in our depreciation and amortization expense for the first quarter of 2015, compared to the first quarter of 2014, in total dollars, was the result of additional depreciation on capital investments, including acquisitions and lease buyouts of $3.1 billion, during the rolling four quarter period ending with the first quarter of 2015.

Operating Profit and FIFO Operating Profit

Operating profit was $1.1 billion, or 3.33% of sales, for the first quarter of 2015, compared to $930 million, or 2.82% of sales, for the first quarter of 2014. Operating profit, as a percentage of sales, increased 51 basis points in the first quarter of 2015, compared to the first quarter of 2014, primarily due to increased supermarket sales, the 2014 charge due to the pension plan agreements, the effect of our retail fuel operations, productivity improvements, effective cost controls and reductions in transportation and advertising costs, as a percentage of sales, partially offset by continued investments in lower prices for our customers and increases in company sponsored pension, credit card, incentive plan, healthcare benefit and shrink costs, as a percentage of sales.

We calculate FIFO operating profit as operating profit excluding the LIFO charge. FIFO operating profit is a non-GAAP financial measure and should not be considered as an alternative to operating profit or any other GAAP measure of performance. FIFO operating profit should not be reviewed in isolation or considered as a substitute for our financial results as reported in accordance with GAAP. FIFO operating profit is an important measure used by management to evaluate operational effectiveness. Management believes FIFO operating profit is a useful metric to investors and analysts because it measures our day-to-day operational effectiveness. Since fuel discounts are earned based on in-store purchases, fuel operating profit does not include fuel discounts, which are allocated to our in-store supermarket location departments. We also derive OG&A expenses, rent and depreciation and amortization through the use of estimated allocations in the calculation of fuel operating profit.

FIFO operating profit was $1.1 billion, or 3.42% of sales, for the first quarter of 2015, compared to $958 million, or 2.91% of sales, for the first quarter of 2014. Retail fuel sales lower our FIFO operating profit rate due to the very low FIFO operating profit rate, as a percentage of sales, of retail fuel sales compared to non-fuel sales. FIFO operating profit, as a percentage of sales excluding fuel and the pension plan agreements, increased nine basis points in the first quarter of 2015, compared to 2014. The increase in our adjusted FIFO operating profit rate in the first quarter of 2015, compared to first quarter of 2014, was primarily due to increased supermarket sales, productivity improvements, effective cost controls and reductions in transportation and advertising costs, as a percentage of sales, partially offset by continued investments in lower prices for our customers and increases in company sponsored pension, credit card, incentive plan, healthcare benefit and shrink costs, as a percentage of sales.

L IQUIDITY AND C APITAL R ESOURCES

Cash Flow Information

Net cash provided by operating activities

We generated $1.8 billion of cash from operating activities during both the first quarter of 2015 and 2014. The cash provided by operating activities came from net earnings including noncontrolling interests, adjusted for non-cash expenses, and changes in working capital. The cash provided from operating activities remained similar in 2015, compared to 2014, primarily due to an increase in net earnings including noncontrolling interests, partially offset by changes in working capital. Changes in working capital provided cash from operating activities of $409 million in the first quarter of 2015 and $540 million in the first quarter of 2014. The decrease in cash provided by changes in working capital for the first quarter of 2015, compared to the first quarter of 2014, was primarily due to an increase in cash used for accrued expenses. Prepaid expenses decreased significantly from year-end in 2015 and 2014 reflecting prepayments of certain employee benefits at year-end in each prior year.

Net cash used by investing activities

We used $858 million of cash for investing activities during the first quarter of 2015 compared to $703 million during the first quarter of 2014. The amount of cash used for investing activities increased in the first quarter of 2015 versus 2014, primarily due to increased cash payments for capital investments.

Net cash used by financing activities

We used $913 million of cash for financing activities in the first quarter of 2015 compared to $1.2 billion in the first quarter of 2014. The decrease in the amount of cash used for financing activities for the first quarter of 2015, compared to the first quarter of 2014, was primarily due to a decrease in repurchases of our outstanding common shares, offset partially by an increase in payments on commercial paper. Proceeds from the issuance of common shares resulted from exercises of employee stock options.

Debt Management

As of May 23, 2015, we maintained a $2.75 billion (with the ability to increase by $750 million), unsecured revolving credit facility that, unless extended, terminates on June 30, 2019. Outstanding borrowings under the credit agreement and commercial paper borrowings, and some outstanding letters of credit, reduce funds available under the credit agreement. As of May 23, 2015, we had $990 million of outstanding commercial paper and no borrowings under our credit agreement. The outstanding letters of credit that reduce funds available under our credit agreement totaled $8 million as of May 23, 2015.

Our bank credit facility and the indentures underlying our publicly issued debt contain various restrictive covenants. As of May 23, 2015, we were in compliance with these financial covenants. Furthermore, management believes it is not reasonably likely that we will fail to comply with these financial covenants in the foreseeable future.

Total debt, including both the current and long-term portions of capital leases and lease-financing obligations, was $11.3 billion for both the first quarters of 2015 and 2014. Total debt decreased $290 million as of the end of the first quarter of 2015, from $11.6 billion as of year-end 2014. Total debt remained consistent as of the end of the first quarter of 2015, compared to the end of the first quarter of 2014 primarily due to the issuance of $500 million of senior notes bearing an interest rate of 2.95%, partially offset by payments at maturity of $300 million of senior notes bearing an interest rate of 4.95% and a decrease in outstanding commercial paper of $255 million.

Common Stock Repurchase Program

During the first quarter of 2015, we invested $585 million to repurchase 8.0 million Kroger common shares at an average price of $73.48 per share. These shares were reacquired under two separate share repurchase programs. The first is a $500 million repurchase program that was authorized by Kroger’s Board of Directors on June 26, 2014. The second is a program that uses the cash proceeds from the exercises of stock options by participants in Kroger’s stock option and long-term incentive plans as well as the associated tax benefits.

On June 25, 2015, our Board of Directors approved a new $500 million share repurchase program to replace the prior authorization, which had been exhausted. As of June 29, 2015, we have not made any repurchases under this program.

Liquidity Needs

We estimate our liquidity needs over the next twelve-month period to be approximately $5.0 billion, which includes anticipated requirements for working capital, capital expenditures, interest payments and scheduled principal payments of debt and commercial paper, offset by cash and temporary cash investments on hand at the end of the first quarter of 2015. Based on current operating trends, we believe that cash flows from operating activities and other sources of liquidity, including borrowings under our commercial paper program and bank credit facility, will be adequate to meet our liquidity needs for the next twelve months and for the foreseeable future beyond the next twelve months. We have approximately $990 million of commercial paper and $500 million of senior notes maturing in the next twelve months, which is included in the $5.0 billion in estimated liquidity needs. The commercial paper matures in the second quarter of 2015 and the $500 million of senior notes mature in the third quarter of 2015. We expect to refinance this debt, in 2015, by issuing additional senior notes or commercial paper on favorable terms based on our past experience. We believe we have adequate coverage of our debt covenants to continue to maintain our current debt ratings and to respond effectively to competitive conditions.

C APITAL I NVESTMENTS

Capital investments, excluding mergers, acquisitions and the purchase of leased facilities, totaled $915 million for the first quarter of 2015, compared to $709 million for the first quarter of 2014. During the first quarter of 2015, we opened, acquired, expanded, or relocated 17 supermarkets and also completed 20 major within-the-wall remodels. Total supermarket square footage at the end of the first quarter of 2015 increased 0.5% from the end of the first quarter of 2014. Excluding mergers, acquisitions and operational closings, total supermarket square footage at the end of the first quarter of 2015 increased 1.8% over the end of the first quarter of 2014.

R ETURN ON I NVESTED C APITAL

We calculate return on invested capital (“ROIC”) by dividing adjusted operating profit for the prior four quarters by the average invested capital. Adjusted operating profit is calculated by excluding certain items included in operating profit, and adding back our LIFO charge, depreciation and amortization and rent. Average invested capital is calculated as the sum of (i) the average of our total assets, (ii) the average LIFO reserve, (iii) the average accumulated depreciation and amortization and (iv) a rent factor equal to total rent for the last four quarters multiplied by a factor of eight; minus (i) the average taxes receivable, (ii) the average trade accounts payable, (iii) the average accrued salaries and wages and (iv) the average other current liabilities. Averages are calculated for ROIC by adding the beginning balance of the first quarter and the ending balance of the fourth quarter, of the last four quarters, and dividing by two. We use a factor of eight for our total rent as we believe this is a common factor used by our investors, analysts and rating agencies. ROIC is a non-GAAP financial measure of performance. ROIC should not be reviewed in isolation or considered as a substitute for our financial results as reported in accordance with GAAP. ROIC is an important measure used by management to evaluate our investment returns on capital. Management believes ROIC is a useful metric to investors and analysts because it measures how effectively we are deploying our assets. All items included in the calculation of ROIC are GAAP measures, excluding certain adjustments to operating income.

Although ROIC is a relatively standard financial term, numerous methods exist for calculating a company’s ROIC. As a result, the method used by our management to calculate ROIC may differ from methods other companies use to calculate their ROIC. We urge you to understand the methods used by other companies to calculate their ROIC before comparing our ROIC to that of such other companies.

The following table provides a reconciliation of ROIC for the rolling four quarters basis ended May 23, 2015 ($ in millions). There is no prior year comparative number as the prior year calculation does not include a full year of Harris Teeter assets and results.

	Rolling Four Quarters Ended
	May 23, 2015
Return on Invested Capital
Numerator
Operating profit	$	3,309
LIFO charge	147
Depreciation and amortization	1,987
Rent	705
Adjusted operating profit on a rolling four quarters basis	$	6,148

Denominator
Average total assets	$	29,662
Average taxes receivable(1)	(19		)
Average LIFO reserve	1,199
Average accumulated depreciation and amortization(2)	16,530
Average trade accounts payable	(5,344		)
Average accrued salaries and wages	(1,124		)
Average other current liabilities(3)	(2,736		)
Rent x 8	5,640
Average invested capital	$	43,808
Return on Invested Capital	14.03		%

(1) As of May 23, 2015 and May 24, 2014, taxes receivable were $15 and $23, respectively.

(2) As of May 23, 2015 and May 24, 2014, accumulated depreciation and amortization was $17,108 and $15,951, respectively.

(3) As of May 23, 2015 and May 24, 2014, other current liabilities included accrued income taxes of $9 and $49, respectively. Accrued income taxes are removed from other current liabilities in the calculation of average invested capital.

C RITICAL A CCOUNTING P OLICIES

We have chosen accounting policies that we believe are appropriate to report accurately and fairly our operating results and financial position, and we apply those accounting policies in a consistent manner. Our critical accounting policies are summarized in our Annual Report on Form 10-K for the fiscal year ended January 31, 2015.

The preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We base our estimates on historical experience and other factors we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could vary from those estimates.

The net increase (decrease) in book overdrafts previously reported in financing activities in the Consolidated Statements of Cash Flows are now reported within operating activities. See Recently Adopted Accounting Standards for an additional change to the Consolidated Balance Sheets for a recently adopted accounting standard. Prior year amounts have been revised to the current year presentation. These revisions were not material to the prior years.

R ECENTLY A DOPTED A CCOUNTING S TANDARDS

In April 2015, the Financial Accounting Standards Board (“FASB”) amended Accounting Standards Codification 835, “Interest-Imputation of Interest.” The amendment simplifies the presentation of debt issuance costs related to a recognized debt liability by requiring it be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This amendment became effective beginning February 1, 2015, and was adopted retrospectively in accordance with the standard. The adoption of this amendment resulted in amounts previously reported in other assets to now be reported within long-term debt including obligations under capital leases and financing obligations in the Consolidated Balance Sheets. These amounts were not material to the prior year. The adoption of this amendment did not have an effect on our Consolidated Statements of Operations.

R ECENTLY I SSUED A CCOUNTING S TANDARDS

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” which provides guidance for revenue recognition. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This guidance will be effective for us in the first quarter of its fiscal year ending January 27, 2018. Early adoption is not permitted. We are currently in the process of evaluating the effect of adoption of this ASU on the Consolidated Financial Statements.

In April 2015, the FASB issued ASU 2015-04, “Retirement Benefits (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets.” This amendment permits an entity to measure defined benefit plan assets and obligations using the month end that is closest to the entity’s fiscal year end for all plans. This guidance will be effective for us in the fiscal year ending January 28, 2017. The implementation of this amendment will not have an effect on the Consolidated Statements of Operations and will not have a significant effect on the Consolidated Balance Sheets.

In April 2015, the FASB issued ASU 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” This amendment removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share. This guidance will be effective for us in the fiscal year ending January 28, 2017. The implementation of this amendment will have an effect on the Company’s Notes to the Consolidated Financial Statements and will not have an effect on the Consolidated Statements of Operations or Consolidated Balance Sheets.

O UTLOOK

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 “comfortable,” “committed,” “will,” “expect,” “goal,” “should,” “intend,” “target,” “believe,” “anticipate,” “plan,” 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” and “Outlook” in our Annual Report on Form 10-K for our last fiscal year and any subsequent filings, as well as those identified below.

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 below could cause actual results to differ materially.

· We expect net earnings per diluted share in the range of $3.80-$3.90 for fiscal year 2015, which is consistent with our long-term net earnings per diluted share growth rate of 8-11%, growing off a 2014 adjusted net earnings of $3.52 per diluted share. On a post-split basis, we expect net earnings per diluted share in the range of $1.90-$1.95 for fiscal year 2015, growing off a 2014 adjusted net earnings of $1.76 per diluted share, on a post-split basis. On a post-split basis, adjusted net earnings by quarter for 2014 were $0.54 in first quarter, $0.35 in second quarter, $0.35 in third quarter and $0.52 in the fourth quarter.

· We expect identical supermarket sales growth, excluding fuel, of 3.5%-4.5% in fiscal year 2015.

· We expect full-year FIFO non-fuel operating margin for 2015 to expand slightly compared to 2014, excluding the 2014 adjusted items.

· For 2015, we expect our annualized LIFO charge to be approximately $90 million.

· For 2015, we expect interest expense to be approximately $480 million.

· We plan to use cash flow primarily to repurchase common shares, fund our cash dividend, fund capital investments and maintain our current investment grade debt rating.

· We expect to obtain sales growth from new square footage, as well as from increased productivity from existing locations.

· We expect capital investments, excluding mergers, acquisitions and purchases of leased facilities, to be $3.0 - $3.3 billion. We expect total supermarket square footage for 2015 to grow approximately 2.0 — 2.5% before mergers, acquisitions and operational closings.

· For 2015, we expect our effective tax rate to be approximately 35.0%, excluding the resolution of certain tax items and potential changes to tax legislation.

· We do not anticipate goodwill impairments in 2015.

· For 2015, we expect to contribute approximately $5 million to company-sponsored pension plans and $250 million to multi-employer pension funds. We continue to evaluate and address our potential exposure to under-funded multi-employer pension plans. Although these liabilities are not a direct obligation or liability for Kroger, any new agreements that would commit us to fund certain multi-employer plans will be expensed when our commitment is probable and an estimate can be made.

· In 2015, we will negotiate agreements with UFCW for store associates in Columbus, Denver, Memphis and Portland. We will also negotiate agreements with the Teamsters covering our Memphis and Southern California distribution centers. Negotiations this year will be challenging as we must have competitive cost structures in each market while meeting our associates’ needs for solid wages and good quality, affordable health care and retirement benefits.

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 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 use cash flow to continue to repurchase shares, fund dividends, increase capital investments and maintain our investment grade debt rating, could be affected by unanticipated increases in net total debt, our inability to generate cash flow at the levels anticipated, and our failure to generate expected earnings.

· Our ability to achieve sales, earnings and cash flow goals may be affected by: labor negotiations or disputes; changes in the types and numbers of businesses that compete with us; pricing and promotional activities of existing and new competitors, including non-traditional competitors, and the aggressiveness of that competition; our response to these actions; the state of the economy, including interest rates, the inflationary and deflationary trends in certain commodities, and the unemployment rate; the effect that fuel costs have on consumer spending; volatility of fuel margins; changes in government-funded benefit programs; manufacturing commodity costs; 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 inconsistent pace of the economic recovery; changes in inflation or deflation in product and operating costs; stock repurchases; 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 potential costs and risks associated with potential cyber-attacks or data security breaches; the success of our future growth plans; and the successful integration of Harris Teeter. Our ability to achieve sales and earnings goals may also be affected by our ability to manage the factors identified above.

· During the first three quarters of each fiscal year, our LIFO charge and the recognition of LIFO expense is affected primarily by estimated year-end changes in product costs. Our fiscal year LIFO charge is affected primarily by changes in product costs at year-end.

· If actual results differ significantly from anticipated future results for certain reporting units including variable interest entities, an impairment loss for any excess of the carrying value of the reporting units’ goodwill over the implied fair value would have to be recognized.

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

· Changes in our product mix may negatively affect certain financial indicators. For example, we continue to add supermarket fuel centers to our store base. Since gasoline generates low profit margins, we expect to see our FIFO gross margins decline as gasoline sales increase.

We cannot fully foresee the effects of changes in economic conditions on Kroger’s business. We have assumed economic and competitive situations will not change significantly in 2015.

Other factors and assumptions not identified above could also cause actual results to differ materially from those set forth in the forward-looking information. Accordingly, actual events and results may vary significantly from those included in, contemplated or implied by forward-looking statements made by us or our representatives. We undertake no obligation to update the forward-looking information contained in this filing.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in our exposure to market risk from the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the fiscal year ended January 31, 2015.

Item 4. Controls and Procedures.

The Chief Executive Officer and the Chief Financial Officer, together with a disclosure review committee appointed by the Chief Executive Officer, evaluated Kroger’s disclosure controls and procedures as of the quarter ended May 23, 2015, the end of the period covered by this report. Based on that evaluation, Kroger’s Chief Executive Officer and Chief Financial Officer concluded that Kroger’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) of the Exchange Act) were effective as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In connection with the evaluation described above, there was no change in Kroger’s internal control over financial reporting during the quarter ended May 23, 2015, that has materially affected, or is reasonably likely to materially affect, Kroger’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Various claims and lawsuits arising in the normal course of business, including suits charging violations of certain antitrust, wage and hour, or civil rights laws, as well as product liability cases, are pending against the Company. Some of these suits purport or have been determined to be class actions and/or seek substantial damages. Any damages that may be awarded in antitrust cases will be automatically trebled. 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 adverse 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 possible to reasonably estimate and where an adverse outcome is probable. Nonetheless, assessing and predicting the outcomes of these matters involve substantial uncertainties. 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 impact on the Company’s financial condition, results of operations, or cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(c)

ISSUER PURCHASES OF EQUITY SECURITIES

Period(1)	Total Number of Shares Purchased(2)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(3)	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(4) (in millions)
First four weeks
February 1, 2015 to February 28, 2015	954,699	$	71.79	954,699	$	442
Second four weeks
March 1, 2015 to March 28, 2015	1,962,226	$	75.24	1,812,832	$	331
Third four weeks
March 29, 2015 to April 25, 2015	2,568,531	$	75.65	2,568,435	$	171
Fourth four weeks
April 26, 2015 to May 23, 2015	2,625,537	$	70.81	2,625,407	$	2
Total	8,110,993	$	73.53	7,961,373	$	2

(1) The reported periods conform to our fiscal calendar composed of thirteen 28-day periods. The first quarter of 2015 contained four 28-day periods.

(2) Includes (i) shares repurchased under a $500 million share repurchase program authorized by the Board of Directors and announced on June 26, 2014 (“2014 Repurchase Program”), (ii) shares repurchased under a program announced on December 6, 1999 to repurchase common shares to reduce dilution resulting from our employee stock option and long-term incentive plans, under which repurchases are limited to proceeds received from exercises of stock options and the tax benefits associated therewith (“the 1999 Repurchase Program”), and (iii) 149,620 shares that were surrendered to the Company by participants under our long-term incentive plans to pay for taxes on restricted stock awards.

(3) Represents shares repurchased under the 2014 Repurchase Program and the 1999 Repurchase Program.

(4) The amounts shown in this column reflect the amount remaining under the 2014 Repurchase Program at the end of each period. Amounts available under the 1999 Repurchase Program are dependent upon option exercise activity. On June 25, 2015, our Board of Directors approved a new $500 million share repurchase program (the “2015 Repurchase Program”) to replace the 2014 Repurchase Program, which has been exhausted. The 2015 Repurchase Program and the 1999 Repurchase Program do not have an expiration date but may be terminated by the Board of Directors at any time.

Item 6. Exhibits.

EXHIBIT 3.1	-	Amendment to the Amended Articles of Incorporation.

EXHIBIT 3.2	-	Amended Articles of Incorporation are hereby incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended May 22, 2010.

EXHIBIT 3.3	-	The Company’s regulations are hereby incorporated by reference to Exhibit 3.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended May 26, 2007.

EXHIBIT 4.1	-	Instruments defining the rights of holders of long-term debt of the Company and its subsidiaries are not filed as Exhibits because the amount of debt under each instrument is less than 10% of the consolidated assets of the Company. The Company undertakes to file these instruments with the SEC upon request.

EXHIBIT 10.1*	-	The Kroger Co. 2015 Long-Term Cash Bonus Plan.

EXHIBIT 10.2*	-	Amendment to Restricted Stock Agreements, between the Company and David Dillon, dated January 14, 2015.

EXHIBIT 31.1	-	Rule 13a–14(a) / 15d–14(a) Certifications – Chief Executive Officer.

EXHIBIT 31.2	-	Rule 13a–14(a) / 15d–14(a) Certifications – Chief Financial Officer.

EXHIBIT 32.1	-	Section 1350 Certifications.

EXHIBIT 99.1	-	Additional Exhibits – Statement of Computation of Ratio of Earnings to Fixed Charges.

EXHIBIT 101.INS	-	XBRL Instance Document.

EXHIBIT 101.SCH	-	XBRL Taxonomy Extension Schema Document.

EXHIBIT 101.CAL	-	XBRL Taxonomy Extension Calculation Linkbase Document.

EXHIBIT 101.DEF	-	XBRL Taxonomy Extension Definition Linkbase Document.

EXHIBIT 101.LAB	-	XBRL Taxonomy Extension Label Linkbase Document.

EXHIBIT 101.PRE	-	XBRL Taxonomy Extension Presentation Linkbase Document.

*Management contract or compensatory plan or arrangement

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE KROGER CO.

Dated: June 30, 2015	By:	/s/ W. Rodney McMullen
		W. Rodney McMullen
		Chairman of the Board and Chief Executive Officer

Dated: June 30, 2015	By:	/s/ J. Michael Schlotman
		J. Michael Schlotman
		Senior Vice President and Chief Financial Officer

Exhibit Index

Exhibit 3.1 -		Amendment to the Amended Articles of Incorporation.

Exhibit 3.2 -		Amended Articles of Incorporation are hereby incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended May 22, 2010.

Exhibit 3.3 -		The Company’s regulations are hereby incorporated by reference to Exhibit 3.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended May 26, 2007.

Exhibit 4.1 -		Instruments defining the rights of holders of long-term debt of the Company and its subsidiaries are not filed as Exhibits because the amount of debt under each instrument is less than 10% of the consolidated assets of the Company. The Company undertakes to file these instruments with the SEC upon request.

EXHIBIT 10.1* -		The Kroger Co. 2015 Long-Term Cash Bonus Plan.

EXHIBIT 10.2* -		Amendment to Restricted Stock Agreements, between the Company and David Dillon, dated January 14, 2015.

Exhibit 31.1 -		Rule 13a–14(a) / 15d–14(a) Certifications – Chief Executive Officer.

Exhibit 31.2 -		Rule 13a–14(a) / 15d–14(a) Certifications – Chief Financial Officer.

Exhibit 32.1 -		Section 1350 Certifications.

Exhibit 99.1 -		Additional Exhibits - Statement of Computation of Ratio of Earnings to Fixed Charges.

EXHIBIT 101.INS -		XBRL Instance Document.

EXHIBIT 101.SCH -		XBRL Taxonomy Extension Schema Document.

EXHIBIT 101.CAL -		XBRL Taxonomy Extension Calculation Linkbase Document.

EXHIBIT 101.DEF -		XBRL Taxonomy Extension Definition Linkbase Document.

EXHIBIT 101.LAB -		XBRL Taxonomy Extension Label Linkbase Document.

EXHIBIT 101.PRE -		XBRL Taxonomy Extension Presentation Linkbase Document.

*Management contract or compensatory plan or arrangement

EXHIBIT 3.1

FILED WITH SECRETARY OF STATE OF OHIO

JUNE 25, 2015

AMENDMENT TO THE AMENDED ARTICLES OF INCORPORATION

THE KROGER CO.

June 25, 2015

The Kroger Co., a corporation for profit, heretofore organized and now existing under the laws of the State of Ohio, makes and files this Amendment to the Amended Articles of Incorporation and states:

1. The name of the Corporation is THE KROGER CO.

2. The principal office of the Corporation is located at Cincinnati, in Hamilton County, Ohio.

3. The last clause of paragraph FOURTH, Section A of the Amended Articles of Incorporation of the Corporation is hereby amended and restated in its entirety to state: “and two billion (2,000,000,000) Common Shares of the par value of $1.00 each.”

4. This Amendment to the Amended Articles of Incorporation herein certified has been duly adopted in accordance with Section 1701.69 of the Ohio Revised Code.

[ Signature Page Follows ]

IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of Amendment on this 25th day of June, 2015.

	THE KROGER CO.


	By:	/s/ Christine S. Wheatley
	Name: Christine S. Wheatley
	Title: Group Vice President, Secretary and General Counsel

EXHIBIT 10.1

THE KROGER CO.

2015

LONG-TERM CASH BONUS PLAN

1. PURPOSE OF THE LONG-TERM CASH BONUS PLAN. The purpose of The Kroger Co. 2015 Long-Term Cash Bonus Plan (the “2015 Plan” or the “Plan”) is to reward participating Kroger executive employees for improved Company long-term performance.

2. ELIGIBILITY. Awards under this Plan may be made only to employees who are executives of The Kroger Co. (the “Company” or “Kroger”) and its subsidiaries and affiliates at pay level 35 or higher and who are notified in writing by the Compensation Committee of the Board of Directors (the “Compensation Committee” or the “Committee”) (or Kroger’s CEO at the direction of the Compensation Committee) of their participation in the Plan.

3. ADMINISTRATION. The Compensation Committee will administer the Plan. The Committee will construe and interpret the Plan. The Committee has full authority and discretion to determine the timing of awards, to select from those eligible the individuals that will participate in the Plan, and to establish such other measures as may be necessary or appropriate to the objectives of the Plan. All decisions regarding the vesting of awards under the Plan will be made by the Committee. The Committee’s decisions will be final and binding on all parties, including the Company and all participants.

4. AWARD CYCLE. The 2015 Plan will include fiscal years 2015, 2016, and 2017. The last day of fiscal 2017 will be the end of the award cycle for the 2015 Plan. It is contemplated that a new plan will be adopted every year, with each plan covering three years.

5. LONG-TERM BONUS. Each participant is eligible to earn a long-term bonus based on actual Company performance measured against the performance standards described below.

6. COMPANY PERFORMANCE STANDARDS. Company performance will be measured in four ways: (i) improvement in Customer 1 st Tracker scores, (ii) reductions in Total Operating Costs (excluding fuel) as a percentage of sales, (iii) improvement in Associate Survey scores, and (iv) improvement in Return on Invested Capital.

(a) Customer 1 st Tracker : Customer 1 st Tracker is a measure of Company performance in four key areas (People, Shopping Experience, Product and Price) based on results of customer surveys. The Customer 1 st Tracker methodology to be used under this Plan is the one currently in use by the Company, subject to such modifications as the Committee may approve from time to time. Fiscal year end 2014 results will be the base against which performance under the Plan will be measured.

(b) Total Operating Costs : Total operating costs, for purposes of the Plan, will be calculated by adding (i) OG&A, depreciation, and rent (excluding fuel), for the total Company, and (ii) warehouse and transportation costs, shrink, and advertising expenses, for our supermarket operations (excluding fuel) for the Company’s supermarket operations. Total operating costs will exclude one-time expenses incurred in lieu of future anticipated obligations. Future expenses that are avoided by virtue of the incurrence of the one-time expense will be deemed to be total operating expenses in the year in which they otherwise would have been incurred. The total operating costs, as a percentage of sales, for fiscal year 2014 will be the base against which performance under the Plan will be measured.

(c) Associate Survey : Associate Survey is a measure of Company performance designed to measure the engagement of Kroger associates, based on the results of associate surveys. The Associate Survey engagement index score to be used under this Plan is the one currently in use by the Company, subject to such modifications as the Committee may approve from time to time. Fiscal year end 2014 results will be the base against which performance under the Plan will be measured.

(d) Return on Invested Capital : Return on invested capital, for purposes of the Plan, will be calculated by dividing adjusted operating profit for the prior four quarters by the average invested capital. Adjusted operating profit will be calculated by excluding unusual items included in operating profit, and adding our LIFO charge, depreciation and amortization, and rent. Average invested capital will be calculated as the sum of (i) the average of our total assets, (ii) the average LIFO reserve, (iii) the average accumulated depreciation and amortization, and (iv) a rent factor equal to total rent for the last four quarters multiplied by a factor of eight; minus (i) the average taxes receivable, (ii) the average trade accounts payable, (iii) the average accrued salaries and wages, and (iv) the average other current liabilities. Averages are calculated for return on invested capital by adding the beginning balance of the first quarter and the ending balance of the fourth quarter, of the last four quarters, and dividing by two. Fiscal year end 2014 results will be the base against which performance under the Plan will be measured.

7. DETERMINING AWARD PAYOUTS. Except with respect to participants who die during the award cycle, as described in paragraph 10(c) below, Long-Term Bonus awards under the Plan will be calculated as of the end of fiscal year 2017. Provided that no decrease occurs in any of the four key areas, for each one point improvement in the Customer 1 st Tracker score, a bonus amount equal to four percent of the participant’s base salary as of the later of (i) January 31, 2015, and (ii) the date on which the participant first became eligible to participate in the Plan, will be earned. For each basis point reduction in Total Operating Costs, an additional bonus amount equal to one-half of one percent of the participant’s base salary as of the later of (i) January 31, 2015, and (ii) the date on which the participant first became eligible to participate in the Plan, will be earned. Under the Associate Survey, for each one point improvement in the associate engagement index score, a bonus amount equal to four percent of the participant’s base salary as of the later of (i) January 31, 2015, and (ii) the date on which the participant first became eligible to participate in the Plan, will be earned. For each basis point improvement in Return on Invested Capital, an additional bonus amount equal to one percent of the participant’s base salary as of the later of (i) January 31, 2015, and (ii) the date on which the participant first became eligible to participate in the Plan, will be earned. In no event will any Long-Term Bonus award exceed the lesser of $5,000,000 and 100% of the participant’s base salary as of the later of (i) January 31, 2015, and (ii) the date on which the participant first became eligible to participate in the Plan. Plan bonus potentials for participants who become eligible for participation after the first day of the award cycle of the Plan will be prorated based on the remaining number of days in the award cycle. In all cases, the effect during the award cycle of this Plan of accelerating the payment, funding, or recognition of expense of multi-employer pension liability, or the imposition of pension withdrawal liability; in either case undertaken by the Company as part of its effort to mitigate its exposure to multi-employer pension plan liability, will be excluded for purposes of calculating the Plan bonus.

8. PAYMENT OF AWARDS. Awards, if any, earned under the terms of the Plan will be paid in cash. Unless some other date is selected by the Committee, awards will be paid in March of 2018 except for participants who make deferral elections under the deferred compensation supplement in which case the provisions of the deferred compensation supplement will control. Amounts earned under the Plan will not be taken into consideration in calculating earnings under any of the Company’s pension plans.

9. ADJUSTMENTS. The Committee will make such adjustments as it deems necessary or desirable based on changes in accounting or tax law, or on account of any acquisition, disposition or other developments that may affect the calculation of awards under the Plan.

10. TERMINATION OF EMPLOYMENT, PERMANENT DISABILITY, RETIREMENT, OR DEATH OF PARTICIPANT.

(a) Participation in the Plan does not create a contract of employment, or grant any employee the right to be retained in the service of the Company. Any participant whose employment is terminated by the Company; who voluntarily terminates his or her employment (other than in accordance with paragraph (b) below); or whose pay level drops below pay level 35, prior to the end of the 2015 Plan award cycle, will forfeit all rights to payment under the Plan.

(b) If a participant voluntarily terminates his or her employment after reaching age 55 with at least five years of service with the Company, or due to permanent disability as determined by the Company, participation will continue, and that participant will be paid a pro rata share of the amount earned according to the terms of the award proportionate to the period of active service during the 2015 Plan award cycle beginning with the date on which the participant first became a participant under the Plan.

(c) If a participant dies during the 2015 Plan award cycle, participation will continue until the end of the fiscal year in which the death occurs, and the participant’s designated beneficiary (or if none, then the participant’s estate) will be paid a prorata share of the amount earned according to the terms of the award proportionate to the period of active service during the 2015 Plan award cycle before the participant’s death beginning with the date on which the participant first became a participant under the Plan. The amount of the award payout, which will be made as soon as reasonably practicable as determined by the Committee, will be calculated as of the end of the fiscal year in which the participant’s death occurs based on actual results as of the end of that fiscal year.

(d) Notwithstanding anything contained in this paragraph 10 to the contrary, in the event that during the 2015 Plan award cycle a participant provides services as an employee, director, consultant, agent, or otherwise, to any of Kroger’s competitors, the participant’s award hereunder terminates. For purposes of this paragraph 10(d), a competitor is any business that sells groceries, food, drugs, health and beauty care items, motor fuels, or pharmaceuticals, at retail in one or more of the same geographic areas that Kroger sells those products.

(e) For purposes of this Plan, “period of active service” means the period of time that the participant actually is working for Kroger plus any earned but unused vacation for the year in which the participant ceases employment, and excluding any “banked” vacation earned but not taken in prior years.

11. Change in Control . A bonus equal to 50% of the participant’s base salary as of the later of (i) February 1, 2015, and (ii) the date on which the participant first became eligible to participate in the Plan, will be paid to the participant if at any time during the 2015 Plan award cycle any of the following occur:

(a) without prior approval of our Board of Directors, any person, group, entity or group thereof, excluding our employee benefit plans, becomes the owner of, or obtains the right to acquire, 20% or more of the voting power of our then outstanding voting securities; or

(b) a tender or exchange offer has expired, other than an offer by us, under which 20% or more of our then outstanding voting securities have been purchased; or

(c) as a result of, or in connection with, or within two years following (i) a merger or business combination, (ii) a reorganization, or (iii) a proxy contest, in any case which was not approved by our Board of Directors, the individuals who were directors of Kroger immediately before the transaction cease to constitute at least a majority thereof, except for changes caused by death, disability or normal retirement; or

(d) our shareholders have approved (i) an agreement to merge or consolidate with or into another corporation and Kroger is not the surviving corporation or (ii) an agreement, including a plan of liquidation, to sell or otherwise dispose of all or substantially all of our assets.

12. EFFECTIVE DATE OF PLAN. This Plan is effective as of February 2, 2015.

13. AMENDMENT, SUSPENSION, OR TERMINATION OF PLAN. The Committee or the Board of Directors of the Company may at any time suspend, terminate or amend the plan in such respects as it deems to be in the best interests of the Company. No amendment will adversely affect any right of any participants, or their successors in interest, under the terms of any award made hereunder before the effective date of the amendment.

14. DEFERRED COMPENSATION SUPPLEMENT. The Deferred Compensation Supplement attached as Annex I hereto is adopted as a part of this Plan.

IN WITNESS WHEREOF, The Kroger Co. has caused this Plan to be adopted this 30th day of January, 2015.

	THE KROGER CO.


	By:	/s/ Christine S. Wheatley
		Christine S. Wheatley
		Group Vice President, Secretary and General Counsel

ANNEX I

DEFERRED COMPENSATION SUPPLEMENT TO

THE KROGER CO. 2015 LONG-TERM CASH BONUS PLAN

Effective as of February 1, 2015

1. Establishment and Purpose of this Deferred Compensation Supplement

Effective as of the date set forth above, The Kroger Co. (the “Company”) adopts this Deferred Compensation Supplement (the “Supplement”) to The Kroger Co. 2015 Long-Term Cash Bonus Plan (the “Plan”). The purpose of the Supplement is to provide supplemental deferred compensation to certain highly compensated employees of the Company. The Supplement is intended to be unfunded and maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees, within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974 (“ERISA”). The Supplement is also intended to comply with the requirements of Section 409A of the Internal Revenue Code (the “Code”).

2. Definitions

As used in the Supplement, in addition to the terms defined in Section 1 of the Supplement, these words and phrases have the following meanings (all other capitalized terms in the Supplement have the meanings ascribed to them in the Plan, unless the context requires otherwise):

(a) “Account” means a bookkeeping account established on the records of the Company for a Participant which is credited with amounts deferred by a Participant and interest on those amounts under Section 4 of the Supplement.

(b) “Affiliate” means an organization that is (i) a member of the same controlled group of corporations (as defined in Code Section 414(b)) as the Company, (ii) a trade or business under common control (as defined in Code Section 414(c)) with the Company, (iii) an organization which is a member of an affiliated service group (as defined in Code Section 414(m)) that includes the Company, or (iv) otherwise required to be aggregated with the Company under Code Section 414(o).

(d) “Committee” means the Retirement Management Committee of the Company.

(e) “Company” means The Kroger Co., an Ohio corporation, or any successor.

(f) “Compensation Committee” means the Compensation Committee of the Board.

(g) “Designated Beneficiary” means the persons or entities designated by the Participant, in a form and manner acceptable to the Committee, to receive payment of the remaining balance of the Participant’s Account in the event the Participant dies before receiving the entire interest credited to the Participant’s Account.

(h) “Election” means an election by an Eligible Employee, consistent with the terms of the Supplement and in a form and manner satisfactory to the Committee, to elect to defer a Long-Term Bonus for a Performance Period and to specify a time and form of payment for the portion of the Participant’s Account attributable to such deferred amounts.

(i) “Eligible Employee” means any individual who has been designated as eligible to participate in the Plan.

(j) “Insolvency” means an entity is unable to pay its debts as they become due, or is subject to a pending proceeding as a debtor under the United States Bankruptcy Code.

(k) “Long-Term Bonus” means a bonus payable to an Eligible Employee under the Plan.

(l) “Participant” means an Eligible Employee who has elected to defer a Long-Term Bonus payable under the Plan in accordance with Section 3 of the Supplement.

(m) “Performance-Based Compensation” means compensation where the amount of, or entitlement to, the compensation is contingent on the satisfaction of pre-established organizational or individual performance criteria relating to a Performance Period in which a Participant performs services. In determining whether an amount constitutes Performance-Based Compensation, the Committee shall apply the rules set forth in Treasury Regulation Section 1.409A-1(e), or any subsequent guidance.

(n) “Performance Period” means a period of at least twelve (12) months in which Performance-Based Compensation is determined for the performance of services.

(o) “Plan Year” means the fiscal year of the Company.

(p) “Unforeseeable Emergency” means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. An Unforeseeable Emergency will not include the need to send a Participant’s child to college or the desire to purchase a home.

3. Deferral Election .

(a) Election to Defer Long-Term Bonus . A Participant may file an Election to defer receipt of all or any portion of the Participant’s Long-Term Bonus that becomes payable under the Plan. A Participant’s Election to defer receipt of a Long-Term Bonus must be made no later than six months prior to the end of the applicable Performance Period, and is irrevocable once made, and must designate the time and manner in which such deferred Long-Term Bonus, and interest on such deferred amount, is to be later paid in accordance with the distribution options set forth in Section 5.

(b) Designated Beneficiary. A Participant shall, in the Participant’s Election, name a Designated Beneficiary with respect to amounts credited to the Participant’s Account. The Participant may change or revoke the designation of a Designated Beneficiary by written notice to the Committee or the Committee’s designee.

(c) Termination of Participation . An individual shall cease to be a Participant in this Supplement when all amounts allocated to the Participant’s Account have been paid under the terms of this Supplement.

4. Benefits .

(a) Crediting of Deferred Amounts . As of the date a Long-Term Bonus would otherwise be payable to a Participant under Section 5 of the Plan, a Participant’s Account shall be credited with an amount equal to the portion of the Long-Term Bonus deferred under this Supplement pursuant to the Participant’s Election for the Performance Period in question.

(b) Crediting of Interest . A Participant’s Account for each Performance Period shall be credited with interest based upon the interest rate established for the Plan Year by the Board, or by the Compensation Committee, before the beginning of each Plan Year. Once established by the Board or the Compensation Committee, such interest rate shall apply for subsequent Plan Years, unless changed by the Board or the Compensation Committee. For each Plan Year, a Participant’s Account shall be credited with interest on a quarterly basis pursuant to the following provisions:

(i) The interest for a calendar quarter shall be credited effective as of the last day of the calendar quarter.

(ii) The interest for a calendar quarter shall be in an amount equal to (A) ¼ of the applicable interest rate for the Plan Year, multiplied by (B) the average of the beginning and ending balances of the Participant’s Account for the calendar quarter.

(c) Effect upon the Kroger Consolidated Retirement Benefit Plan. Amounts deferred under the Supplement are not taken into account in computing the monthly benefits to which a Participant and/or Participant’s spouse or beneficiary is entitled under the Kroger Consolidated Retirement Benefit Plan or any other pension plan of the Company.

5. Time and Form of Distribution .

(a) Distribution following Termination of Employment . A Participant, in the Participant’s Election for a Performance Period, shall specify the time and manner that the Participant’s Account attributable to the Performance Period is to be paid to the Participant upon the Participant’s termination of employment with the Company (for any reason other than death) from among the following choices:

(i) Immediate Lump Sum . The Account shall be paid to the Participant in a single cash lump sum payment as soon as administratively possible after the first day of the calendar quarter that occurs six months after the Participant’s termination of employment. The amount of the lump sum payment shall be equal to the balance of the Account as of the last day of the calendar quarter preceding the date of payment to the Participant.

(ii) Deferred (Next Year) Lump Sum . The Account shall be paid to the Participant in a single cash lump sum payment as soon as administratively possible after the later of (A) six months after the Participant’s termination of employment or (B) the first day of the calendar year following the date of the Participant’s termination of employment. The amount of the lump sum payment shall be equal to the balance of the Account as of the last day of the calendar quarter preceding the date of payment to the Participant.

In the event that the Participant dies before the date of actual payment of the lump sum payment, the Participant’s Designated Beneficiary shall receive the Participant’s lump sum payment at the same time and manner prescribed by subsection (i) or (ii), as applicable.

(iii) Immediate Quarterly Installments . The Account shall be paid to the Participant in quarterly installment payments (not less than 4 nor more than 40) commencing as soon as administratively possible after the first day of the calendar quarter that occurs six months after the Participant’s termination of employment. The amount of each quarterly installment shall be determined by dividing (A) the balance of the Account as of the last day of the calendar quarter preceding the quarterly installment payment to the Participant, by (B) the number of the remaining quarterly installment payments to be made to the Participant plus the payment currently being made.

(iv) Deferred (Retirement Age) Quarterly Installments . The Account shall be paid to the Participant in quarterly installment payments (not less than 4 nor more than 40) commencing as soon as administratively possible after the first day of the calendar quarter that occurs six months after the later of (A) the Participant’s termination of employment or (B) the date of the Participant’s retirement age specified in the Participant’s Election. The amount of each quarterly installment shall be determined by dividing (A) the balance of the Account as of the last day of the calendar quarter preceding the quarterly installment payment to the Participant, by (B) the number of the remaining quarterly installment payments to be made to the Participant plus the payment currently being made.

In the event that the Participant dies before commencement of the Participant’s quarterly installment payments, or the Participant dies after commencement of the Participant’s quarterly installment payments, the Participant’s Designated Beneficiary shall receive the Participant’s quarterly installment payments, at the election of the Participant in the Participant’s Election, either (A) at the same time and manner prescribed by subsections (iii) or (iv), as applicable, as if the quarterly installment payments were being made to the Participant or (B) in a single lump sum payment as soon as administratively possible after the first day of the calendar quarter following the date of the Participant’s death in an amount equal to the balance of the Account as of the last day of the calendar year preceding the date of payment to the Designated Beneficiary.

(b) Distribution upon the Death of a Participant . A Participant, in the Participant’s Election, shall specify the time and manner that the Account is to be paid to the Participant’s Designated Beneficiary upon the Participant’s death.

(i) Time and Manner of Payment . The Participant may elect one of the following time and manner of payments with respect to payments to the Participant’s Designated Beneficiary:

(A) Immediate (Next Quarter) Lump Sum . The Account shall be paid to the Participant’s Designated Beneficiary in a single cash lump sum payment as soon as administratively possible after the first day of the calendar quarter following the date of the Participant’s death. The amount of the lump sum payment shall be equal to the balance of the Account as of the last day of the calendar quarter preceding the date of payment to the Designated Beneficiary.

(B) Deferred (Next Year) Lump Sum . The Account shall be paid to the Participant’s Designated Beneficiary in a single cash lump sum as soon as administratively possible after the first day of the calendar year following the date of the Participant’s death. The amount of the lump sum payment shall be equal to the balance of the Account as of the last day of the calendar year preceding the date of payment to the Designated Beneficiary.

(C) Immediate (Next Quarter) Quarterly Installments . The Account shall be paid to the Participant’s Designated Beneficiary in quarterly installment payments (not less than 4 nor more than 40) commencing as soon as administratively possible after the first day of the calendar quarter following the date of the Participant’s death. The amount of each quarterly installment shall be determine by dividing (1) the balance of the Account as of the last day of the calendar quarter preceding the quarterly installment payment to the Designated Beneficiary, by (2) the number of the remaining quarterly installment payments to be made to the Designated Beneficiary plus the payment currently being made.

(ii) Special Death Distribution Provisions . In the event of the death of the Participant, the Committee must receive written notice and verification of the death of the Participant and reserves the right to delay distribution of a Participant’s Account to the Participant’s Designated Beneficiary until the Committee’s receipt and acceptance of such notice and verification.

The distribution options elected by the Participant in Sections 5(a) and (b) shall apply to and be binding upon any subsequent Designated Beneficiary, including any such subsequent Designated Beneficiary arising by a change by the Participant or by operation of any contingency provisions of the Participant’s beneficiary designation.

The Participant’s written designation of a Designated Beneficiary and its contingency provisions (if any) shall govern the determination of the proper person entitled to benefits under the Plan following the death of the Participant and the Participant’s Designated Beneficiary. However, in the absence of a specific contingency provision therefore with respect to the Account, the following default provisions shall apply:

(A) In the event that the Participant dies without any Designated Beneficiary, the Participant’s Designated Beneficiary shall be deemed the Participant’s estate.

(B) In the event that the Participant’s Designated Beneficiary dies after the Participant and with outstanding benefits under the Plan, such Designated Beneficiary’s own beneficiary designated in writing to the Committee (or, if none, the Designated Beneficiary’s estate) shall thereafter be considered the Participant’s Designated Beneficiary.

(C) In the event that the Participant and the Designated Beneficiary die simultaneously or under circumstances such that the order of death cannot be determined, the Participant, for purposes of the Plan, shall be deemed to have survived the Designated Beneficiary.

(c) Changes to Distribution Elections . The Committee may, in its discretion, allow a Participant to elect to defer the time of payment or change the form of payment of the Participant’s Account; provided, however, that no such election shall be effective unless:

(i) The election will not take effect until at least twelve (12) months after the date on which the election is made,

(ii) Except in the case of a payment as the result of the Participant’s death or the occurrence of an Unforeseeable Emergency, the first payment with respect to such election is deferred for not less than five years from the date on which such payment would otherwise have been made, and

(iii) Any election which is related to a payment at a specified time or pursuant to a fixed schedule may not be made less than twelve months prior to the date of the first scheduled payment under that election.

(d) Unforeseeable Emergency. If a Participant has an Unforeseeable Emergency, the Participant may apply in writing to the Committee for an emergency payment under this Section 5(d). The Company will pay to the Participant that portion of the Participant’s Account under the Plan as necessary to meet the Unforeseeable Emergency. For purposes of this Section 5(d), a payment due to an Unforeseeable Emergency will not exceed the amount that the Committee determines is reasonably necessary to satisfy the need created by the Unforeseeable Emergency, plus amounts reasonably necessary to pay taxes reasonably anticipated as the result of the payment, after taking into account the extent to which such need is or may be relieved through reimbursement or compensation by insurance or otherwise, or by liquidation of the Participant’s assets (to the extent that such liquidation would not itself cause severe financial hardship). Upon application for a payment due to Unforeseeable Emergency, the Participant will furnish to the Committee all information as the Participant deems appropriate and as the Committee deems necessary and appropriate to make a determination on the application.

(e) Tax Withholding . The Company may withhold income or other taxes from any distribution of a Participant’s Account if the Company determines that withholding is necessary or appropriate to comply with any Federal, State or local tax withholding or similar requirements of law.

(f) Payments to Legal Incompetents . Upon proof satisfactory to the Committee that any person entitled to receive a payment under the Supplement is legally incompetent to receive the payment, the Committee may direct the payment to be made to a guardian or conservator of the estate of the person. Any payment made under the preceding sentence will release the Company from all further liability to the extent of the payment made.

(g) Discharge of Obligation . Any payment made by the Company pursuant to the Supplement shall, to the extent of the payments made, constitute a complete discharge of all obligations under the Supplement of the Company and the Committee. The Committee may require the payee, as a condition precedent to any payment, to execute a receipt and release in a form satisfactory to the Committee. The Committee may also require the payee, as a condition precedent to any payment, to execute an acknowledgement or agreement in a form satisfactory to the Committee concerning repayment of erroneous or duplicate benefits.

(h) Correction of Mistakes . Any mistake in the amount of a Participant’s benefits under the Supplement may be corrected by the Committee when the mistake is discovered. The mistake may be corrected in any reasonable manner authorized by the Committee. In appropriate circumstances (such as where the mistake is not material or is not timely discovered), the Committee may in its sole and absolute discretion waive the making of any correction.

6. Fully Vested; Forfeiture for Cause .

All amounts credited to the Participant’s Account shall be fully vested and nonforfeitable at all times. Notwithstanding the foregoing, any Participant, regardless of age, who is terminated for theft or embezzlement of Company assets, or for accepting bribes from suppliers, or who resigns during the pendency or carrying out of an investigation which established such conduct, shall forfeit 100% of the interest credited to his Account.

7. Funding Policy and Method .

This Supplement shall be unfunded within the meaning of Section 201(2) of ERISA, and all payments under the Supplement shall be made from the general assets of the Company, including, at the sole option of the Company, from any assets held in any trust established by the Company the assets of which are subject to the claims of the Company’s general, unsecured creditors in the event of the Company’s Insolvency. No assets shall be irrevocably set aside to pay benefits under the Supplement in a manner making the assets unreachable by the Company’s general, unsecured creditors in the event of the Company’s Insolvency. Participants and Designated Beneficiaries shall have no right to any specific assets of the Company by virtue or the existence or terms of the Supplement and shall be general, unsecured creditors of the Company at all times with respect to any claim for benefits under the Supplement.

8. Administration

(a) Committee Authority. The Committee shall be responsible for the operation and administration of the Supplement and for carrying out the provisions of the Supplement. The Committee shall have discretionary authority to make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Supplement, and to decide or resolve any and all questions, including interpretations of the Supplement. Any action taken by the Committee in its discretion shall be final and conclusive on all parties. The Committee’s prior exercise of discretionary authority shall not obligate it to exercise its authority in a like fashion in the future. The Committee may, from time to time, delegate to others, including employees of the Company, administrative duties as it sees fit.

(b) Account Statements. As soon as administratively possible after the end of each calendar year, the Company shall prepare and furnish to each Participant a statement of the status of each of his Account of the Plan effective as of the last day of the calendar year, and such other information as the Committee may prescribe.

(c) Indemnification. The Company shall indemnify, through insurance or otherwise, each member of the Committee against any claims, losses, expenses, damages or liabilities arising out of the performance (or failure of performance) of their responsibilities under the Plan.

9. Claims and Appeals .

(a) Payment of Benefits . The payment of benefits due under the Supplement shall be made at such times and in such amounts as provided for under the terms of the Supplement. Each Participant and Designated Beneficiary shall be obligated to provide the Company a current address so that payments may be made as required. The mailing of a payment to the last known mailing address of a Participant or Designated Beneficiary shall be deemed full payment of the amount so mailed.

(b) Written Claim for Benefits . If a Participant or Designated Beneficiary does not receive payment of benefits under the Supplement which the Participant or Designated Beneficiary believes are due under the Supplement, the Participant or Designated Beneficiary may file a written claim for benefits with the Committee. The written claim shall be in a form satisfactory to, and with such supporting documentation and information as may be required by, the Committee.

(c) Denial of Claim . If a Participant’s or Designated Beneficiary’s claim for benefits is denied in whole or in part by the Committee, a written notice will be furnished to the claimant within 90 days after the date the claim was received. If circumstances require a longer period, the claimant will be notified in writing, prior to the expiration of the 90 day period, of the reasons for an extension of time; provided, however, that no extensions will be permitted beyond 90 days after the expiration of the initial 90 day period.

(d) Reasons for Denial . A denial or partial denial of a claim will clearly set forth:

(i) the specific reason or reasons for the denial;

(ii) a specific reference to pertinent Supplement provisions on which the denial is based;

(iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and

(iv) an explanation of the procedure for review of the denied or partially denied claim, including the claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review.

(e) Review of Denial . Upon denial of a claim, in whole or in part, a claimant or a duly authorized representative of the claimant may request a full and fair review of the denied claim by filing a written notice of appeal with the Committee. Any appeal must be received by the Committee within 60 days of the date that the notice of the denied claim was received. A claimant or the claimant’s authorized representative will have, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits and may submit issues and comments in writing, except for privileged or confidential documentation. The review will take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

If the claimant fails to file a request for review within 60 days of the notification of denial, the claim will be deemed abandoned and the claimant precluded from reasserting it. If the claimant does file a request for review, the request must include a description of the issues and evidence the claimant deems relevant. Failure to raise issues or present evidence on review will preclude those issues or evidence from being presented in any subsequent proceeding or judicial review of the claim.

(f) Decision Upon Review . The Committee will provide a written decision on review. If the claim is denied on review, the decision shall set forth:

(i) the specific reason or reasons for the adverse determination;

(ii) specific reference to pertinent Supplement provisions on which the adverse determination is based;

(iii) a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits; and

(iv) a statement describing any voluntary appeal procedures offered by the Supplement and the claimant’s right to obtain the information about such procedures, as well as a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA.

A decision will be rendered by the Committee as soon as practicable. Ordinarily decisions will be rendered within 60 days following receipt of the request for review. If the need to hold a hearing or special circumstances requires additional processing time, the decision shall be rendered as soon as possible, but not later than 120 days following receipt of the request for review.

(g) Finality of Determinations; Exhaustion of Remedies . To the extent permitted by law, decisions reached under the claims procedures set forth in this Section shall be final and binding on all parties. No legal action for benefits under the Supplement shall be brought unless and until the claimant has exhausted all remedies under this Section. In any such legal action, the claimant may only present evidence and theories which the claimant presented during the claims procedure. Any claims which the claimant does not in good faith pursue through the review stage of the procedure shall be treated as having been irrevocably waived. Judicial review of a claimant’s denied claim shall be limited to a determination of whether the denial was an abuse of discretion based on the evidence and theories the claimant presented during the claims procedure. Any suit or legal action initiated by a claimant under the Supplement must be brought by the claimant no later than one year following a final decision on the claim for benefits. Notwithstanding the foregoing, in no event may a claimant initiate suit or legal action more than two years after the facts giving rise to the action occurred. These limitations on suits or legal actions for benefits will apply in any forum where a claimant initiates the suit or legal action.

10. Amendment and Termination of this Supplement .

The Company reserves the right to amend or terminate this Supplement at any time by resolution of the Board or the Compensation Committee. No amendment or termination of this Supplement shall deprive a Participant or Designated Beneficiary of any portion of the Participant’s or Designated Beneficiary’s vested benefit accrued under the Supplement as of the date of the amendment or termination.

11. General Provisions .

(a) Definition and Supplement Interpretation . The capitalized words and phrases used throughout the Supplement shall have the meanings in Section 2, unless the context requires otherwise. Unless otherwise plainly required by the context, any gender may be construed to include all genders, and the singular or plural may be construed to include the plural or singular, respectively. The section headings in the Supplement have been inserted for the convenience of reference only and are not to be considered in the interpretation of the Supplement.

(b) Interpretation and Savings Clause . The Supplement is intended to comply with Code Section 409A and guidance issued under Code Section 409A. Notwithstanding any other provision of this Supplement, the Supplement shall be interpreted and administered accordingly. If any provision of the Supplement is held invalid or unenforceable, that invalidity or unenforceability shall not affect any other provision, and the Supplement shall be construed and enforced as if the affected provision had not been included.

(c) No Employment Rights . Neither the Plan or the Supplement, nor the action of the Company in establishing or continuing the Plan or the Supplement, nor any action taken by the Committee, nor participation in the Plan or the Supplement, shall be construed as giving any person any right to remain in the employ of the Company or an Affiliate or, except as provided in the Plan and the Supplement, the right to any payment or benefit. Nothing in the Plan or the Supplement shall affect the right of the Company or an Affiliate to terminate a person’s employment at any time, with or without cause.

(d) Assignment or Alienation of Benefits .

(i) General Rule . Except as expressly provided in the Supplement, the benefits payable under the Plan or the Supplement shall not be subject to assignment or alienation, and any attempt to do so shall be void.

(ii) Domestic Relations Orders . Notwithstanding any other provision of the Supplement, all or a portion of a Participant’s Account may be paid to another person as specified in a domestic relations order that the Committee determines is a Qualified Domestic Relations Order. For this purpose, a “Qualified Domestic Relations Order” means a judgment, decree, or order (including the approval of a property settlement agreement) that:

(A) is issued pursuant to a State’s domestic relations law;

(B) relates to the provision of child support, alimony payments or marital property rights to a spouse, former spouse, child or other dependent of a Participant; and

(C) creates or recognizes the existence of an alternate payee’s right to, or assigns to the alternate payee the right to, receive all or a portion of the Participant’s benefits under the Supplement;

The Committee shall determine in its sole and absolute discretion whether any document received by it is a Qualified Domestic Relations Order. In making this determination, the Committee may consider the rules applicable to “domestic relations orders” under Code Section 414(p) and Section 206(d) of ERISA, and other rules and procedures it deems relevant. If an order is determined to be a Qualified Domestic Relations Order, the amount to which the alternate payee is entitled under the Qualified Domestic Relations Order shall be paid in a single lump-sum payment as soon as practicable after the determination.

(e) Governing Law . To the extent not preempted by federal law, this Supplement shall be interpreted and construed in accordance with the laws of the State of Ohio (determined without regard to choice of laws principles).

IT WITNESS WHEREOF, The Kroger Co. has caused this Deferred Compensation Supplement to The Kroger Co. 2015 Long-Term Bonus Plan to be executed as of the 30th day of January, 2015.

	THE KROGER CO.


	By:	/s/ Christine S. Wheatley

	Title: Group Vice President, Secretary and General Counsel

DEFERRAL AGREEMENT

THIS FORM APPLIES ONLY TO DEFERRALS MADE WITH RESPECT TO LONG-TERM BONUSES THAT MAY BECOME PAYABLE UNDER THE 2015 LONG-TERM BONUS PLAN

PARTICIPANT:

DATE OF BIRTH:

SOCIAL SECURITY NO.:

CURRENT ADDRESS:

DEFERRAL ELECTION (FISCAL YEARS 2015-2017)

The Long-Term Bonus that may become payable to you under The Kroger Co. 2015 Long-Term Bonus Plan (the “Plan” ), which includes the Company’s 2015-2017 Fiscal Years, may be deferred under the Deferred Compensation Supplement to the Plan (the “Supplement” ), provided the Company receives your properly completed Deferral Agreement no later than six months prior to the end of fiscal year 2017 .

¨ I elect to defer all or a portion of the Long-Term Bonus that may become payable to me under the Plan, as designated below. I understand that this deferral election is irrevocable, and is subject to all of the terms of the Plan and Supplement.

DEFERRAL AMOUNT:

	%	( enter percentage of Long-Term Bonus to be deferred )

PAYMENT ELECTION FOR AMOUNTS DEFERRED

I elect to have the amount of my Long-Term Bonus (Fiscal Years 2015-2017) deferred, and earnings on such amounts, paid as follows:

¨ Immediate Lump Sum Payment. Lump sum payment after the first day of the calendar quarter that occurs six (6) months after my termination of employment.

¨ Deferred (Next Year) Lump Sum Payment. Lump sum payment after the later of (i) the first day of the calendar year following my termination of employment or (ii) six (6) months after my termination of employment.

¨ Immediate (Next Quarter) Installment Payments. Quarterly installment payments of payments [ specify number of payments - no less than four (4) and no more than forty (40) ] commencing after the first day of the calendar quarter that occurs six (6) months after my termination of employment.

¨ Deferred (Retirement Age) Installment Payments. Quarterly installment payments of payments [ specify number of payments - no less than four (4) and no more than forty (40) ] commencing after the first day of the calendar quarter that occurs six (6) months following the later of (i) my termination of employment or (ii) my birthday [ specify birthday for which payments shall commence ].

DESIGNATION OF BENEFICIARY

Pursuant to the Supplement to the Plan, I designate the following person(s) to receive payment of the amounts in my Account that are attributable to deferrals (and earnings on such deferrals) in the event of my death prior to complete distribution of such amounts. I understand that if I do not have a valid Designation of Beneficiary on file, the amounts credited to my Account that are attributable to deferrals (and earnings on such deferrals) shall be distributed to the executor or administrator of my estate.

Beneficiary(ies)	Percentage of Death Benefit:

		%
		%
		%
TOTAL:		% ( must equal 100% )

Please attach any contingent Designated Beneficiary provisions.

PAYMENT TO DESIGNATED BENEFICIARY

I elect to have the amounts in my Account that are attributable to deferrals (and earnings on such deferrals) that are unpaid as of the date of my death, paid to my Designated Beneficiary as follows:

¨ Immediate (Next Quarter) Lump Sum Payment. Lump sum payment after the first day of the calendar quarter following the date of my death.

¨ Deferred (Next Year) Lump Sum Payment. Lump sum payment after the first day of the calendar year following the date of my death.

PARTICIPANT’S ACKNOWLEDGEMENTS

I acknowledge that I have received a copy of the Plan and Supplement, and agree that the deferral of any portion of my Long-Term Bonus that may become payable to me under the Plan is subject to the terms and conditions of the Plan and Supplement.


Participant’s Signature


Participant’s Name ( Printed )


Date

	Committee

	By:
2015 Long-Term Bonus Plan
Deferred Compensation Supplement
Deferral Agreement
	Date:

ALTERNATIVE REPORTING AND DISCLOSURE STATEMENT
FOR PENSION PLANS FOR CERTAIN SELECTED EMPLOYEES

To the Secretary of Labor:

In compliance with the requirements of the alternative method of reporting and disclosure under Part 1 of Title I of the Employee Retirement Income Security Act of 1974 for unfunded or insured pension plans for a select group of management or highly compensated employees, specified in Department of Labor Regulations, 29 C.F.R. §2520.104-23, the following information is provided by the undersigned employer.

Name and Address of Employer:		The Kroger Co.
		1014 Vine Street
		Cincinnati, Ohio 45202-1141

Employer Identification Number:		31-0345740

The Employer maintains a plan (or plans) primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.

Number of Plans and

Participants in Each

Plan: Plan covering Employees (or

Plans covering and Employees, respectively.)

Dated , 20 .

	THE KROGER CO.


	By:

	Title:

This form should be mailed to:

Top Hat Plan Exemption

Employee Benefits Security Administration

Room N-1513

U.S. Department of Labor

200 Constitution Avenue, NW

Washington, DC 20210

(Send certified mail to evidence filing requirement satisfied )

EXHIBIT 10.2

Amendment to Restricted Stock Agreements

This Amendment is entered into as of January 14, 2015, between The Kroger Co., an Ohio corporation (“Kroger”), and David Dillon (“you”).

1. On June 23, 2011 and July 12, 2012, pursuant to agreements (the “Agreements”) under one or more of its Long-Term Incentive Plans, Kroger granted to you restricted Kroger common shares (the “Shares”).

2. Paragraph 3 of the Agreements provide that upon termination of your employment, for reasons other than death or disability, Shares for which restrictions have not then lapsed will be forfeited by you.

3. Kroger’s Board of Directors has determined that it is in the best interests of Kroger for you to agree to add provisions relating to your retirement that were not otherwise contained in the Agreements. Kroger and you agree that paragraph 3 of the Agreements is amended to read as follows:

3. Unless and until the restrictions on the shares lapse, the shares will be forfeited by you if your employment by Kroger ceases for any reason other than death or disability, as determined by the Committee as defined in the Plan, your “Retirement,” as defined below, or upon a “Change in Control” as defined below. At the time of such death, disability, or Change in Control, the restrictions will lapse, the shares no longer will be subject to the restrictions, and any new certificates issued to you or your legal representative for all shares theretofore subject to risk of forfeiture will be free of the foregoing legend. Upon your Retirement the restrictions on your shares will continue to lapse in accordance with the vesting schedule outlined in paragraph 6, and upon lapsing of those restrictions those shares will no longer be subject to the risk of forfeiture and will be free of the restrictive legend. For purposes of this Agreement, a Retirement will be deemed to occur when you voluntarily leave Kroger’s employ (i) after having at least five years of service at Kroger and having attained the age of 62, and (ii) upon terms deemed satisfactory to the Committee in its sole discretion, including execution of a non-compete agreement in the form attached hereto as Attachment A. “Terms deemed satisfactory to the Committee” will include, but not be limited to, a retirement date and leadership transition plan acceptable to both you and Kroger. In the event that you fail to comply with any of the terms of your Retirement, including the non-compete agreement, then any shares for which restrictions have not yet lapsed immediately will be forfeited, and will entitle Kroger to pursue any other remedies available to Kroger.

4. Attachment A hereto is incorporated by this reference into each of the Agreements.

5. Except as amended above, the Agreements remain unchanged.

The parties have executed this amendment on the date set forth above.

	The Kroger Co.


	By	/s/ W. Rodney McMullen
		W. Rodney McMullen
		Chief Executive Officer

	(“you”)

	/s/ David Dillon
	David Dillon

NON-COMPETE AGREEMENT

Attachment A

This NON-COMPETE AGREEMENT (the “ Agreement ”) is dated and deemed effective as of January 14, 2015, by David Dillon (“ Associate ”) in favor of The Kroger Co., an Ohio corporation, (“ Kroger ”), with reference to the following facts:

RECITALS

A. Kroger is awarding to the Associate an equity award of Kroger common shares (the “ Equity Award ”) on the terms and conditions of an agreement (the “ Equity Award Agreement ”) to which this Agreement is attached.

B. Associate is a key Associate of Kroger and, in consideration and as a condition of the Equity Award, has agreed to execute this non-compete Agreement.

NOW, THEREFORE , in consideration of the foregoing and the mutual covenants and promises contained herein, the parties hereto do mutually covenant and agree as follows:

1. COVENANT NOT TO COMPETE

Associate agrees that Associate will not, for a period of four years from the date of this Agreement, without the prior written consent of Kroger, which consent may be withheld by Kroger in Kroger’s sole discretion, provide services as an employee, director, consultant, agent, or otherwise, to any of Kroger’s competitors. For purposes of this Agreement, a Kroger competitor is any business (whether brick and mortar or online) that sells groceries, food, drugs, health and beauty care items, motor fuels, or pharmaceuticals, at retail, in one or more of the same geographic areas that Kroger sells those products.

2. COVENANT NOT TO SOLICIT OR INTERFERE

Associate agrees that Associate will not, during the term of this Agreement, without the prior written consent of Kroger, which consent may be withheld in Kroger’s sole discretion, directly or indirectly through the actions of any other person or entity, whether for the Associate’s own benefit or for that of another person or entity, take any action to attempt to solicit, divert or take away any business of Kroger, or do or assist in any way with anything that would impair the goodwill of Kroger.

3. AGREEMENT NOT TO DISCLO SE CONFIDENTIAL INFORMATION

Associate agrees that Associate will not, during the term of this Agreement or at any time thereafter, without the prior written consent of Kroger, which consent may be withheld in Kroger’s sole discretion, directly or indirectly through the actions of any other person or entity, disclose or use for the benefit of any person or entity besides Kroger any confidential information or trade secrets.

4. CONSIDERATION

As consideration for the covenants and agreements of Associate contained herein, Kroger has awarded to Associate the Equity Award.

5. NOTICES

Whenever, under the terms of this Agreement, notice is required or permitted to be given by one party to the other party, such notice must be in writing and will be deemed to have been sufficiently given if deposited in the United States mail, in a properly stamped envelope, certified mail, return receipt requested, or with a courier, or with an agent designated to make a personal delivery, addressed to the party to whom it is to be given, as follows:

If to Kroger:	The Kroger Co.
	1014 Vine Street
	Cincinnati, OH 45202

	Attn: General Counsel
If to Associate:	David Dillon

or at such address designated by either party in accordance with this paragraph. Any written notice will be deemed effective upon receipt if sent by certified mail as provided above, courier, or personal delivery, or upon rejection if sent by certified mail, courier, or attempted personal delivery.

6. MISCELLANEOUS PROVISIONS

6.1 Governing Law . This Agreement will be governed by and its terms construed in accordance with the laws of the State of Ohio without reference to its conflict of laws rules, and sole and exclusive jurisdiction and venue over any legal action brought hereunder will reside exclusively in Hamilton County, Ohio.

6.2 WAIVER OF JURY TRIAL . BOTH PARTIES ACKNOWLEDGE AND AGREE THAT ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE BOTH PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT THAT THE PARTIES MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUCH ACTION OR PROCEEDING. BOTH PARTIES CERTIFY AND ACKNOWLEDGE THAT: (A) NO REPRESENTATION HAS BEEN MADE, EXPESSLY OR OTHERWISE, THAT THE OTHER PARTY WOULD NOT, IN THE EVENT OF SUCH ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER; (B) THEY UNDERSTAND AND CONSIDERED THE IMPLICATIONS OF THIS WAIVER; (C) THEY MAKE THIS WAIVER VOLUNTARILY; AND (D) THEY HAVE BEEN INDUCED TO ENTER INTO THIS WAIVER VOLUNTARILY BY THE MUTUAL WAIVER CONTAINED IN THIS SECTION 6.2.

6.3 Compliance With Laws . Nothing contained in this Agreement will be construed so as to require the commission of any act contrary to law, and whenever there is a conflict between any provision of this Agreement and any law contrary to which the parties have no legal right to contract, the latter will prevail, but in such event the provision of this Agreement so affected will be curtailed and limited only to the extent necessary to bring it within the legal requirements. It is the express intent of the parties hereto that this Agreement be enforced as broadly as possible to effectuate the benefits and considerations intended hereunder to be conferred upon Kroger.

6.4 Injunctive Relief . The parties hereto agree that the geographical area and time restriction described herein are both reasonable and fair to Associate and Kroger. Associate understands and acknowledges that the foregoing provisions are designed to preserve the integrity of Kroger’s business. Associate agrees this non-compete covenant is of a special and unique nature, the loss of which cannot be adequately compensated for in damages by an action in law and that the breach or threatened breach of the provisions hereof would cause Kroger and the continued operation and economic viability of Kroger’s business irreparable harm. Accordingly, if Associate breaches or threatens breach of any obligation in this. Agreement, in addition to any other remedies available under this Agreement, at law or in equity, Associate agrees that Kroger will be entitled to immediate injunctive relief (without the necessity of proving actual damages) and specific performance of this Agreement and any other equitable relief including, without limitation, the right to enjoin Associate from violating the terms of this Agreement, without need for bond or undertaking Nothing in this Agreement will limit Kroger’s right to recover any other damages, including compensatory and punitive damages, to which it may be entitled as a result of Associate’s breach.

6.5 Attorneys’ Fees . In the event any action, suit or other proceeding is brought to enforce or interpret this Agreement or any part hereof or the rights or obligations of any party to this Agreement, the prevailing party will be entitled to recover its reasonable attorneys’ fees and costs incurred in that action, suit or other proceeding as may be awarded by the Court, in addition to any other relief to which it may be entitled.

6.6 Remedies Cumulative . Each of the various rights, powers and remedies will be deemed to be cumulative with, and in addition to, all the rights, powers and remedies that Kroger may have hereunder or under applicable law relating hereto or to the subject matter hereof, and the exercise or partial exercise of any such right, power or remedy will constitute neither an exclusive election thereof nor a waiver of any other such right, power or remedy.

6.7 Amendments and Waivers . No amendment or waiver of any provision of this Agreement will in any event be effective unless the same is in writing and signed by the party to be bound thereby. No failure or delay on the part of any party in exercising any power, right, privilege or remedy under this Agreement will operate as a waiver thereof, nor will any single or partial exercise of any such right, power or remedy constitute a waiver of any other or further exercise of any right, power or remedy. Any waiver of any provision of this Agreement, and any consent to any departure by any of the parties from the terms of any provision of this Agreement, will be effective only in the specific instance and for the specific purpose for which given.

6.8 Successors and Assigns . This Agreement is binding upon and will inure to the benefit of each of the parties hereto and their respective successors and assigns.

6.9 Severability of Provisions . This Agreement will be performed and will be enforceable to the full extent allowable by applicable law, and the illegality, invalidity, waiver or unenforceability of any provision of this Agreement will not affect the legality, validity, applicability or enforceability of the remaining provisions hereof.

6.10 Counterpart Execution . This Agreement may be executed in multiple counterparts, and all executed counterparts constitute one agreement.

6.11 Headings. The paragraph headings in this Agreement are for reference only, and do not affect the interpretation of this Agreement.

6.12 Entire Agreement . This Agreement constitutes and embodies the entire understanding and agreement of the parties hereto relating to the subject matter hereof and there are no other agreements or understandings, written or oral, in effect between the parties relating to such subject matter except as expressly referred to herein.

6.13 Signatures . The parties have executed this Agreement as of the date first shown above.

“Kroger”:

/s/ W. Rodney McMullen

“Associate”:

/s/ David Dillon

EXHIBIT 31.1

CERTIFICATION

I, W. Rodney McMullen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Kroger Co.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 30, 2015
	/s/ W. Rodney McMullen
	W. Rodney McMullen
	Chairman of the Board and
	Chief Executive Officer
	(principal executive officer)

EXHIBIT 31.2

CERTIFICATION

I, J. Michael Schlotman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of The Kroger Co.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 30, 2015
	/s/ J. Michael Schlotman
	J. Michael Schlotman
	Senior Vice President and
	Chief Financial Officer
	(principal financial officer)

EXHIBIT 32.1

NOTE: The referenced officers, based on their knowledge, furnish the following certification, pursuant to 18 U.S.C. §1350.

We, W. Rodney McMullen, Chief Executive Officer and Chairman of the Board, and J. Michael Schlotman, Senior Vice President and Chief Financial Officer, of The Kroger Co. (the “Company”), do hereby certify in accordance with 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Quarterly Report on Form 10-Q of the Company for the period ended May 23, 2015 (the “Periodic Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §78m or 78o(d)); and

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: June 30, 2015	/s/ W. Rodney McMullen
	W. Rodney McMullen
	Chairman of the Board and Chief Executive Officer

	/s/ J. Michael Schlotman
	J. Michael Schlotman
	Senior Vice President and Chief Financial Officer

A signed original of this written statement as required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to The Kroger Co., and will be retained by The Kroger Co. and furnished to the SEC or its staff upon request.

EXHIBIT 99.1

Schedule of computation of ratio of earnings to fixed charges of The Kroger Co. and consolidated subsidiary companies for the five fiscal years ended January 31, 2015 and for the quarters ended May 23, 2015 and May 24, 2014.

	May 23,			May 24,			January 31,			February 1,			February 2,			January 28,			January 29,
	2015			2014			2015			2014			2013			2012			2011
	(16 weeks)			(16 weeks)			(52 weeks)			(52 weeks)			(53 weeks)			(52 weeks)			(52 weeks)
	(in millions of dollars)
Earnings:
Earnings before tax expense	$	954		$	783		$	2,649		$	2,282		$	2,302		$	843		$	1,734
Fixed charges	272			272			896			797			823			794			826
Capitalized interest	(2		)	(1		)	(5		)	(5		)	(3		)	(6		)	(7		)

Pre-tax earnings before fixed charges	$	1,224		$	1,054		$	3,540		$	3,074		$	3,122		$	1,631		$	2,553

Fixed charges:
Interest	$	150		$	148		$	493		$	448		$	465		$	441		$	455
Portion of rental payments deemed to be interest	122			124			403			349			358			353			371

Total fixed charges	$	272		$	272		$	896		$	797		$	823		$	794		$	826

Ratio of earnings to fixed charges	4.5			3.9			4.0			3.9			3.8			2.1			3.1