Welcome

2010 Investor Conference:

Creating Sustainable Long Term Value

September 29, 2010

 Agenda
8:00 am Welcome & Introduction Dave Dillon
8:10 am How We Drive Value Creation Rodney McMullen
8:40 am Customer Loyalty Don Becker
8:55 am Associate Engagement Katy Barclay
9:10 am Break
9:25 am Financial Review Mike Schlotman
9:55 am Technology Innovation Chris Hjelm
10:10 am Summary
10:25 am Q&A Session
11:15 am Lunch & Tour

3
 Forward-Looking Statements

This presentation includes forward-looking statements

which are subject to risks and uncertainties. Actual
results might differ materially from those projected in
the forward-looking statements. Additional information
concerning factors that could cause actual results to
materially differ from those in the forward-looking
statements is contained in our Securities and Exchange
Commission filings.

4
 Welcome and Introduction

Dave Dillon
Chairman and Chief Executive Officer
 Kroger at a Glance

 One of the largest U.S. retailers

 2,468 supermarkets and multi-department stores in 31 states
 2009 annual revenues: $76.7 billion
 2009 operating profit: $1.1 billion
 #1 or #2 market share in 38 of 42 major markets
 Nearly 50% of households hold one of our shopper cards
 334,000 associates

6
 A Broad Footprint Across the U.S.
2,468 Supermarkets in 31 States
Washington
(126)
Montana North Maine
(4) Minnesota
Dakota
Oregon VT
(55) NH
Idaho South Wisconsin
MA
(14) New York
Wyoming Dakota
RI
(9) (134) CT
Iowa Pennsylvania
Nevada Nebraska Ohio NJ
(12) Illinois (212) MD
(55) Utah WV
DE
Colorado (61)
(48) Kansas
(145) (46) Virginia
(138) Missouri (109) (62)
(67) (18) Kentucky
(375) (121) North Carolina
Arizona New Oklahoma Arkansas Tennessee (18)
South
(126) Mexico (35) Carolina
(11)
(27) Georgia
(175)
Texas (10)
(34)
Alaska
(201) (9)
(11)

7
 Key Retail Grocery Industry Trends
 Continued macro uncertainty
 Consumer behavior mirroring economic realities
 Cost volatility in food
– Inflation in perishables
– Deflation in grocery tied to promotions to drive volumes
 More rational approach to managing for profitability
 Performance closely tied to successfully meeting customers
needs

8
 Sustained Industry Leadership
Over Time
1987 1997 2007
Safeway Kroger Walmart*
Kroger Safeway Kroger
American Stores Walmart* Safeway
Winn-Dixie Albertsons Costco
A&P American Stores SUPERVALU
Lucky Stores Costco Publix
Albertsons Winn-Dixie Ahold USA
Supermarkets Gen. Publix Delhaize America
Publix A&P H.E. Butt
Vons Companies Food Lion A&P

* Includes Walmart Supercenters and Walmart subsidiary Sam’s Clubs.

9
Source: Business Guides, Directory of Supermarket, Grocery & Convenience Store Chains, 1988, 1998, 2008
 Significant Growth Opportunities
Industry Market Share
2004 2009
$457.4 billion $556.9 billion

Average Store
Sales in Millions
Independents < $20 > $20
Source: Progressive Grocer’s 72nd and 77th Annual Reports of the Grocery Industry
10
*Independents classified as fewer than 10 stores
 Volatility in Food Costs

Source: Company reports 11

 Cost Volatility Across Departments

Source: Company reports 12

 The New Consumer Reality
 Drivers of consumer behavior:
– ~ 10% unemployment
– Flat/falling home prices
– Customer uncertainty regarding economy is reflected in
cautious spending
 Our competitive response:
– Rewarding most loyal customers
– Balancing price and tonnage
– Targeted offerings to meet unique needs
– Balance of corporate brand, national brands
– Superior shopping experience

13
How We Drive Value Creation

Rodney McMullen
President and Chief Operating Officer
 Our Competitive Advantages

 Unique consumer insights drive high customer loyalty

 Compelling three-tier corporate brand strategy
 Successful multi-faceted strategy is difficult to replicate
 Leader in growing identical sales – 27 consecutive quarters
 Gaining market share and leveraging scale
 Solid balance sheet with significant financial flexibility
 Seasoned and proven leadership team
 High quality asset base
 Track record of rewarding shareholders through dividends
and share repurchases

15
 Customer 1st Strategy

Four Key Elements:

16
 A Virtuous Cycle of Value Creation

Improve Connection Strong ID Sales

with Customers Growth

Invest in Shopping Operating Cost

Experience Leverage
17
 How We Measure Our Success

 Financial Metrics (all excluding fuel)

– ID sales
– Supermarket selling gross margin
– Operating costs
– Operating margin
 Non-Financial Metrics
– Customer 1st Tracker scores
– Loyal household growth
– Market share

18
Progress on Key Customer 1st Metrics
PEOPLE SHOPPING EXPERIENCE

PRODUCTS PRICE

19
 Driving Loyal Household Growth

 Over 90% of Kroger’s transactions involve a loyalty card*

 Nearly 50% of U.S. households carry one of our shopper
cards
 Our ability to collect and analyze customer purchase data
allows us to respond rapidly to shifts in buying patterns
 The data allows us to segment and target
 dunnhumby enables us to more effectively partner with our
national vendors than our peers

20
* Excludes Food 4 Less division
 Growing Share of Market – Dollar Sales
FY 2007 FY 2009

1.7% 1.9%
10.2% 19.0% 9.7%
4.3% 4.1% 20.0%

10.9% 11.1%

27.0%
26.4%
27.4%
26.9%

Kroger Rem Food Mass Warehouse Drug Dollar A/O Channels

Source: Nielsen Homescan Fiscal Year Sales Trends – August 14, 2010 21
See Appendix 1 for definition of segments
Customer 1st Drives Value Creation

More return visits and

increased
sales and share

Growing profits and

cash flow to reinvest in
business & enhance
shareholder value

22
Earning Customer Loyalty

Don Becker
Executive Vice President
Deep Customer Knowledge

24
 Growing Loyalty Helps Drive ID Sales
6% GAP between KR IDs and Industry IDs

5%

4%

3%

2%

1%

0%

25
Source: Credit Suisse and Company data
 Our Pricing Strategy

 Significant investment in price based on research data

 Strategy focuses on three areas:
– Everyday prices
– Weekly specials
– Store brands
 We are price competitive for everyday items important
to price sensitive shoppers
 Shoppers are willing to pay a certain premium for
Kroger store experience

26
 Products

 Produce & meat quality

 Offer the products our customers want
 Corporate brands

27
 Shopping Experience

 Improving speed of checkout

 Store cleanliness & convenience

28
People!

29
 Produce: Investing in Price

 Customer research & loyalty card data told us that

we needed to address pricing
 We responded by investing in lower prices on
produce
– Lower everyday prices on fruits and vegetables that
matter most to our customers
– Weekly specials
– Price competitive, not the price leader

30
Produce: Investing in Products

31
 Produce: Investing in the Shopping
Experience

 Great displays
 Improved signage

32
 Produce: Investing in Service

 Keep departments clean & well-stocked

 Engage with customers

33
 Produce: Investment Results

 Emphasizing the 4 Keys help drive double-digit

tonnage growth
 Focusing on all 4 attributes of Customer 1st has
delivered similar successes throughout our stores

34
Our Exclusive Brands

35
 Industry Leader in Corporate Brands…

 Private label penetration

as a percent of industry
unit sales has risen
markedly in recent years

 Kroger’s three-tier
corporate branding
strategy serves the
needs of a diverse
customer mix

Source: Private Label Manufacturing Association 2Q10 data as reported in Barclays Capital U.S. Supermarket Industry Review – 36
Fall 2010 and Company Reports
…and Gaining Share

37
Three-Tier Corporate Brand Strategy

Private
Value

Banner 38
Responding to Customer Needs
with Unique New Products

39
 Creating Win – Win Vendor
Relationships

 Customer-centric approach to merchandising

 The right product for the right customer at the
right store
 More effective promotion, advertising and direct
mail spend
 Data sharing on the performance of national
brands in Kroger stores
 Tonnage growth
 Growing pool of loyal lifetime customers

40
 Strengthening Our Relationship with
CPG Companies
Improving Rating in Cannondale Associates Survey

Source: Cannondale Associates Manufacturer Survey Results as reported in Barclays Capital U.S. Supermarket Industry Review – 41
Fall 2010 and Company Reports
42
 Driving Success
Through Associate Engagement

Katy Barclay
Senior Vice President
44
 A More Focused Approach

 More sophisticated tools and processes to define

and measure employee engagement
 Aligning associates with Kroger’s business
objectives and strategy
 Carefully acknowledging input from our associates
and rewarding success

45
 What is Associate Engagement?

 A positive emotional attachment to the job and

the company

 A strong personal desire for the company to be

successful

 A personal commitment to always do the right

thing

46
 Why Focus on Associate
Engagement?

 Companies with engaged employees report:

 Greater sales and profit growth
 Higher productivity
 Greater customer loyalty
 Higher shareholder value

47
Source: Towers Watson
 Financial Impact of Engagement
Companies with high levels of engagement:

Have higher 5-year total returns to

13% shareholders

50% Enjoy a higher market premium

26% Experience greater employee productivity

48
Source: Towers Watson
 Going a Level Deeper …

Extensive research proves that engaged

employees are:
 Twice as likely to be top performers
 Exceed performance expectations
 Miss fewer days of work
 Connect with the company, products and
customers
 Resilient during organizational change

49
Source: Towers Watson
 Engagement Defined

Connected attached to their companies

motivated to help their companies

Committed succeed

Aligned know how to make their

companies successful

50
 Engagement Drivers

 Customer Focus
 Leadership
 Associate
Communications
 Recognition

51
 Engaging Front-end Associates

 Leaders are involved

and committed
 Teams come
together to build and
own the outcomes
 Associates are
involved and excited
to deliver results
 Customers are scoring
us higher in the
Customer 1st Tracker
52
 Measuring Effectiveness and Outcomes

 Measuring Effectiveness:
– Proven, action-oriented
questions
– Highly predictive of
associate engagement
– Customer data validates
effectiveness
 Outcomes:
– Identical sales growth,
excluding fuel
– Annual productivity
improvements 53
Driving Success through
Associate Engagement

54
 Financial Review

Mike Schlotman
Senior Vice President and Chief Financial Officer
 Driving Sustainable Earnings Growth

 Objective: Grow earnings through steady increases in

identical sales coupled with a slight increase in annual
operating margin, both excluding fuel sales
 Key long-term financial metrics (all exclude fuel):
– ID sales
– Supermarket selling gross margin
– Operating costs
– Operating margin

57
27 Consecutive Quarters of
Positive ID Sales Growth

58
 Kroger Outperforms
Industry ID Sales Growth

59
Source: Kroger ID Sales and Credit Suisse Supermarket Industry ID Estimates 8/4/10
 Slowing the Rate of
Gross Margin Decline

Change in Supermarket Selling Gross Margin Rate

(ex fuel, rolling 4-qtrs basis)
-

(20)
Basis Points

(40)

(60)

(80)

(100)

(120)
Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10

Source: Company data 60

 Reducing Operating Costs

 Since 2003, operating costs have declined by over 200

basis points, as a rate of non fuel sales due to:
– Cost reduction and efficiency initiatives
– Sales leverage
 If not for these efficiencies and increased sales
leverage, operating costs would have been $1.5 billion
higher in fiscal 2009

61
 Operating Margin Goals

 Long term objective: slight increase in operating

margin annually (ex fuel)
 Sales leverage will drive operating margin
improvement
 FY09 operating margin isn’t “the new normal”

62
 Outperforming Peers
5-Yr Compound Annual EPS Growth Rate – Food Retailers

A B C D E KR
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8% 63
 Attractive Returns on Invested Capital
5-Yr Average

16%

14%

12%

10%

8%

6%

4%

2%

0%
2005 2006 2007 2008 2009
Kroger
64
Source: Thomson Reuters
 Delivering Value to Shareholders

Cash Returned to Shareholders 2005 – 2009

($ in Millions)

KR SWY SVU WFMI

Dividends $807 $538 $633 $609
Share Repurchases $3,161 $1,789 $490 $204
Net Cash Returned to
$3,968 $2,326 $1,123 $813
Shareholders

Market Capitalization $12,933 $7,363 $2,117 $6,098

Cash Returned as % of Current
30.7% 31.6% 53.0% 13.3%
Market Cap

Source: Barclays Capital Estimates – U.S. Supermarket Industry Overview Fall 2010 - Released 9/15/10 65
 Disciplined Investment for
Future Growth
(In Billions)

*Excludes acquisitions & purchases of leased facilities. 66

**Halfway point of guidance for $1.9 to $2.1 billion.
 Financial Leverage Decreasing

2.3 Net Total Debt to EBITDA

2.2

2.1

2.0

1.9

1.8

1.7

1.6

67
Source: Company data
 Attractive Credit Rating

 BBB Credit Rating

 Committed to a solid investment grade
 Current $2.5 billion credit agreement expires November 2011
 Favorable credit environment for issuers; anticipate
negotiating a new credit agreement on favorable terms

68
 Improving Performance in Q2
($ in millions except for per share amounts)

2Q10 2Q09 % Change

Sales $18,795.9 $17,728.2 6.02%
Operating Profit $493.5 $499.1 (1.12%)
Net Earnings $261.6 $254.4 2.83%
EPS $0.41 $0.39 5.13%

Operating Margin 2.63% 2.82%

Tax Rate 31.70% 34.75%

69
 Strong Cash Flow
Year-to-date Highlights:
 Operating Activities
– Generated $2.3 billion net cash
 Investing Activities
– $952 million in capital expenditures
 Financing Activities
– Issued $300 million in long-term debt
– Repurchased $228 million in common stock
– Paid out $123 million in dividends

More than $1 billion in cash and temporary cash investments

70
 Fiscal 2010 Annual Guidance

Guidance
ID Sales (ex fuel) 2% to 3%
Non-fuel Operating Margin Slight decline compared to FY 2009
Tax Rate 35.5%
Fuel Margin $0.11/gal
EPS (diluted) $1.60 to $1.80
(Targeting the upper half of the range)
Capital Expenditures $1.9 to $2.1 billion

71
 The Role of Technology Innovation in
Customer 1st

Chris Hjelm
Senior Vice President and Chief Information Officer
Our Technology Strategy
Focus on Four Key Areas:

Build
Drive
Reliable
Innovation
Platforms

Implement
Transform
Customer &
the
Associate
Organization
Solutions

73
 Customer 1st Strategy

“Align Technology Objectives for Positive Business Outcomes”

74
Good Prices – Distribution Center
Automation

75
Good Prices – Distribution Center
Automation

76
 Shopping Experience Makes Me
Want to Return – Pharmacy

 Single view of patient across Kroger

 Prescription imaging
 Release to patient, we know when prescriptions are
sold, not just filled
 Signature capture for HIPAA, EZ Caps, counseling, proof
of delivery
 Platform for innovation

77
Shopping Experience Makes Me
Want to Return – Digital Coupons
 Conservative estimates have
us crossing 15M coupon
downloads a month by
March of next year
 We offer over 100 coupons
valued at over $150 every
week
 Redemption rates are
typically 10%
 We’re currently working to
release a cross-platform
mobile coupon application
78
 Digital Coupon Growth

79
Source: Company data since inception in February 2010
Great People – Associate Portal

 New secure website

provides content and
gives associates a single
trusted source for
company and division
information

 Access from home or

work
 End goal is to
personalize and provide
role-specific information
to our associates
 Platform for innovation

80
 Driving Continuous Innovation
 Research and Development Capability
– Game changing focus
– Challenge the status quo
– Partnerships to accelerate commercialization
 Associate Engagement
– Everyone plays a role
 Technology Infrastructure
 Leverage Intellectual Property

81
Innovation In Process –
Consumer Mobility

Pilot in 2010 Kroger Mobile Technology Platforms

(i-Phone/Droid) 82
Innovation in Process –
Advantage Checkout

83
Innovation in Process –
Advantage Checkout

84
Summary
 Creating Sustainable Long Term Value

 Unique consumer insights drive high customer loyalty

 Compelling three-tier corporate brand strategy
 Successful multi-faceted strategy is difficult to replicate
 Leader in growing identical sales – 27 consecutive quarters
 Gaining market share and leveraging scale
 Solid balance sheet with significant financial flexibility
 Seasoned and proven leadership team
 High quality asset base
 Track record of rewarding shareholders through dividends
and share repurchases

86
Questions and Answers
Appendix
 Appendix 1: Nielsen
Homescan Definitions
Kroger
Rem Food – all other grocery retailers excluding Kroger
Mass – Walmart, K-mart, Target, etc.
Warehouse – Sam’s Club, BJ’s, Costco, etc.
Drug – CVS, Walgreens, Rite-aid, etc.
Dollar – Dollar stores
A/O Channels – Gas stations, convenience stores, military
bases

90
 Forward-Looking Statements
The accompanying slides contain certain forward-looking statements about the future performance of the Company. These
statements are based on management’s assumptions and beliefs in light of the information currently available to it. These
forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially.
Our ability to achieve identical supermarket sales and earnings growth and earnings per share goals, the timing that those
earnings occur within the year, our ability to achieve results in the upper half of our earnings guidance range, and our ability
to continue to deliver shareholder value through dividends and share repurchases, may be affected by: labor disputes,
particularly as the Company seeks to manage health care and pension costs; industry consolidation; pricing and promotional
activities of existing and new competitors, including non-traditional competitors, and the aggressiveness of that competition;
our response to these actions; unexpected changes in product costs; the state of the economy, including interest rates and
the inflationary and deflationary trends in certain commodities; the extent to which our customers exercise caution in their
purchasing behavior in response to economic conditions; the number of shares outstanding; the success of our future growth
plans; goodwill impairment; volatility in our fuel margins; and our ability to generate sales at desirable margins, as well as the
success of our programs designed to increase our identical sales without fuel. In addition, any delays in opening new stores,
or changes in the economic climate could cause us to fall short of our sales and earnings targets. Our ability to increase
identical supermarket sales also could be adversely affected by increased competition and sales shifts to other stores that we
operate, as well as increases in sales of our corporate brand products. Earnings and sales also may be affected by adverse
weather conditions, particularly to the extent that hurricanes, tornadoes, floods, and other conditions disrupt our operations or
those of our suppliers; create shortages in the availability or increases in the cost of products that we sell in our stores or
materials and ingredients we use in our manufacturing facilities; or raise the cost of supplying energy to our various
operations. Our results also will be affected by the inconsistent pace of the economic recovery, consumer confidence, and
changes in inflation and deflation in product and operating costs. Our capital expenditures could vary from our expectations if
we are unsuccessful in acquiring suitable sites for new stores; development costs vary from those budgeted; our logistics and
technology or store projects are not completed on budget or within the time frame projected; or if current operating
conditions fail to improve or worsen. Our fuel margins could fail to normalize at 11¢ per gallon if rapid changes in fuel costs
occur. Our non-fuel operating margin guidance could change if we are unable to pass on any cost increases, if our strategies
fail to deliver the cost savings contemplated, or if changes in the cost of our inventory and the timing of those changes differ
from our expectations. Any change in tax laws, the regulations related thereto, the applicable accounting rules or standards,
or the interpretation thereof by federal, state or local authorities could affect our expected effective tax rate. Please refer to
Kroger’s reports and filings with the Securities and Exchange Commission for a further discussion of these risks and
uncertainties. 91