Kroger 10-Q 2022-08-13

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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​

FORM 10-Q

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

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For the quarterly period ended August 13, 2022

OR

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

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For the transition period from to

Commission file number 1-303

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The Kroger Co.

(Exact name of registrant as specified in its charter)

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​

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

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1014 Vine Street**,** Cincinnati**,** Ohio 45202

(Address of principal executive offices)

(Zip Code)

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(513) 762-4000

(Registrant’s telephone number, including area code)

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Unchanged

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

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

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

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

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

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

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

​

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

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

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There were 715,806,319 shares of Common Stock ($1 par value) outstanding as of September 13, 2022.

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PART I – FINANCIAL INFORMATION

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Item 1.	Financial Statements.

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THE KROGER CO.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

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​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Second Quarter Ended					​	Two Quarters Ended					​
​	​	August 13,		​	August 14,		​	August 13,		​	August 14,		​
(In millions, except per share amounts)		2022			2021			2022			2021
Sales	​	$	34,638	​	$	31,682	​	$	79,238	​	$	72,980	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating expenses	​	​	​	​	​	​	​	​	​	​	​	​	​
Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below	​		27,392	​		24,914	​		62,343	​		56,861	​
Operating, general and administrative	​		5,417	​		5,091	​		12,414	​		12,515	​
Rent	​		191	​		191	​		448	​		452	​
Depreciation and amortization	​		684	​		647	​		1,574	​		1,508	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating profit	​		954	​		839	​		2,459	​		1,644	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Other income (expense)	​	​	​	​	​	​	​	​	​	​	​	​	​
Interest expense	​	​	(127)	​	​	(137)	​	​	(303)	​	​	(302)	​
Non-service component of company-sponsored pension plan costs	​	​	11	​	​	15	​	​	26	​	​	33	​
Gain (loss) on investments	​	​	103	​	​	(122)	​	​	(429)	​	​	(601)	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net earnings before income tax expense	​		941	​		595	​		1,753	​		774	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Income tax expense	​		209	​		126	​		356	​		162	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net earnings including noncontrolling interests	​		732	​		469	​		1,397	​		612	​
Net income attributable to noncontrolling interests	​		1	​		2	​		3	​		5	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net earnings attributable to The Kroger Co.	​	$	731	​	$	467	​	$	1,394	​	$	607	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net earnings attributable to The Kroger Co. per basic common share	​	$	1.01	​	$	0.62	​	$	1.92	​	$	0.80	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Average number of common shares used in basic calculation	​		716	​		746	​		720	​		750	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net earnings attributable to The Kroger Co. per diluted common share	​	$	1.00	​	$	0.61	​	$	1.89	​	$	0.79	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Average number of common shares used in diluted calculation	​		725	​		755	​		730	​		758	​

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

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THE KROGER CO.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

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​	​	​	​	​	​	​	​	​	​	​	​	​	​
​		Second Quarter Ended					​	Two Quarters Ended					​
​	​	August 13,		​	August 14,		​	August 13,		​	August 14,		​
(In millions)		2022			2021			2022			2021
Net earnings including noncontrolling interests	​	$	732	​	$	469	​	$	1,397	​	$	612	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Other comprehensive income	​	​	​	​	​	​	​	​	​	​	​	​	​
Change in pension and other postretirement defined benefit plans, net of income tax(1)	​	​	(1)	​	​	1	​	​	(1)	​	​	2	​
Amortization of unrealized gains and losses on cash flow hedging activities, net of income tax(2)	​	​	2	​	​	1	​	​	4	​	​	3	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total other comprehensive income	​		1	​		2	​		3	​	​	5	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Comprehensive income	​		733	​		471	​		1,400	​		617	​
Comprehensive income attributable to noncontrolling interests	​		1	​		2	​		3	​		5	​
Comprehensive income attributable to The Kroger Co.	​	$	732	​	$	469	​	$	1,397	​	$	612	​

(1)	Amount is net of tax of $1 for the second quarters of 2022 and 2021. Amount is net of tax of $2 for the first two quarters of 2021.

(2)	Amount is net of tax of $3 for the second quarter of 2021. Amount is net of tax of $1 for the first two quarters of 2022 and $4 for the first two quarters of 2021.

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

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THE KROGER CO.

CONSOLIDATED BALANCE SHEETS

(unaudited)

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​	​	​	​	​	​	​	​
​		August 13,			January 29,
(In millions, except par amounts)	​	2022		​	2022
ASSETS	​	​	​	​	​	​	​
Current assets	​	​	​	​	​	​	​
Cash and temporary cash investments	​	$	1,102	​	$	1,821	​
Store deposits in-transit	​		1,087	​		1,082	​
Receivables	​		1,869	​		1,828	​
FIFO inventory	​		9,125	​		8,353	​
LIFO reserve	​		(1,810)	​		(1,570)	​
Prepaid and other current assets	​	​	536	​	​	660	​
Total current assets	​		11,909	​		12,174	​
​	​	​	​	​	​	​	​
Property, plant and equipment, net	​		24,118	​		23,789	​
Operating lease assets	​	​	6,771	​	​	6,695	​
Intangibles, net	​		917	​		942	​
Goodwill	​		3,076	​		3,076	​
Other assets	​		1,950	​		2,410	​
​	​	​	​	​	​	​	​
Total Assets	​	$	48,741	​	$	49,086	​
​	​	​	​	​	​	​	​
LIABILITIES	​	​	​	​	​	​	​
Current liabilities	​	​	​	​	​	​	​
Current portion of long-term debt including obligations under finance leases	​	$	789	​	$	555	​
Current portion of operating lease liabilities	​	​	656	​	​	650	​
Trade accounts payable	​		7,446	​		7,117	​
Accrued salaries and wages	​		1,356	​		1,736	​
Other current liabilities	​		6,319	​		6,265	​
Total current liabilities	​		16,566	​		16,323	​
​	​	​	​	​	​	​	​
Long-term debt including obligations under finance leases	​	​	12,488	​	​	12,809	​
Noncurrent operating lease liabilities	​	​	6,449	​	​	6,426	​
Deferred income taxes	​		1,522	​		1,562	​
Pension and postretirement benefit obligations	​		439	​		478	​
Other long-term liabilities	​		1,638	​		2,059	​
​	​	​	​	​	​	​	​
Total Liabilities	​		39,102	​		39,657	​
​	​	​	​	​	​	​	​
Commitments and contingencies see Note 6	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
SHAREOWNERS’ EQUITY	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
Preferred shares, $100 par per share, 5 shares authorized and unissued	​	​	—	​	​	—	​
Common shares, $1 par per share, 2,000 shares authorized; 1,918 shares issued in 2022 and 2021	​		1,918	​		1,918	​
Additional paid-in capital	​		3,716	​		3,657	​
Accumulated other comprehensive loss	​		(464)	​		(467)	​
Accumulated earnings	​		25,128	​		24,066	​
Common shares in treasury, at cost, 1,202 shares in 2022 and 1,191 shares in 2021	​		(20,641)	​		(19,722)	​
​	​	​	​	​	​	​	​
Total Shareowners’ Equity - The Kroger Co.	​		9,657	​		9,452	​
Noncontrolling interests	​		(18)	​		(23)	​
​	​	​	​	​	​	​	​
Total Equity	​		9,639	​		9,429	​
​	​	​	​	​	​	​	​
Total Liabilities and Equity	​	$	48,741	​	$	49,086	​

​

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

​

​

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

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​	​	​	​	​	​	​	​
​	​	Two Quarters Ended					​
​	​	August 13,		​	August 14,		​
(In millions)		2022			2021
Cash Flows from Operating Activities:	​	​	​	​	​	​	​
Net earnings including noncontrolling interests	​	$	1,397	​	$	612	​
Adjustments to reconcile net earnings including noncontrolling interests to net cash provided by operating activities:	​	​	​	​	​	​	​
Depreciation and amortization	​		1,574	​		1,508	​
Operating lease asset amortization	​	​	329	​	​	332	​
LIFO charge	​		240	​		84	​
Share-based employee compensation	​		103	​		108	​
Company-sponsored pension plans	​		(20)	​		(24)	​
Deferred income taxes	​		(40)	​		(24)	​
Gain on the sale of assets	​	​	(13)	​	​	(28)	​
Loss on investments	​	​	429	​	​	601	​
Other	​		66	​		122	​
Changes in operating assets and liabilities:	​	​	​	​	​	​	​
Store deposits in-transit	​		(5)	​		41	​
Receivables	​		(10)	​		(57)	​
Inventories	​		(774)	​		377	​
Prepaid and other current assets	​		115	​		356	​
Trade accounts payable	​		330	​		101	​
Accrued expenses	​		(407)	​		(400)	​
Income taxes receivable and payable	​		(41)	​	​	(125)	​
Operating lease liabilities	​	​	(373)	​	​	(374)	​
Other	​		(473)	​		(87)	​
​	​	​	​	​	​	​	​
Net cash provided by operating activities	​		2,427	​		3,123	​
​	​	​	​	​	​	​	​
Cash Flows from Investing Activities:	​	​	​	​	​	​	​
Payments for property and equipment, including payments for lease buyouts	​		(1,430)	​		(1,319)	​
Proceeds from sale of assets	​		37	​	​	107	​
Other	​		5	​		(72)	​
​	​	​	​	​	​	​	​
Net cash used by investing activities	​		(1,388)	​		(1,284)	​
​	​	​	​	​	​	​	​
Cash Flows from Financing Activities:	​	​	​	​	​	​	​
Proceeds from issuance of long-term debt	​		—	​		1	​
Payments on long-term debt including obligations under finance leases	​		(486)	​	​	(369)	​
Dividends paid	​	​	(307)	​	​	(274)	​
Proceeds from issuance of capital stock	​	​	119	​		85	​
Treasury stock purchases	​		(975)	​		(751)	​
Proceeds from financing arrangement	​	​	—	​	​	166	​
Other	​	​	(109)	​		(159)	​
​	​	​	​	​	​	​	​
Net cash used by financing activities	​		(1,758)	​		(1,301)	​
​	​	​	​	​	​	​	​
Net (decrease) increase in cash and temporary cash investments	​		(719)	​		538	​
​	​	​	​	​	​	​	​
Cash and temporary cash investments:	​	​	​	​	​	​	​
Beginning of year	​		1,821	​		1,687	​
End of period	​	$	1,102	​	$	2,225	​
​	​	​	​	​	​	​	​
Reconciliation of capital investments:	​	​	​	​	​	​	​
Payments for property and equipment, including payments for lease buyouts	​	$	(1,430)	​	$	(1,319)	​
Payments for lease buyouts	​	​	10	​		—	​
Changes in construction-in-progress payables	​		(74)	​		89	​
Total capital investments, excluding lease buyouts	​	$	(1,494)	​	$	(1,230)	​
​	​	​	​	​	​	​	​
Disclosure of cash flow information:	​	​	​	​	​	​	​
Cash paid during the year for interest	​	$	379	​	$	365	​
Cash paid during the year for income taxes	​	$	432	​	$	301	​

​

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

​

​

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS’ EQUITY

(unaudited)

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	Accumulated		​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	Additional		​	​	​	​	​	​	Other		​	​	​	​	​	​	​	​	​
​	​	Common Stock				​	Paid-In		​	Treasury Stock				​	Comprehensive		​	Accumulated		​	Noncontrolling		​	​	​
(In millions, except per share amounts)		Shares		Amount			Capital			Shares		Amount			Loss			Earnings			Interest			Total
Balances at January 30, 2021	​	1,918	​	$	1,918	​	$	3,461		1,160	​	$	(18,191)	​	$	(630)	​	$	23,018	​	$	(26)		$	9,550
Issuance of common stock:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exercised		—	​		—	​		—		(2)	​		31	​		—	​		—	​		—	​		31
Restricted stock issued		—	​		—	​		(35)		(1)	​		17	​		—	​		—	​		—	​		(18)
Treasury stock activity:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Treasury stock purchases, at cost		—	​		—	​		—		10	​		(338)	​		—	​		—	​		—	​		(338)
Stock options exchanged		—	​		—	​		—		2	​		(64)	​		—	​		—	​		—	​		(64)
Share-based employee compensation		—	​		—	​		56		—	​		—	​		—	​		—	​		—	​		56
Other comprehensive income net of income tax of $2		—	​		—	​		—		—	​		—	​		3	​		—	​		—	​		3
Other		—	​		—	​		23		—	​		(23)	​		—	​		1	​		3	​		4
Cash dividends declared ($0.18 per common share)		—	​		—	​		—		—	​		—	​		—	​		(138)	​		—	​		(138)
Net earnings including noncontrolling interests		—	​		—	​		—		—	​		—	​		—	​		140	​		3	​		143
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balances at May 22, 2021		1,918		$	1,918		$	3,505		1,169		$	(18,568)		$	(627)		$	23,021		$	(20)		$	9,229
Issuance of common stock:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exercised		—	​		—	​		—		(2)	​		54	​		—	​		—	​		—	​		54
Restricted stock issued		—	​		—	​		(99)		(2)	​		56	​		—	​		—	​		—	​		(43)
Treasury stock activity:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Treasury stock purchases, at cost		—	​		—	​		—		8	​		(299)	​		—	​		—	​		—	​		(299)
Stock options exchanged		—	​		—	​		—		1	​		(50)	​		—	​		—	​		—	​		(50)
Share-based employee compensation		—	​		—	​		52		—	​		—	​		—	​		—	​		—	​		52
Other comprehensive income net of income tax of $4		—	​		—	​		—		—	​		—	​		2	​		—	​		—	​		2
Other		—	​		—	​		69		—	​		(69)	​		—	​		—	​		(2)	​		(2)
Cash dividends declared ($0.21 per common share)		—	​		—	​		—		—	​		—	​		—	​		(154)	​		—	​		(154)
Net earnings including noncontrolling interests		—	​		—	​		—		—	​		—	​		—	​		467	​		2	​		469
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balances at August 14, 2021		1,918		$	1,918		$	3,527		1,174		$	(18,876)		$	(625)		$	23,334		$	(20)		$	9,258
Issuance of common stock:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exercised		—	​		—	​		—		(1)	​		33	​		—	​		—	​		—	​		33
Restricted stock issued		—	​		—	​		(3)		—	​		—	​		—	​		—	​		—	​		(3)
Treasury stock activity:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Treasury stock purchases, at cost		—	​		—	​		—		6	​		(251)	​		—	​		—	​		—	​		(251)
Stock options exchanged		—	​		—	​		—		1	​		(47)	​		—	​		—	​		—	​		(47)
Share-based employee compensation		—	​		—	​		51		—	​		—	​		—	​		—	​		—	​		51
Other comprehensive income net of income tax of $37		—	​		—	​		—		—	​		—	​		134	​		—	​		—	​		134
Other		—	​		—	​		15		—	​		(15)	​		—	​		(1)	​		(10)	​		(11)
Cash dividends declared ($0.21 per common share)		—	​		—	​		—		—	​		—	​		—	​		(158)	​		—	​		(158)
Net earnings including noncontrolling interests		—	​		—	​		—		—	​		—	​		—	​		483	​		2	​		485
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balances at November 6, 2021		1,918		$	1,918		$	3,590		1,180		$	(19,156)		$	(491)		$	23,658		$	(28)		$	9,491
Issuance of common stock:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exercised		—	​		—	​		—		(2)	​		54	​		—	​		—	​		—	​		54
Restricted stock issued		—	​		—	​		—		—	​		—	​		—	​		—	​		—	​		—
Treasury stock activity:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Treasury stock purchases, at cost		—	​		—	​		—		11	​		(534)	​		—	​		—	​		—	​		(534)
Stock options exchanged		—	​		—	​		—		2	​		(64)	​		—	​		—	​		—	​		(64)
Share-based employee compensation		—	​		—	​		44		—	​		—	​		—	​		—	​		—	​		44
Other comprehensive income net of income tax of $8		—	​		—	​		—		—	​		—	​		24	​		—	​		—	​		24
Other		—	​		—	​		23		—	​		(22)	​		—	​		—	​		1	​		2
Cash dividends declared ($0.21 per common share)		—	​		—	​		—		—	​		—	​		—	​		(157)	​		—	​		(157)
Net earnings including noncontrolling interests		—	​		—	​		—		—	​		—	​		—	​		565	​		4	​		569
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balances at January 29, 2022		1,918		$	1,918		$	3,657		1,191		$	(19,722)		$	(467)		$	24,066		$	(23)		$	9,429

​

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

​

​

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS’ EQUITY

(unaudited)

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	Accumulated		​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	Additional		​	​	​	​	​	​	Other		​	​	​	​	​	​	​	​	​
​	​	Common Stock				​	Paid-In		​	Treasury Stock				​	Comprehensive		​	Accumulated		​	Noncontrolling		​	​	​
(In millions, except per share amounts)		Shares		Amount			Capital			Shares		Amount			Loss			Earnings			Interest			Total
Balances at January 29, 2022	​	1,918	​	$	1,918	​	$	3,657		1,191	​	$	(19,722)	​	$	(467)	​	$	24,066	​	$	(23)	​	$	9,429
Issuance of common stock:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exercised		—	​		—	​		—		(4)	​		113	​		—	​		—	​		—	​		113
Restricted stock issued		—	​		—	​		(77)		(2)	​		12	​		—	​		—	​		—	​		(65)
Treasury stock activity:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Treasury stock purchases, at cost		—	​		—	​		—		10	​		(520)	​		—	​		—	​		—	​		(520)
Stock options exchanged		—	​		—	​		—		3	​		(145)	​		—	​		—	​		—	​		(145)
Share-based employee compensation		—	​		—	​		57		—	​		—	​		—	​		—	​		—	​		57
Other comprehensive income net of income tax of $-		—	​		—	​		—		—	​		—	​		2	​		—	​		—	​		2
Other		—	​		—	​		77		—	​		(77)	​		—	​		—	​		3	​		3
Cash dividends declared ($0.21 per common share)		—	​		—	​		—		—	​		—	​		—	​		(147)	​		—	​		(147)
Net earnings including noncontrolling interests		—	​		—	​		—		—	​		—	​		—	​		664	​		2	​		666
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balances at May 21, 2022		1,918		$	1,918		$	3,714		1,198		$	(20,339)		$	(465)		$	24,583		$	(18)		$	9,393
Issuance of common stock:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exercised		—	​		—	​		—		—	​		6	​		—	​		—	​		—	​		6
Restricted stock issued		—	​		—	​		(89)		(2)	​		47	​		—	​		—	​		—	​		(42)
Treasury stock activity:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Treasury stock purchases, at cost		—	​		—	​		—		6	​		(300)	​		—	​		—	​		—	​		(300)
Stock options exchanged		—	​		—	​		—		—	​		(10)	​		—	​		—	​		—	​		(10)
Share-based employee compensation		—	​		—	​		46		—	​		—	​		—	​		—	​		—	​		46
Other comprehensive income net of income tax of $1		—	​		—	​		—		—	​		—	​		1	​		—	​		—	​		1
Other		—	​		—	​		45		—	​		(45)	​		—	​		—	​		(1)	​		(1)
Cash dividends declared ($0.26 per common share)		—	​		—	​		—		—	​		—	​		—	​		(186)	​		—	​		(186)
Net earnings including noncontrolling interests		—	​		—	​		—		—	​		—	​		—	​		731	​		1	​		732
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balances at August 13, 2022		1,918		$	1,918		$	3,716		1,202		$	(20,641)		$	(464)		$	25,128		$	(18)		$	9,639

​

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

​

​

​

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

​

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

​

1.	ACCOUNTING POLICIES

​

Basis of Presentation and Principles of Consolidation

​

The accompanying financial statements include the consolidated accounts of The Kroger Co., its wholly-owned subsidiaries and other consolidated entities. The January 29, 2022 balance sheet was derived from audited financial statements and, due to its summary nature, does not include all disclosures required by generally accepted accounting principles (“GAAP”). Significant intercompany transactions and balances have been eliminated. References to the “Company” in these Consolidated Financial Statements mean the consolidated company.

​

In the opinion of management, the accompanying unaudited Consolidated Financial Statements include adjustments, all of which are of a normal, recurring nature that are necessary for a fair statement of results of operations for such periods but should not be considered as indicative of results for a full year. The financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted, pursuant to SEC regulations. Accordingly, the accompanying Consolidated Financial Statements should be read in conjunction with the financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2022.

​

The unaudited information in the Consolidated Financial Statements for the second quarters and two quarters ended August 13, 2022 and August 14, 2021 includes the results of operations of the Company for the 12 and 28 week periods then ended.

​

Fair Value Measurements

​

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

​

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

​

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

​

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

​

The Company records cash and temporary cash investments, store deposits in-transit, receivables, prepaid and other current assets, trade accounts payable, accrued salaries and wages and other current liabilities at approximated fair value. Certain other investments and derivatives are recorded as Level 1, 2 or 3 instruments. The equity investment in Ocado is measured at fair value through net earnings. The fair value of all shares owned, which is measured using Level 1 inputs, was $558 and $987 as of August 13, 2022 and January 29, 2022, respectively, and is included in “Other assets” in the Company’s Consolidated Balance Sheets. An unrealized loss for this Level 1 investment of approximately $429 and $601 for the first two quarters of 2022 and 2021, respectively, is included in “Gain (loss) on investments” in the Company’s Consolidated Statements of Operations. An unrealized gain of $103 and unrealized loss of $122 for this Level 1 investment was recorded for the second quarters of 2022 and 2021, respectively, and is included in the “Gain (loss) on investments” in the Company’s Consolidated Statements of Operations. Refer to Note 2 for the disclosure of debt instrument fair values.

​

​

2.	DEBT OBLIGATIONS

​

Long-term debt consists of:

​

​	​	​	​	​	​	​
​	​	August 13,		​	January 29,
​		2022			2022
1.70% to 8.00% Senior Notes due through 2049	​	$	10,211	​	$	10,607
Other	​		1,114	​		1,138
​	​	​	​	​	​	​
Total debt, excluding obligations under finance leases	​		11,325	​		11,745
Less current portion	​		(652)	​		(451)
​	​	​	​	​	​	​
Total long-term debt, excluding obligations under finance leases	​	$	10,673	​	$	11,294

​

The fair value of the Company’s long-term debt, including current maturities, was estimated based on the quoted market prices for the same or similar issues adjusted for illiquidity based on available market evidence. If quoted market prices were not available, the fair value was based upon the net present value of the future cash flow using the forward interest rate yield curve in effect at August 13, 2022 and January 29, 2022. At August 13, 2022, the fair value of total debt was $11,094 compared to a carrying value of $11,325. At January 29, 2022, the fair value of total debt was $13,189 compared to a carrying value of $11,745.

​

Additionally, in the first two quarters of 2022, the Company repaid $400 of senior notes bearing an interest rate of 2.80% using cash on hand.

​

During the first quarter of 2021, the Company acquired 28, previously leased, properties for a purchase price of $455. Separately, the Company also entered into a transaction to sell those properties to a third party for total proceeds of $621. Total cash proceeds received as a result of the transactions was $166. The sale transaction did not qualify for sale-leaseback accounting treatment. As a result, the Company recorded property, plant and equipment for the $455 price paid and recorded a $621 financing obligation. The leases have a base term of 25 years and twelve option periods of five years each. The Company has the option to purchase the individual properties for fair market value at the end of the base term or at the end of any option period. The Company is obligated to repurchase the properties at the end of the base term for $300 if the lessor exercises its put option.

​

​

3.	BENEFIT PLANS

​

The following table provides the components of net periodic benefit cost for the company-sponsored defined benefit pension plans and other post-retirement benefit plans for the second quarters of 2022 and 2021:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Second Quarter Ended
​	​	Pension Benefits					​	Other Benefits
​	​	August 13,		​	August 14,		​	August 13,		​	August 14,
​		2022			2021			2022			2021
Components of net periodic benefit cost (benefit):	​	​	​	​	​	​	​	​	​	​	​	​	​
Service cost		$	2		$	4		$	1		$	1	​
Interest cost	​		24	​		22	​		—	​		1	​
Expected return on plan assets	​		(35)	​		(40)	​		—	​		—	​
Amortization of:	​	​	​	​	​	​	​	​	​	​	​	​	​
Prior service cost	​		—	​		—	​		(3)	​		(3)	​
Actuarial loss (gain)	​		6	​		9	​		(3)	​		(4)	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net periodic benefit cost (benefit)		$	(3)		$	(5)		$	(5)		$	(5)	​

​

The following table provides the components of net periodic benefit cost for the company-sponsored defined benefit pension plans and other post-retirement benefit plans for the first two quarters of 2022 and 2021:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Two Quarters Ended
​	​	Pension Benefits					​	Other Benefits
​	​	August 13,		​	August 14,		​	August 13,		​	August 14,
​		2022			2021			2022			2021
Components of net periodic benefit cost (benefit):	​	​	​	​	​	​	​	​	​	​	​	​	​
Service cost		$	5		$	7		$	2		$	2	​
Interest cost	​		54	​		54	​		3	​		2	​
Expected return on plan assets	​		(82)	​		(93)	​		—	​		—	​
Amortization of:	​	​	​	​	​	​	​	​	​	​	​	​	​
Prior service cost	​		—	​		—	​		(7)	​		(7)	​
Actuarial loss (gain)	​		14	​		21	​		(8)	​		(10)	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net periodic benefit cost (benefit)		$	(9)		$	(11)		$	(10)		$	(13)	​

​

The Company is not required to make any contributions to its company-sponsored pension plans in 2022, but may make contributions to the extent such contributions are beneficial to the Company. The Company did not make any contributions to its company-sponsored pension plans in the first two quarters of 2022 and 2021.

​

The Company contributed $175 and $158 to employee 401(k) retirement savings accounts in the first two quarters of 2022 and 2021, respectively.

​

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. In addition to the recurring multi-employer pension contributions the Company makes in the normal course of business, in the first two quarters of 2021, the Company contributed an incremental $106, $81 net of tax, to multi-employer pension plans, helping stabilize future associate benefits.

​

During the first quarter of 2021, associates within the Fred Meyer and QFC divisions ratified an agreement for the transfer of liabilities from the Sound Retirement Trust to the UFCW Consolidated Pension Plan. The Company transferred $449, $344 net of tax, in net accrued pension liabilities and prepaid escrow funds to fulfill obligations for past service for associates and retirees. The agreement will be satisfied by cash installment payments to the UFCW Consolidated Pension Plan and will be paid evenly over seven years.

​

​

4.	EARNINGS PER COMMON SHARE

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Second Quarter Ended							​	Second Quarter Ended							​	​
​	​	August 13, 2022							​	August 14, 2021							​
​		​	​		​		Per			​	​		​		Per		​	​
​	​	Earnings		​	Shares	​	Share		​	Earnings		​	Shares	​	Share		​	​
​	​	(Numerator)		​	(Denominator)	​	Amount		​	(Numerator)		​	(Denominator)	​	Amount		​	​
Net earnings attributable to The Kroger Co. per basic common share	​	$	724		716	​	$	1.01	​	$	462		746	​	$	0.62	​	​
Dilutive effect of stock options	​	​	​		9	​	​	​	​	​	​		9	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net earnings attributable to The Kroger Co. per diluted common share	​	$	724		725	​	$	1.00	​	$	462		755	​	$	0.61	​	​

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Two Quarters Ended							​	Two Quarters Ended							​
​	​	August 13, 2022							​	August 14, 2021							​
​		​	​		​		Per			​	​		​		Per
​	​	Earnings		​	Shares	​	Share		​	Earnings		​	Shares	​	Share		​
​	​	(Numerator)		​	(Denominator)	​	Amount		​	(Numerator)		​	(Denominator)	​	Amount
Net earnings attributable to The Kroger Co. per basic common share	​	$	1,381		720	​	$	1.92	​	$	601		750	​	$	0.80	​
Dilutive effect of stock options	​	​	​		10	​	​	​	​	​	​		8	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net earnings attributable to The Kroger Co. per diluted common share	​	$	1,381		730	​	$	1.89	​	$	601		758	​	$	0.79	​

​

The Company had combined undistributed and distributed earnings to participating securities totaling $7 and $5 in the second quarters of 2022 and 2021, respectively. For the first two quarters of 2022 and 2021, the Company had combined undistributed and distributed earnings to participating securities of $13 and $6, respectively.

​

The Company had options outstanding for approximately 2 million shares during each of the second quarters of 2022 and 2021 that were excluded from the computations of net earnings per diluted common share because their inclusion would have had an anti-dilutive effect on net earnings per share. The Company had options outstanding for approximately 1 million and 8 million shares during the first two quarters of 2022 and 2021, respectively, that were excluded from the computations of net earnings per diluted common share because their inclusion would have had an anti-dilutive effect on net earnings per share.

​

​

5.	LEASES AND LEASE-FINANCED TRANSACTIONS

​

On May 17, 2018, the Company entered into a Partnership Framework Agreement with Ocado International Holdings Limited and Ocado Group plc (“Ocado”), which has since been amended. Under this agreement, Ocado will partner exclusively with the Company in the U.S., enhancing the Company’s digital and robotics capabilities in its distribution networks. In the first two quarters of 2022, the Company opened three additional Kroger Delivery customer fulfillment centers in Romulus, Michigan, Dallas, Texas and Pleasant Prairie, Wisconsin, which brings the Company’s total Kroger Delivery customer fulfillment centers to six as of August 13, 2022. The Company determined the arrangement with Ocado contains a lease of the robotic equipment used to fulfill customer orders. As a result, the Company establishes a finance lease when each facility begins fulfilling orders to customers. The base term of each lease is 10 years with options to renew at the Company’s sole discretion. The Company elected to combine the lease and non-lease elements in the contract. As a result, the Company will account for all payments to Ocado as lease payments. During the first two quarters of 2022, the Company recorded finance lease assets of $429 and finance lease liabilities of $391 related to the Company’s agreement with Ocado.

​

6.	COMMITMENTS AND CONTINGENCIES

​

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

​

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

​

The principal contingencies are described below:

​

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

​

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

​

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

​

​

The Company is one of dozens of companies that have been named in various lawsuits alleging that defendants contributed to create a public nuisance through the distribution and dispensing of opioids. At present, the Company is named in a significant number of lawsuits pending in various state courts as well as in the United States District Court for the Northern District of Ohio, where over 2,000 cases have been consolidated as Multi-District Litigation ("MDL") pursuant to 28 U.S.C. §1407 in a case entitled In re National Prescription Opiate Litigation. Most of these cases have been stayed but Kroger entities have been named in five bellwether cases that are proceeding on a staggered discovery schedule before Judge Polster, the MDL judge. Once discovery is completed, those cases will be remanded to the originating federal court for trial. The Company is vigorously defending these matters and believes that these cases are without merit. At this stage in the proceedings, the Company is unable to determine the probability of the outcome of these matters or the range of reasonably possible loss, if any.

​

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

​

7.	ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

​

The following table represents the changes in AOCI by component for the first two quarters of 2022 and 2021:

​

​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	Pension and		​	​	​
​	​	Cash Flow		​	Postretirement		​	​	​
​	​	Hedging		​	Defined Benefit		​	​	​
​		Activities(1)			Plans(1)			Total(1)
Balance at January 30, 2021	​	$	(54)	​	$	(576)	​	$	(630)
Amounts reclassified out of AOCI(2)	​	​	3	​		2	​		5
Net current-period OCI	​	​	3	​		2	​		5
Balance at August 14, 2021	​	$	(51)	​	$	(574)	​	$	(625)
​	​	​	​	​	​	​	​	​	​
Balance at January 29, 2022	​	$	(47)	​	$	(420)	​	$	(467)
Amounts reclassified out of AOCI(2)	​		4	​	​	(1)	​		3
Net current-period OCI	​		4	​		(1)	​		3
Balance at August 13, 2022	​	$	(43)	​	$	(421)	​	$	(464)

(1)	All amounts are net of tax.

(2)	Net of tax of $4 for cash flow hedging activities and $2 for pension and postretirement defined benefit plans for the first two quarters of 2021. Net of tax of $1 for cash flow hedging activities for the first two quarters of 2022.

​

​

The following table represents the items reclassified out of AOCI and the related tax effects for the second quarters and first two quarters of 2022 and 2021:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Second Quarter Ended					​	Two Quarters Ended
​		August 13,			August 14,			August 13,			August 14,
​	​	2022		​	2021		​	2022		​	2021		​
Cash flow hedging activity items	​	​	​	​	​	​	​	​	​	​	​	​	​
Amortization of gains and losses on cash flow hedging activities(1)	​	$	2	​	$	4	​	$	5	​	$	7	​
Tax expense	​		—	​		(3)	​		(1)	​		(4)	​
Net of tax	​		2	​		1	​		4	​		3	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pension and postretirement defined benefit plan items	​	​	​	​	​	​	​	​	​	​	​	​	​
Amortization of amounts included in net periodic pension cost(2)	​		—	​		2			(1)			4	​
Tax expense			(1)			(1)			—			(2)	​
Net of tax			(1)			1			(1)			2	​
Total reclassifications, net of tax		$	1		$	2		$	3		$	5	​

(1)	Reclassified from AOCI into interest expense.

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

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8.	INCOME TAXES

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The effective income tax rate was 22.3% for the second quarter of 2022 and 21.1% for the second quarter of 2021. The effective income tax rate was 20.3% for the first two quarters of 2022 and 20.9% for the first two quarters of 2021. The effective income tax rate for the second quarters of 2022 and 2021 differed from the federal statutory rate due to the effect of state income taxes, partially offset by the benefit from share-based payments and the utilization of tax credits. The effective income tax rate for the first two quarters of 2022 and 2021 differed from the federal statutory rate due to the benefit from share-based payments and the utilization of tax credits, partially offset by the effect of state income taxes.

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9.	SUBSEQUENT EVENT

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On September 9, 2022, the Company’s Board of Directors approved a $1,000 share repurchase program. The previous repurchase program was exhausted subsequent to the end of the second quarter of 2022.

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

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CAUTIONARY STATEMENT

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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 “achieve,” “affect,” “anticipate,” “believe,” “committed,” “confident,” “continue,” “could,” “estimate,” “expect,” “future,” “guidance,” “maintain,” “may,” “strategy,” “target,” “trend,” “will,” and “would,” and similar words or phrases. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially. These include the specific risk factors identified in “Risk Factors” in our Annual Report on Form 10-K for our last fiscal year and any subsequent filings, as well as those identified in this Form 10-Q.

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

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	●	The extent to which our sources of liquidity are sufficient to meet our requirements may be affected by the state of the financial markets and the effect that such condition has on our ability to issue commercial paper at acceptable rates. Our ability to borrow under our committed lines of credit, including our bank credit facilities, could be impaired if one or more of our lenders under those lines is unwilling or unable to honor its contractual obligation to lend to us, or in the event that global pandemics, including the ongoing COVID-19 pandemic (including any variant), 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.

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	●	Our ability to achieve sales, earnings and incremental FIFO operating profit goals may be affected by: COVID-19 pandemic related factors, risks and challenges, including among others, the length of time that the pandemic continues, future variants, mutations or related strains of the virus and the effectiveness of vaccines against variants, continued efficacy of vaccines over time and availability of vaccine boosters, the extent of vaccine refusal, and global access to vaccines, as well as the effect of vaccine and/or testing mandates and related regulations, the potential for additional future spikes in infection and illness rates including breakthrough infections among the fully vaccinated, and the corresponding potential for disruptions in workforce availability and customer shopping patterns, re-imposed restrictions as a result of resurgence and the corresponding future easing of restrictions, and interruptions in domestic and global supply chains or capacity constraints; whether and when the global pandemic will become endemic, the pace of recovery when the pandemic subsides or becomes endemic, which may vary materially over time and among the different regions we serve; labor negotiations; potential work stoppages; changes in the unemployment rate; pressures in the labor market; changes in government-funded benefit programs; changes in the types and numbers of businesses that compete with us; pricing and promotional activities of existing and new competitors, including non-traditional competitors, and the aggressiveness of that competition; our response to these actions; the state of the economy, including interest rates, the current inflationary environment and future potential inflationary and/or deflationary trends and such trends in certain commodities, products and/or operating costs; the geopolitical environment including the war in Ukraine; unstable political situations and social unrest; changes in tariffs; the effect that fuel costs have on consumer spending; volatility of fuel margins; manufacturing commodity costs; supply constraints; diesel fuel costs related to our logistics operations; trends in consumer spending; the extent to which our customers exercise caution in their purchasing in response to economic conditions; the uncertainty of economic growth or recession; stock repurchases; changes in the regulatory environment in which we operate; our ability to retain pharmacy sales from third party payors; consolidation in the healthcare industry, including pharmacy benefit managers; our ability to negotiate modifications to multi-employer pension plans; natural disasters or adverse weather conditions; the effect of public health crises or other significant catastrophic events; the potential costs and risks associated with potential cyber-attacks or data security breaches; the success of our future growth plans; the ability to execute our growth strategy and value creation model, including continued cost savings, growth of our alternative profit businesses, and our ability to better serve our customers and to generate customer loyalty and sustainable growth through our strategic pillars of fresh, Our Brands, personalization, and seamless; and the successful integration of merged companies and new partnerships.

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

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

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

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

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Kroger has developed multiple levers within our business model to deliver net earnings growth and consistent and attractive total shareholder return (“TSR”). Our execution of this model is allowing us to deliver today and invest for the future. The foundation of our value creation model is our omnichannel position in food retail, which is built on Kroger’s unique assets: our stores, digital ecosystem, Our Brands and our data. These unique assets, when combined with our go-to-market strategy, deliver an unmatched value proposition for our customers. We continue to build long-term customer loyalty through Fresh, Our Brands, Data and Personalization and our seamless ecosystem, to drive sustainable sales growth in our retail supermarket business, including fuel and health and wellness. This, in turn, generates the data and traffic that enables our fast-growing, high operating margin alternative profits. We are evolving from a traditional food retailer into a more diverse, food first business that we expect will consistently deliver net earnings growth in the future. This will be achieved by:

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| | ● | Growing identical sales without fuel. Our plan involves maximizing growth opportunities in our supermarket business and is supported by continued strategic investments in our customers, associates, and our seamless ecosystem to ensure we deliver a full, friendly and fresh experience for every customer, every time. Part of our growth plan

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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 29, 2022.

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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 August 13, 2022, 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.

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The Company is in the process of implementing a broad, multi-year, technology transformation project to modernize mainframe, middleware and legacy systems to achieve better process efficiencies across customer service, merchandising, sourcing, payroll and accounting through the use of various solutions. There have been no material additional implementations of modules during the quarter ended August 13, 2022. As the Company’s technology transformation project continues, the Company continues to emphasize the maintenance of effective internal controls and assessment of the design and operating effectiveness of key control activities throughout development and deployment of each phase and will evaluate as additional phases are deployed.

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There were no changes in Kroger’s internal control over financial reporting that materially affected, or were reasonably likely to materially affect, Kroger’s internal control over financial reporting during the quarter ended August 13, 2022.

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PART II - OTHER INFORMATION

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Incorporated by reference herein is information regarding certain legal proceedings in which we are involved as set forth under “Litigation” contained in Note 6 – “Commitments and Contingencies” in the Notes to the Consolidated Financial Statements in Item 1 of Part I of this Quarterly Report on Form 10-Q.

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

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(c)

ISSUER PURCHASES OF EQUITY SECURITIES

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​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	Approximate
​	​	​	​	​	​	​	​	​	Dollar Value of
​	​	​	​	​	​	​	​	​	Shares that May
​	​	​	​	​	​	​	Total Number of	​	Yet Be
​	​	​	​	​	​	​	Shares Purchased	​	Purchased
​	​	Total Number	​	Average		​	as Part of Publicly	​	Under the Plans
​	​	of Shares	​	Price Paid Per		​	Announced Plans	​	or Programs(4)
Period(1)		Purchased(2)		Share(2)			or Programs(3)		(in millions)
First four weeks	​	​	​	​	​	​	​	​	​	​	​
May 22, 2022 to June 18, 2022		3,903,166		$	51.09		3,903,086		$	102	​
Second four weeks	​	​	​	​	​	​	​	​	​	​	​
June 19, 2022 to July 16, 2022		3,092,495		$	48.10		2,168,963		$	1	​
Third four weeks	​	​	​	​	​	​	​	​	​	​	​
July 17, 2022 to August 13, 2022		98,937		$	47.03		98,937		$	1	​
Total		7,094,598		$	49.73		6,170,986		$	1	​

(1)	The reported periods conform to our fiscal calendar composed of thirteen 28-day periods. The second quarter of 2022 contained three 28-day periods.

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(2)

Includes (i) shares repurchased under the December 2021 Repurchase Program described below in (4), (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 (“1999 Repurchase Program”) and (iii) 923,612 shares that were surrendered to the Company by participants under our long-term incentive plans to pay for taxes on restricted stock awards.

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(3)	Represents shares repurchased under the December 2021 Repurchase Program and the 1999 Repurchase Program.

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(4)

On December 30, 2021, our Board of Directors approved a $1.0 billion share repurchase program to reacquire shares via open market purchase or privately negotiated transactions, block trades, or pursuant to trades intending to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “December 2021 Repurchase Program”). The amounts shown in this column reflect the amount remaining under the December 2021 Repurchase Program as of the specified period end dates. Amounts available under the 1999 Repurchase Program are dependent upon option exercise activity. The December 2021 Repurchase Program and the 1999 Repurchase Program do not have an expiration date but may be suspended or terminated by our Board of Directors at any time. The December 2021 Repurchase Program was exhausted subsequent to the end of the second quarter of 2022. On September 9, 2022, our Board of Directors approved a $1.0 billion share repurchase program to reacquire shares via open market purchase or privately negotiated transactions, block trades, or pursuant to trades intending to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “September 2022 Repurchase Program”). The September 2022 Repurchase Program does not have an expiration date but may be suspended or terminated by our Board of Directors at any time.

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EXHIBIT 3.1	-	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, as amended by the Amendment to Amended Articles of Incorporation, which is hereby incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended May 23, 2015.
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EXHIBIT 3.2	-	The Company’s regulations are hereby incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the SEC on June 27, 2019.
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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.
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EXHIBIT 10.1	​	The Kroger Co. 2019 Amended and Restated Long-Term Incentive Plan which is hereby incorporated by reference to Exhibit 99.1 of the Company’s Form S-8 filed with the SEC on July 6, 2022.
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EXHIBIT 31.1*	-	Rule 13a—14(a) / 15d—14(a) Certifications — Chief Executive Officer.
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EXHIBIT 31.2*	-	Rule 13a—14(a) / 15d—14(a) Certifications — Chief Financial Officer.
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EXHIBIT 32.1*	-	Section 1350 Certifications.
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EXHIBIT 101.INS*	-	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
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EXHIBIT 101.SCH*	-	XBRL Taxonomy Extension Schema Document.
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EXHIBIT 101.CAL*	-	XBRL Taxonomy Extension Calculation Linkbase Document.
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EXHIBIT 101.DEF*	-	XBRL Taxonomy Extension Definition Linkbase Document.
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EXHIBIT 101.LAB*	-	XBRL Taxonomy Extension Label Linkbase Document.
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EXHIBIT 101.PRE*	-	XBRL Taxonomy Extension Presentation Linkbase Document.
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EXHIBIT 104	-	Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
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*Filed herewith	​	​
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SIGNATURES

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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.

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​	THE KROGER CO.
​	​
Dated: September 16, 2022	By:	/s/ W. Rodney McMullen
​	​	W. Rodney McMullen
​	​	Chairman of the Board and Chief Executive Officer
​	​	​
Dated: September 16, 2022	By:	/s/ Gary Millerchip
​	​	Gary Millerchip
​	​	Senior Vice President and Chief Financial Officer

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