Cover and table of contents

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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

​

For the quarterly period ended August 17, 2024

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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​

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The Kroger Co.

(Exact name of registrant as specified in its charter)

​

​

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

​

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

(Address of principal executive offices)

(Zip Code)

​

(513) 762-4000

(Registrant’s telephone number, including area code)

​

Unchanged

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

​

​

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

​

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

​

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

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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 723,486,278 shares of Common Stock ($1 par value) outstanding as of September 17, 2024.

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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)

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Second Quarter Ended					​	Two Quarters Ended					​
​	​	August 17,		​	August 12,		​	August 17,		​	August 12,		​
(In millions, except per share amounts)		2024			2023			2024			2023
Sales	​	$	33,912	​	$	33,853	​	$	79,181	​	$	79,018	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating expenses	​	​	​	​	​	​	​	​	​	​	​	​	​
Merchandise costs, including advertising, warehousing, and transportation, excluding items shown separately below	​		26,261	​		26,475	​		61,385	​		61,555	​
Operating, general and administrative	​		5,886	​		6,935	​		13,490	​		14,328	​
Rent	​		199	​		206	​		469	​		470	​
Depreciation and amortization	​		751	​		716	​		1,728	​		1,674	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Operating profit (loss)	​		815	​		(479)	​		2,109	​		991	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Other income (expense)	​	​	​	​	​	​	​	​	​	​	​	​	​
Interest expense	​	​	(84)	​	​	(93)	​	​	(207)	​	​	(247)	​
Non-service component of company-sponsored pension plan benefits	​	​	3	​	​	8	​	​	6	​	​	17	​
(Loss) gain on investments	​	​	(121)	​	​	367	​	​	(105)	​	​	290	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net earnings (loss) before income tax expense	​		613	​		(197)	​		1,803	​		1,051	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Income tax expense (benefit)	​		148	​		(18)	​		382	​		268	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net earnings (loss) including noncontrolling interests	​		465	​		(179)	​		1,421	​		783	​
Net income (loss) attributable to noncontrolling interests	​		(1)	​		1	​		8	​		1	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net earnings (loss) attributable to The Kroger Co.	​	$	466	​	$	(180)	​	$	1,413	​	$	782	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net earnings (loss) attributable to The Kroger Co. per basic common share	​	$	0.64	​	$	(0.25)	​	$	1.94	​	$	1.08	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Average number of common shares used in basic calculation	​		723	​		719	​		722	​		718	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net earnings (loss) attributable to The Kroger Co. per diluted common share	​	$	0.64	​	$	(0.25)	​	$	1.93	​	$	1.07	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Average number of common shares used in diluted calculation	​		727	​		719	​		728	​		725	​

​

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

​

​

THE KROGER CO.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​
​		Second Quarter Ended					​	Two Quarters Ended					​
​	​	August 17,		​	August 12,		​	August 17,		​	August 12,		​
(In millions)		2024			2023			2024			2023
Net earnings (loss) including noncontrolling interests	​	$	465	​	$	(179)	​	$	1,421	​	$	783	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Other comprehensive (loss) income	​	​	​	​	​	​	​	​	​	​	​	​	​
Change in pension and other postretirement defined benefit plans, net of income tax(1)	​	​	—	​	​	(3)	​	​	(2)	​	​	(7)	​
Unrealized gains and losses on cash flow hedging activities, net of income tax(2)	​		(123)	​		105	​		(53)	​		196	​
Amortization of unrealized gains and losses on cash flow hedging activities, net of income tax(3)	​	​	2	​	​	2	​	​	4	​	​	3	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Total other comprehensive (loss) income	​		(121)	​		104	​		(51)	​	​	192	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Comprehensive income (loss)	​		344	​		(75)	​		1,370	​		975	​
Comprehensive (loss) income attributable to noncontrolling interests	​		(1)	​		1	​		8	​		1	​
Comprehensive income (loss) attributable to The Kroger Co.	​	$	345	​	$	(76)	​	$	1,362	​	$	974	​

(1)	Amount is net of tax of $(1) for the second quarters of 2024 and 2023. Amount is net of tax of $(1) for the first two quarters of 2024 and $(2) for the first two quarters of 2023.

(2)	Amount is net of tax of $(37) for the second quarter of 2024 and $33 for the second quarter of 2023. Amount is net of tax of $(16) for the first two quarters of 2024 and $59 for the first two quarters of 2023.

(3)	Amount is net of tax of $1 for the first two quarters of 2024 and 2023.

​

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

​

​

​

THE KROGER CO.

CONSOLIDATED BALANCE SHEETS

(unaudited)

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​	​	​	​	​	​	​	​
​		August 17,			February 3,
(In millions, except par amounts)	​	2024		​	2024
ASSETS	​	​	​	​	​	​	​
Current assets	​	​	​	​	​	​	​
Cash and temporary cash investments	​	$	2,786	​	$	1,883	​
Store deposits in-transit	​		1,091	​		1,215	​
Receivables	​		2,149	​		2,136	​
FIFO inventory	​		9,014	​		9,414	​
LIFO reserve	​		(2,371)	​		(2,309)	​
Assets held for sale	​		589	​		—	​
Prepaid and other current assets	​	​	805	​	​	609	​
Total current assets	​		14,063	​		12,948	​
​	​	​	​	​	​	​	​
Property, plant and equipment, net	​		25,708	​		25,230	​
Operating lease assets	​	​	6,786	​	​	6,692	​
Intangibles, net	​		866	​		899	​
Goodwill	​		2,673	​		2,916	​
Other assets	​		1,347	​		1,820	​
​	​	​	​	​	​	​	​
Total Assets	​	$	51,443	​	$	50,505	​
​	​	​	​	​	​	​	​
LIABILITIES	​	​	​	​	​	​	​
Current liabilities	​	​	​	​	​	​	​
Current portion of long-term debt including obligations under finance leases	​	$	196	​	$	198	​
Current portion of operating lease liabilities	​	​	666	​	​	670	​
Accounts payable	​		10,344	​		10,381	​
Accrued salaries and wages	​		1,261	​		1,323	​
Liabilities held for sale	​	​	192	​	​	—	​
Other current liabilities	​		3,473	​		3,486	​
Total current liabilities	​		16,132	​		16,058	​
​	​	​	​	​	​	​	​
Long-term debt including obligations under finance leases	​	​	12,034	​	​	12,028	​
Noncurrent operating lease liabilities	​	​	6,485	​	​	6,351	​
Deferred income taxes	​		1,531	​		1,579	​
Pension and postretirement benefit obligations	​		377	​		385	​
Other long-term liabilities	​		2,372	​		2,503	​
​	​	​	​	​	​	​	​
Total Liabilities	​		38,931	​		38,904	​
​	​	​	​	​	​	​	​
Commitments and contingencies see Note 5	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
SHAREOWNERS’ EQUITY	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​
Preferred shares, $100 par per share, 5 shares authorized and unissued	​	​	—	​	​	—	​
Common shares, $1 par per share, 2,000 shares authorized; 1,918 shares issued in 2024 and 2023	​		1,918	​		1,918	​
Additional paid-in capital	​		3,987	​		3,922	​
Accumulated other comprehensive loss	​		(540)	​		(489)	​
Accumulated earnings	​		27,917	​		26,946	​
Common shares in treasury, at cost, 1,194 shares in 2024 and 1,198 shares in 2023	​		(20,764)	​		(20,682)	​
​	​	​	​	​	​	​	​
Total Shareowners’ Equity - The Kroger Co.	​		12,518	​		11,615	​
Noncontrolling interests	​		(6)	​		(14)	​
​	​	​	​	​	​	​	​
Total Equity	​		12,512	​		11,601	​
​	​	​	​	​	​	​	​
Total Liabilities and Equity	​	$	51,443	​	$	50,505	​

​

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

​

​

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

​

​	​	​	​	​	​	​	​
​	​	Two Quarters Ended					​
​	​	August 17,		​	August 12,		​
(In millions)		2024			2023
Cash Flows from Operating Activities:	​	​	​	​	​	​	​
Net earnings including noncontrolling interests	​	$	1,421	​	$	783	​
Adjustments to reconcile net earnings including noncontrolling interests to net cash provided by operating activities:	​	​	​	​	​	​	​
Depreciation and amortization	​		1,728	​		1,674	​
Operating lease asset amortization	​	​	327	​	​	330	​
LIFO charge	​		62	​		102	​
Share-based employee compensation	​		89	​		92	​
Deferred income taxes	​		(31)	​		(278)	​
Gain on the sale of assets	​	​	(9)	​	​	(43)	​
Loss (gain) on investments	​	​	105	​	​	(290)	​
Other	​		41	​		78	​
Changes in operating assets and liabilities:	​	​	​	​	​	​	​
Store deposits in-transit	​		124	​		(14)	​
Receivables	​		(256)	​		227	​
Inventories	​		271	​		630	​
Prepaid and other current assets	​		(202)	​		68	​
Accounts payable	​		176	​		403	​
Accrued expenses	​		(74)	​		(359)	​
Income taxes receivable and payable	​		95	​	​	252	​
Operating lease liabilities	​	​	(296)	​	​	(378)	​
Other	​		(107)	​		1,087	​
​	​	​	​	​	​	​	​
Net cash provided by operating activities	​		3,464	​		4,364	​
​	​	​	​	​	​	​	​
Cash Flows from Investing Activities:	​	​	​	​	​	​	​
Payments for property and equipment, including payments for lease buyouts	​		(2,179)	​		(1,954)	​
Proceeds from sale of assets	​		309	​	​	89	​
Other	​		(35)	​		70	​
​	​	​	​	​	​	​	​
Net cash used by investing activities	​		(1,905)	​		(1,795)	​
​	​	​	​	​	​	​	​
Cash Flows from Financing Activities:	​	​	​	​	​	​	​
Payments on long-term debt including obligations under finance leases	​		(99)	​	​	(708)	​
Dividends paid	​	​	(420)	​	​	(376)	​
Proceeds from issuance of capital stock	​	​	93	​		36	​
Treasury stock purchases	​		(116)	​		(47)	​
Other	​	​	(100)	​		(69)	​
​	​	​	​	​	​	​	​
Net cash used by financing activities	​		(642)	​		(1,164)	​
​	​	​	​	​	​	​	​
Net increase in cash and temporary cash investments	​		917	​		1,405	​
​	​	​	​	​	​	​	​
Cash and temporary cash investments:	​	​	​	​	​	​	​
Beginning of year	​		1,883	​		1,015	​
End of period see Note 9	​	$	2,800	​	$	2,420	​
​	​	​	​	​	​	​	​
Reconciliation of capital investments:	​	​	​	​	​	​	​
Payments for property and equipment, including payments for lease buyouts	​	$	(2,179)	​	$	(1,954)	​
Payments for lease buyouts	​	​	46	​		—	​
Changes in construction-in-progress payables	​		57	​		183	​
Total capital investments, excluding lease buyouts	​	$	(2,076)	​	$	(1,771)	​
​	​	​	​	​	​	​	​
Disclosure of cash flow information:	​	​	​	​	​	​	​
Cash paid during the year for interest	​	$	192	​	$	308	​
Cash paid during the year for income taxes	​	$	197	​	$	290	​

​

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

​

​

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS’ EQUITY

(unaudited)

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	Accumulated		​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	Additional		​	​	​	​	​	​	Other		​	​	​	​	​	​	​	​	​
​	​	Common Stock				​	Paid-In		​	Treasury Stock				​	Comprehensive		​	Accumulated		​	Noncontrolling		​	​	​
(In millions, except per share amounts)		Shares		Amount			Capital			Shares		Amount			Income (Loss)			Earnings			Interest			Total
Balances at January 28, 2023	​	1,918	​	$	1,918	​	$	3,805		1,202	​	$	(20,650)	​	$	(632)	​	$	25,601	​	$	(28)		$	10,014
Issuance of common stock:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exercised		—	​		—	​		—		(1)	​		23	​		—	​		—	​		—	​		23
Restricted stock issued		—	​		—	​		(72)		(1)	​		30	​		—	​		—	​		—	​		(42)
Treasury stock activity:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exchanged		—	​		—	​		—		—	​		(29)	​		—	​		—	​		—	​		(29)
Share-based employee compensation		—	​		—	​		49		—	​		—	​		—	​		—	​		—	​		49
Other comprehensive income net of tax of $26		—	​		—	​		—		—	​		—	​		88	​		—	​		—	​		88
Other		—	​		—	​		44		—	​		(44)	​		—	​		—	​		3	​		3
Cash dividends declared ($0.26 per common share)		—	​		—	​		—		—	​		—	​		—	​		(188)	​		—	​		(188)
Net earnings including noncontrolling interests		—	​		—	​		—		—	​		—	​		—	​		962	​		—	​		962
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balances at May 20, 2023		1,918		$	1,918		$	3,826		1,200		$	(20,670)		$	(544)		$	26,375		$	(25)		$	10,880
Issuance of common stock:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exercised		—	​		—	​		—		(1)	​		13	​		—	​		—	​		—	​		13
Restricted stock issued		—	​		—	​		(85)		(1)	​		55	​		—	​		—	​		—	​		(30)
Treasury stock activity:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exchanged		—	​		—	​		—		—	​		(18)	​		—	​		—	​		—	​		(18)
Share-based employee compensation		—	​		—	​		43		—	​		—	​		—	​		—	​		—	​		43
Other comprehensive income net of tax of $32		—	​		—	​		—		—	​		—	​		104	​		—	​		—	​		104
Other		—	​		—	​		56		—	​		(56)	​		—	​		—	​		2	​		2
Cash dividends declared ($0.29 per common share)		—	​		—	​		—		—	​		—	​		—	​		(211)	​		—	​		(211)
Net earnings (loss) including noncontrolling interests		—	​		—	​		—		—	​		—	​		—	​		(180)	​		1	​		(179)
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balances at August 12, 2023		1,918		$	1,918		$	3,840		1,198		$	(20,676)		$	(440)		$	25,984		$	(22)		$	10,604
Issuance of common stock:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exercised		—	​		—	​		—		—	​		6	​		—	​		—	​		—	​		6
Restricted stock issued		—	​		—	​		(4)		—	​		—	​		—	​		—	​		—	​		(4)
Treasury stock activity:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exchanged		—	​		—	​		—		—	​		(7)	​		—	​		—	​		—	​		(7)
Share-based employee compensation		—	​		—	​		32		—	​		—	​		—	​		—	​		—	​		32
Other comprehensive income net of income tax of $36		—	​		—	​		—		—	​		—	​		119	​		—	​		—	​		119
Other		—	​		—	​		3		—	​		(3)	​		—	​		—	​		3	​		3
Cash dividends declared ($0.29 per common share)		—	​		—	​		—		—	​		—	​		—	​		(209)	​		—	​		(209)
Net earnings including noncontrolling interests		—	​		—	​		—		—	​		—	​		—	​		646	​		1	​		647
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balances at November 4, 2023		1,918		$	1,918		$	3,871		1,198		$	(20,680)		$	(321)		$	26,421		$	(18)		$	11,191
Issuance of common stock:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exercised		—	​		—	​		—		—	​		8	​		—	​		—	​		—	​		8
Restricted stock issued		—	​		—	​		(2)		(1)	​		3	​		—	​		—	​		—	​		1
Treasury stock activity:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exchanged		—	​		—	​		—		1	​		(8)	​		—	​		—	​		—	​		(8)
Share-based employee compensation		—	​		—	​		48		—	​		—	​		—	​		—	​		—	​		48
Other comprehensive income net of income tax of ($50)		—	​		—	​		—		—	​		—	​		(168)	​		—	​		—	​		(168)
Other		—	​		—	​		5		—	​		(5)	​		—	​		—	​		1	​		1
Cash dividends declared ($0.29 per common share)		—	​		—	​		—		—	​		—	​		—	​		(211)	​		—	​		(211)
Net earnings including noncontrolling interests		—	​		—	​		—		—	​		—	​		—	​		736	​		3	​		739
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balances at February 3, 2024		1,918		$	1,918		$	3,922		1,198		$	(20,682)		$	(489)		$	26,946		$	(14)		$	11,601

​

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

​

​

THE KROGER CO.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREOWNERS’ EQUITY

(unaudited)

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	Accumulated		​	​	​	​	​	​	​	​	​
​	​	​	​	​	​	​	Additional		​	​	​	​	​	​	Other		​	​	​	​	​	​	​	​	​
​	​	Common Stock				​	Paid-In		​	Treasury Stock				​	Comprehensive		​	Accumulated		​	Noncontrolling		​	​	​
(In millions, except per share amounts)		Shares		Amount			Capital			Shares		Amount			Income (Loss)			Earnings			Interest			Total
Balances at February 3, 2024	​	1,918	​	$	1,918	​	$	3,922		1,198	​	$	(20,682)	​	$	(489)	​	$	26,946	​	$	(14)	​	$	11,601
Issuance of common stock:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exercised		—	​		—	​		—		(3)	​		85	​		—	​		—	​		—	​		85
Restricted stock issued		—	​		—	​		(76)		(1)	​		33	​		—	​		—	​		—	​		(43)
Treasury stock activity:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exchanged		—	​		—	​		—		2	​		(103)	​		—	​		—	​		—	​		(103)
Share-based employee compensation		—	​		—	​		57		—	​		—	​		—	​		—	​		—	​		57
Other comprehensive income net of tax of $22		—	​		—	​		—		—	​		—	​		70	​		—	​		—	​		70
Other		—	​		—	​		81		—	​		(81)	​		—	​		—	​		—	​		—
Cash dividends declared ($0.29 per common share)		—	​		—	​		—		—	​		—	​		—	​		(210)	​		—	​		(210)
Net earnings including noncontrolling interests		—	​		—	​		—		—	​		—	​		—	​		947	​		9	​		956
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balances at May 25, 2024		1,918		$	1,918		$	3,984		1,196		$	(20,748)		$	(419)		$	27,683		$	(5)		$	12,413
Issuance of common stock:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exercised		—	​		—	​		—		—	​		8	​		—	​		—	​		—	​		8
Restricted stock issued		—	​		—	​		(96)		(2)	​		56	​		—	​		—	​		—	​		(40)
Treasury stock activity:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Stock options exchanged		—	​		—	​		—		—	​		(13)	​		—	​		—	​		—	​		(13)
Share-based employee compensation		—	​		—	​		32		—	​		—	​		—	​		—	​		—	​		32
Other comprehensive income net of tax of ($38)		—	​		—	​		—		—	​		—	​		(121)	​		—	​		—	​		(121)
Other		—	​		—	​		67		—	​		(67)	​		—	​		—	​		—	​		—
Cash dividends declared ($0.32 per common share)		—	​		—	​		—		—	​		—	​		—	​		(232)	​		—	​		(232)
Net earnings (loss) including noncontrolling interests		—	​		—	​		—		—	​		—	​		—	​		466	​		(1)	​		465
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Balances at August 17, 2024		1,918		$	1,918		$	3,987		1,194		$	(20,764)		$	(540)		$	27,917		$	(6)		$	12,512

​

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

​

​

​

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

​

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

​

1.	ACCOUNTING POLICIES

​

Basis of Presentation and Principles of Consolidation

​

The accompanying financial statements include the consolidated accounts of The Kroger Co., its wholly-owned subsidiaries and other consolidated entities. The February 3, 2024 balance sheet was derived from audited financial statements and, due to its summary nature, does not include all disclosures required by generally accepted accounting principles (“GAAP”). Significant intercompany transactions and balances have been eliminated. References to the “Company” in these Consolidated Financial Statements mean the consolidated company.

​

In the opinion of management, the accompanying unaudited Consolidated Financial Statements include adjustments, all of which are of a normal, recurring nature that are necessary for a fair statement of results of operations for such periods but should not be considered as indicative of results for a full year. The financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted, pursuant to SEC regulations. Accordingly, the accompanying Consolidated Financial Statements should be read in conjunction with the financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2024.

​

The unaudited information in the Consolidated Financial Statements for the second quarters ended August 17, 2024 and August 12, 2023 includes the results of operations of the Company for the 12 and 28 week periods then ended.

​

Reclassifications

​

In the fourth quarter of 2023, the Company retrospectively reclassified certain liabilities from “Other current liabilities” to “Accounts payable” on the Consolidated Balance Sheets to better align the presentation of liabilities associated with its third-party financing arrangements and other current liabilities on the Consolidated Balance Sheets with management’s internal reporting. A similar reclassification was made to the Consolidated Statement of Cash Flows resulting in a change to “Accounts payable” and “Accrued expenses” within “Net cash provided by operating activities” for the quarter ended August 12, 2023. The reclassification did not affect total current liabilities on the Company’s Consolidated Balance Sheet or total operating cash flows on the Consolidated Statement of Cash Flows.

​

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 fair value of all financial instruments, measured using Level 1 inputs, was $225 and $578 as of August 17, 2024 and February 3, 2024, respectively, and is included in “Other assets” in the Company’s Consolidated Balance Sheets. An unrealized loss for the Company’s Level 1 investments of approximately $73 and an unrealized gain of approximately $91 for the first two quarters of 2024 and 2023, respectively, is included in “(Loss) gain on investments” in the Company’s Consolidated Statements of Operations. An unrealized gain for the Company’s Level 1 investments of approximately $12 and $255 for the second quarters of 2024 and 2023, respectively, is included in “(Loss) gain on investments” in the Company’s Consolidated Statements of Operations.

​

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

​

The Company's forward-starting interest rate swaps and treasury lock agreements are considered Level 2 instruments. The Company values these forward-starting interest rate swaps and treasury locks using observable forward yield curves. These forward yield curves are classified as Level 2 inputs. Refer to Note 2 for the disclosure of forward-starting interest rate swaps and treasury lock fair values.

​

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

​

Accounts Payable Financing Arrangement

​

The Company has an agreement with a third party to provide an accounts payable tracking system which facilitates participating suppliers’ ability to finance payment obligations from the Company with designated third-party financial institutions. Participating suppliers may, at their sole discretion, make offers to finance one or more payment obligations of the Company prior to their scheduled due dates at a discounted price to participating financial institutions. The Company’s obligations to its suppliers, including amounts due and scheduled payment dates, are not affected by suppliers’ decisions to finance amounts under this arrangement. The payment term that the Company has with participating suppliers under these programs is approximately 90 days.

​

As of August 17, 2024 and February 3, 2024, the Company had $327 and $325, respectively, in “Accounts payable” in the Company’s Consolidated Balance Sheets associated with financing arrangements.

​

2.	DEBT OBLIGATIONS

​

Long-term debt consists of:

​

​	​	​	​	​	​	​
​	​	August 17,		​	February 3,
​		2024			2024
1.70% to 8.00% Senior Notes due through 2049	​	$	9,128	​	$	9,123
Other	​		1,046	​		1,064
​	​	​	​	​	​	​
Total debt, excluding obligations under finance leases	​		10,174	​		10,187
Less current portion	​		(23)	​		(25)
​	​	​	​	​	​	​
Total long-term debt, excluding obligations under finance leases	​	$	10,151	​	$	10,162

​

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 17, 2024 and February 3, 2024. At August 17, 2024, the fair value of total debt was $9,472 compared to a carrying value of $10,174. At February 3, 2024, the fair value of total debt was $9,401 compared to a carrying value of $10,187.

​

​

In the second quarter of 2024, the Company terminated five forward-starting interest rate swaps with a maturity date of August 1, 2027 and an aggregate notional amount totaling $5,350. These forward-starting interest rate swaps were hedging the variability in future benchmark interest payments attributable to changing interest rates on the forecasted issuance of fixed-rate debt that was issued in the third quarter of 2024. A notional amount of $2,350 of these forward-starting interest rate swaps was designated as a cash-flow hedge as defined by GAAP. Accordingly, the unamortized gain of $48, $36 net of tax, has been deferred in accumulated other comprehensive income and will be amortized to earnings as the interest payments are made. The remainder of the notional amount of $3,000 of the forward-starting interest rate swaps was not designated as a cash-flow hedge. Accordingly, the changes in the fair value of these forward-starting interest rate swaps not designated as cash-flow hedges were recognized through net earnings. In the second quarters of 2024 and 2023, the Company recognized a realized loss of $133 and an unrealized gain of $112, respectively, related to these forward-starting interest rate swaps that is included in “(Loss) gain on investments” in the Company’s Consolidated Statements of Operations. During the first two quarters of 2024 and 2023, the Company recognized a realized loss of $55 and an unrealized gain of $199, respectively, related to these forward-starting interest rate swaps that is included in “(Loss) gain on investments” in the Company’s Consolidated Statements of Operations.

​

In the second quarter of 2024, the Company entered into two 10-year treasury lock agreements with an aggregate notional amount of $2,100 and a weighted-average interest rate of 3.91% and two 30-year treasury lock agreements with an aggregate notional amount of $3,250 and a weighted-average interest rate of 4.11%. These treasury locks are an agreement used to hedge the U.S. Treasury benchmark interest rate associated with future interest payments on the forecasted issuance of fixed-rate debt that was issued in the third quarter of 2024. These treasury locks were designated as cash-flow hedges as defined by GAAP. Accordingly, the changes in fair value of these treasury locks are recorded to accumulated other comprehensive income and reclassified into net earnings when the hedged transaction affects net earnings. As of August 17, 2024, the fair value of these treasury locks was recorded in “Other assets” for $9 and accumulated other comprehensive income for $7, net of tax.

​

For additional information about the Company’s unsecured bridge loan facility and term loan credit agreement, see Note 10 to the Consolidated Financial Statements. For additional information about the Company’s completed senior notes issuances in the amount of $10,500, amended and restated unsecured revolving credit facility and the termination of the treasury locks, in each case completed subsequent to the second quarter of 2024, see Note 11 to the Consolidated Financial Statements.

​

​

3.	BENEFIT PLANS

​

The following table provides the components of net periodic benefit cost (benefit) for the company-sponsored defined benefit pension plans and other postretirement benefit plans for the second quarters of 2024 and 2023:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Second Quarter Ended
​	​	Pension Benefits					​	Other Benefits
​	​	August 17,		​	August 12,		​	August 17,		​	August 12,
​		2024			2023			2024			2023
Components of net periodic benefit cost (benefit):	​	​	​	​	​	​	​	​	​	​	​	​	​
Service cost		$	1		$	3		$	1		$	1	​
Interest cost	​		30	​		29	​		2	​		2	​
Expected return on plan assets	​		(34)	​		(35)	​		—	​		—	​
Amortization of:	​	​	​	​	​	​	​	​	​	​	​	​	​
Prior service cost	​		—	​		—	​		(1)	​		(3)	​
Actuarial loss (gain)	​		2	​		2	​		(2)	​		(3)	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net periodic benefit cost (benefit)		$	(1)		$	(1)		$	—		$	(3)	​

​

The following table provides the components of net periodic benefit cost (benefit) for the company-sponsored defined benefit pension plans and other post-retirement benefit plans for the first two quarters of 2024 and 2023:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Two Quarters Ended
​	​	Pension Benefits					​	Other Benefits
​	​	August 17,		​	August 12,		​	August 17,		​	August 12,
​		2024			2023			2024			2023
Components of net periodic benefit cost (benefit):	​	​	​	​	​	​	​	​	​	​	​	​	​
Service cost		$	3		$	9		$	2		$	2	​
Interest cost	​		71	​		69	​		5	​		3	​
Expected return on plan assets	​		(79)	​		(80)	​		—	​		—	​
Amortization of:	​	​	​	​	​	0	​	​	​	​	​	0	​
Prior service cost	​		—	​		—	​		(2)	​		(6)	​
Actuarial loss (gain)	​		5	​		4	​		(6)	​		(7)	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net periodic benefit cost (benefit)		$	—		$	2		$	(1)		$	(8)	​

​

The Company is not required to make any contributions to its company-sponsored pension plans in 2024 but may make contributions to the extent such contributions are beneficial to the Company. The Company did not make any significant contributions to its company-sponsored pension plans in the first two quarters of 2024 or 2023.

​

The Company contributed $177 and $179 to employee 401(k) retirement savings accounts in the first two quarters of 2024 and 2023, respectively.

​

​

4.	EARNINGS PER COMMON SHARE

​

Net earnings (loss) attributable to The Kroger Co. per basic common share equals net earnings (loss) attributable to The Kroger Co. less income (loss) allocated to participating securities divided by the weighted-average number of common shares outstanding. Net earnings (loss) attributable to The Kroger Co. per diluted common share equals net earnings (loss) attributable to The Kroger Co. less income (loss) 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 (loss) attributable to The Kroger Co. and shares used in calculating net earnings (loss) attributable to The Kroger Co. per basic common share to those used in calculating net earnings (loss) attributable to The Kroger Co. per diluted common share:

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Second Quarter Ended							​	Second Quarter Ended							​
​	​	August 17, 2024							​	August 12, 2023
​		​	​		​		Per			​	​		​		Per		​
​	​	Earnings		​	Shares	​	Share		​	Earnings		​	Shares	​	Share		​
​	​	(Numerator)		​	(Denominator)	​	Amount		​	(Numerator)		​	(Denominator)	​	Amount		​
Net earnings (loss) attributable to The Kroger Co. per basic common share	​	$	463		723	​	$	0.64	​	$	(179)		719	​	$	(0.25)	​
Dilutive effect of stock options	​	​	​		4	​	​	​	​	​	​		—	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net earnings (loss) attributable to The Kroger Co. per diluted common share	​	$	463		727	​	$	0.64	​	$	(179)		719	​	$	(0.25)	​

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Two Quarters Ended							​	Two Quarters Ended							​
​	​	August 17, 2024							​	August 12, 2023							​
​		​	​		​		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	​	$	1,403		722	​	$	1.94	​	$	775		718	​	$	1.08	​
Dilutive effect of stock options	​	​	​		6	​	​	​	​	​	​		7	​	​	​	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Net earnings attributable to The Kroger Co. per diluted common share	​	$	1,403		728	​	$	1.93	​	$	775		725	​	$	1.07	​

​

The Company had combined undistributed and distributed earnings to participating securities totaling $3 and $(1) in the second quarters of 2024 and 2023, respectively. For the first two quarters of 2024 and 2023, the Company had combined undistributed and distributed earnings to participating securities of $10 and $7, respectively.

​

The Company had options outstanding for approximately 4 million shares during the second quarter of 2024 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. In the second quarter of 2023, there was no dilutive effect of stock options due to the Company having a net loss. The Company had options outstanding for approximately 3 million shares during both the first two quarters of 2024 and 2023 that were excluded from the computations of net earnings per diluted common share because their inclusion would have had an anti-dilutive effect on net earnings per share.

​

5.	COMMITMENTS AND CONTINGENCIES

​

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

​

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

​

​

The principal contingencies are described below:

​

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

​

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

​

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

​

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

​

On September 8, 2023, the Company announced that it reached an agreement in principle with plaintiffs to settle the majority of opioid claims that have been or could be brought against Kroger by states in which they operate, subdivisions, and Native American tribes. Along with the execution of certain non-monetary conditions, the Company has agreed to pay up to $1,200 to states and subdivisions and $36 to Native American tribes in funding for abatement efforts, and approximately $177 to cover attorneys’ fees and costs. States, subdivisions, and the Native American tribes will have an opportunity to opt-in to participate in the settlement, and the Company will have full discretion to determine whether there is sufficient participation for the settlement to become effective. If all conditions are satisfied, the settlement would allow for the full resolution of all claims on behalf of participating states, subdivisions and Native American tribes and is not an admission of any wrongdoing or liability.

​

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

​

The agreement in principle described above includes payments of approximately $1,236 and $177, in equal installments over 11 years and 6 years, respectively. As of August 17, 2024 and February 3, 2024, the Company recorded $284 and $1,129 of the estimated settlement liability in “Other current liabilities” and “Other long-term liabilities,” respectively, in the Company’s Consolidated Balance Sheets. In the first quarter of 2024, the Company made its first annual payment for $138 into an escrow account, which is recorded in “Prepaid and other current assets” in the Company’s Consolidated Balance Sheets. This escrow payment is recorded in “Prepaid and other current assets” within “Changes in operating assets and liabilities” in the Company’s Consolidated Statement of Cash Flows for the first two quarters ended August 17, 2024.

​

During the second quarter of 2024, certain states confirmed their participation or lack of participation in the agreement in principle described above, which resulted in immaterial changes to the settlement amount and timing of payments.

​

​

Because of the conditions remaining to satisfy, the Company cannot predict if the agreement will become effective, and whether unfavorable developments may occur. The amount of the actual loss may differ materially from the accrual estimate recorded as of August 17, 2024.

​

In the first quarter of 2023, the Company recorded a charge of $62 relating to a settlement of opioid litigation claims with the State of West Virginia. The agreed upon settlement framework resolves all opioid lawsuits and claims by the West Virginia Attorney General.

​

The foregoing settlements are not admissions of wrongdoing or liability by the Company and the Company will continue to vigorously defend against any other claims and lawsuits relating to opioids that the settlements do not resolve.

​

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.

​

6.	ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

​

The following table represents the changes in AOCI by component for the first two quarters of 2024 and 2023:

​

​	​	​	​	​	​	​	​	​	​
​	​	​	​	​	Pension and		​	​	​
​	​	Cash Flow		​	Postretirement		​	​	​
​	​	Hedging		​	Defined Benefit		​	​	​
​		Activities(1)			Plans(1)			Total(1)
Balance at January 28, 2023	​	$	(129)	​	$	(503)	​	$	(632)
OCI before reclassifications(2)	​	​	196	​	​	—	​		196
Amounts reclassified out of AOCI(3)	​	​	3	​		(7)	​		(4)
Net current-period OCI	​	​	199	​		(7)	​		192
Balance at August 12, 2023	​	$	70	​	$	(510)	​	$	(440)
​	​	​	​	​	​	​	​	​	​
Balance at February 3, 2024	​	$	60	​	$	(549)	​	$	(489)
OCI before reclassifications(2)	​		(53)	​		—	​		(53)
Amounts reclassified out of AOCI(3)	​		4	​	​	(2)	​		2
Net current-period OCI	​		(49)	​		(2)	​		(51)
Balance at August 17, 2024	​	$	11	​	$	(551)	​	$	(540)

(1)	All amounts are net of tax.

(2)	Net of tax of $59 for cash flow hedging activities for the first two quarters of 2023 and $(16) for the first two quarters of 2024.

(3)	Net of tax of $1 for cash flow hedging activities and $(2) for pension and postretirement defined benefit plans for the first two quarters of 2023. Net of tax of $1 for cash flow hedging activities and $(1) for pension and postretirement defined benefit plans for the first two quarters of 2024.

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The following table represents the items reclassified out of AOCI and the related tax effects for the first two quarters of 2024 and 2023:

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​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Second Quarter Ended					​	Two Quarters Ended
​		August 17,			August 12,			August 17,			August 12,
​	​	2024		​	2023		​	2024		​	2023		​
Cash flow hedging activity items	​	​	​	​	​	​	​	​	​	​	​	​	​
Amortization of gains and losses on cash flow hedging activities(1)	​	$	2	​	$	2	​	$	5	​	$	4	​
Tax expense	​		—	​		—	​		(1)	​		(1)	​
Net of tax	​		2	​		2	​		4	​		3	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​
Pension and postretirement defined benefit plan items	​	​	​	​	​	​	​	​	​	​	​	​	​
Amortization of amounts included in net periodic pension cost(2)	​		(1)	​		(4)			(3)			(9)	​
Tax expense			1			1			1			2	​
Net of tax			—			(3)			(2)			(7)	​
Total reclassifications, net of tax		$	2		$	(1)		$	2		$	(4)	​

(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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7.	INCOME TAXES

The effective income tax rate was 24.1% for the second quarter of 2024 and 9.1% for the second quarter of 2023. The effective income tax rate was 21.2% for the first two quarters of 2024 and 25.5% for the first two quarters of 2023. The effective income tax rate for the second quarter of 2024 differed from the federal statutory rate due to the effect of state income taxes, partially offset by the utilization of tax credits and deductions. The effective tax rate for the first two quarters of 2024 differed from the federal statutory rate due to the effect of state income taxes, partially offset by a tax benefit related to classifying Kroger Specialty Pharmacy as held for sale and the utilization of tax credits and deductions. The effective income tax rate for the second quarter of 2023 reflects a tax benefit resulting from the pre-tax loss that occurred in the second quarter of 2023. The tax benefit was reduced by the nondeductible portion of opioid settlement charges, partially offset by the effect of state income taxes and the utilization of tax credits and deductions. The effective income tax rate for the first two quarters of 2023 differed from the federal statutory rate primarily due to the nondeductible portion of opioid settlement charges and the effect of state income taxes, partially offset by the utilization of tax credits and deductions.

8.	RECENTLY ISSUED ACCOUNTING STANDARDS

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In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This guidance amends existing income tax disclosure guidance, primarily requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation. The ASU is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted and can be applied on either a prospective or retroactive basis. The Company is currently assessing the effect that adoption of this guidance will have on its Consolidated Financial Statements.

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In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The amendments improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The ASU is effective for annual reporting periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024 with early adoption permitted and should be applied on a retroactive basis. The Company is currently assessing the effect that adoption of this guidance will have on its Consolidated Financial Statements and segment disclosures.

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9.	HELD FOR SALE

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During the first quarter of 2024, the Company announced a definitive agreement for the sale of its Kroger Specialty Pharmacy business, subject to customary closing conditions and any regulatory reviews, to CarelonRx, a subsidiary of Elevance Health, for approximately $485, which is expected to complete in the second half of 2024.

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At August 17, 2024, the assets and liabilities related to the Company’s Kroger Specialty Pharmacy business were classified as held for sale in the Consolidated Balance Sheet. The business classified as held for sale will not be reported as discontinued operations, as the disposition does not represent a strategic shift that will have a major effect on the Company’s operations and financial results.

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The “Cash and temporary cash investments” balance classified as held for sale is reflected within “Cash and temporary cash investments” in the Company’s Consolidated Statements of Cash Flows.

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The following table presents information related to the major classes of assets and liabilities that were classified as assets and liabilities held for sale in the Consolidated Balance Sheet as of August 17, 2024:

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​	​	​
​	August 17,
​	2024
Assets held for sale:	​	​
Cash and temporary cash investments	$	14
Receivables	​	152
FIFO inventory	​	129
Prepaid and other current assets	​	3
Property, plant and equipment, net	​	15
Operating lease assets	​	6
Goodwill	​	243
Other assets	​	27
Total assets held for sale	$	589
​	​	​
Liabilities held for sale:	​	​
Accounts payable	$	156
Accrued salaries and wages	​	5
Current portion of operating lease liabilities	​	2
Other current liabilities	​	24
Noncurrent operating lease liabilities	​	4
Other long-term liabilities	​	1
Total liabilities held for sale	$	192

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10.	PROPOSED MERGER WITH ALBERTSONS COMPANIES, INC.

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As previously disclosed, on October 13, 2022, the Company entered into a merger agreement with Albertsons Companies, Inc. (“Albertsons”) pursuant to which all of the outstanding shares of Albertsons common and preferred stock (on an as converted basis) automatically will be converted into the right to receive $34.10 per share, subject to certain reductions described below.

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The per share cash purchase price of $34.10 payable to Albertsons shareholders in the merger was reduced by an amount equal to $6.85, which was the per share amount of a special pre-closing cash dividend that was paid on January 20, 2023 to Albertsons shareholders of record as of October 24, 2022. The adjusted per share cash purchase price is expected to be $27.25.

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In connection with obtaining the requisite regulatory clearance necessary to consummate the transaction, the Company and Albertsons expect to make store divestitures. Subject to the outcome of the divestiture process and as described in the merger agreement, Albertsons was prepared to establish an Albertsons subsidiary (“SpinCo”). SpinCo would be spun-off to Albertsons shareholders immediately prior to the closing of the merger and operate as a standalone public company. As described in more detail below, on September 8, 2023, the Company and Albertsons announced that they entered into a comprehensive divestiture plan with C&S Wholesale Grocers, LLC (“C&S”). As a result of the comprehensive divestiture plan announced with C&S, the Company has exercised its right under the merger agreement to sell what would have been the SpinCo business to C&S. Consequently, the spin-off previously contemplated by the Company and Albertsons is no longer a requirement under the merger agreement and will no longer be pursued by the Company and Albertsons.

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On September 8, 2023, the Company and Albertsons announced they entered into a definitive agreement with C&S for the sale of 413 stores, as well as the QFC, Mariano’s and Carrs banners, the exclusive licensing rights to the Albertsons banner in Arizona, California, Colorado and Wyoming, eight distribution centers, two offices and certain other assets in connection with the proposed merger. In addition, Kroger will divest the Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals and Waterfront Bistro private label brands. On April 22, 2024, the Company and Albertsons announced they had entered into an amended and restated purchase agreement with respect to their definitive agreement with C&S, which provided for the sale of an additional 166 stores, as well as the addition of the Haggen banner, and revision of the exclusive licensing rights such that in Arizona and Colorado, the exclusive licensing rights are to the Safeway banner rather than the Albertsons banner, with the exclusive licensing of the Albertsons banner in California and Wyoming remaining unchanged. In addition, the amended and restated agreement includes increased distribution services agreements to support C&S through a combination of different and larger distribution facilities, and expanded transition services agreement to support C&S and the addition of one dairy facility. The amended and restated agreement also provides C&S with access to the Signature and O Organics private label brands and expands the corporate and office infrastructure provided to C&S. All fuel centers and pharmacies associated with the divested stores will remain with the stores. The stores will be divested by the Company following the closing of the merger. The definitive amended and restated purchase agreement has customary representations and warranties and covenants of a transaction of its type. The divestiture is subject to fulfillment of customary closing conditions, including clearance by the Federal Trade Commission (“FTC”) and the completion of the merger. C&S will pay the Company all cash consideration of approximately $2,761, subject to certain customary adjustments. In addition, there will be a separate future transaction for the sale of select warehouse inventory, which is not expected to occur until after the closing of the merger.

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In connection with the merger agreement, on October 13, 2022, the Company entered into a commitment letter with certain lenders pursuant to which the lenders have committed to provide a $17,400 senior unsecured bridge term loan facility, which, if entered into, would mature 364 days after the closing date of the merger. The commitments are intended to be drawn to finance the merger with Albertsons only to the extent the Company does not arrange for alternative financing prior to closing. As alternative financing for the merger is secured, the commitments with respect to the bridge term loan facility under the commitment letter will be reduced. On July 26, 2024, the Company and the commitment parties under the bridge facility agreed to extend the outside date with respect to the bridge facility commitments to the earlier of the Merger Outside Date (as defined herein) and December 31, 2024. Fees with respect to the bridge term loan facility are included in “Other” in the Company’s Consolidated Statements of Cash Flows within “Cash Flows from Financing Activities” and will be recognized as operating, general and administrative expense in the Company’s Consolidated Statements of Operations over the commitment period.

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On November 9, 2022, the Company executed a term loan credit agreement with certain lenders pursuant to which the lenders committed to provide, contingent upon the completion of the merger with Albertsons and certain other customary conditions to funding, (1) senior unsecured term loans in an aggregate principal amount of $3,000 maturing on the third anniversary of the merger closing date and (2) senior unsecured term loans in an aggregate principal amount of $1,750 maturing on the date that is 18 months after the merger closing date (collectively, the “Term Loan Facilities”). Borrowings under the Term Loan Facilities will be used to pay a portion of the consideration and other amounts payable in connection with the merger with Albertsons. The entry into the term loan credit agreement reduces the commitments under the Company’s $17,400 bridge facility commitment by $4,750 to $12,650. In August 2024, the Company announced that it intends to enter into a second amendment to the term loan agreement to, among other things, amend certain covenants applicable thereto. Borrowings under the Term Loan Facilities will bear interest at rates that vary based on the type of loan and the Company’s debt rating. In addition to the sources of financing described above, the Company expects to finance the transaction with senior notes issuances, borrowings under its commercial paper program, bank credit facility capacity and cash on hand. See Note 11 to the Consolidated Financial Statements for more information.

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On April 12, 2024, the Company and the lenders to the bridge facility, at the Company’s request, further reduced the bridge facility commitment by $2,000 to $10,650.

In accordance with and subject to the merger agreement, Albertsons has extended, and either party may continue to extend, the original outside date of January 13, 2024 from time to time in 30-day increments for up to 270 days in the aggregate ending on October 9, 2024 (as may be extended or waived by the terms of the merger agreement, the “Merger Outside Date”). The Company will be obligated to pay a termination fee of $600 million if the merger agreement is terminated by either party in connection with the occurrence of the Merger Outside Date, and, at the time of such termination, all closing conditions other than regulatory approval have been satisfied. The expected timing of the consummation of the merger is unclear and subject to a number of regulatory obstacles, including the administrative and court proceedings instituted by the FTC and various states, as further described herein.

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On February 26, 2024, the FTC instituted an administrative proceeding (the “FTC Administrative Proceeding”) to prohibit the merger. Simultaneously, the FTC (joined by nine states) filed the FTC Federal Litigation in the United States District Court for the District of Oregon (the “FTC Federal Litigation”) requesting a preliminary injunction to block the merger. On January 15, 2024 and February 14, 2024, the attorneys general of Washington and Colorado, respectively, filed suit in their respective state courts, also seeking to enjoin the merger. In the FTC Federal Litigation, the Company and Albertsons have stipulated to a temporary restraining order that prevents the merger from closing until after 11:59 PM Eastern Time on the fifth business day after the court rules on the FTC’s motion for a preliminary injunction or until after the date set by the court, whichever is later. On July 12, 2024, the FTC administrative law judge recessed the evidentiary portion of the FTC Administrative Proceeding until after the conclusion of the FTC Federal Litigation. A preliminary injunction hearing in the FTC Federal Litigation began on August 26, 2024. In the Colorado case, the court has scheduled a permanent injunction hearing to begin on September 30, 2024 and Kroger and Albertsons have stipulated to a preliminary injunction that prevents the merger from closing until five business days after the Colorado court rules on the Colorado attorney general’s request for a permanent injunction (in the event the Colorado court denies such request). In the Washington case, a trial on the Washington attorney general’s request for a permanent injunction is scheduled to begin on September 16, 2024 and Kroger and Albertsons have committed that they will not close the merger until five days after the Washington court rules on the request for a permanent injunction (so long as such ruling occurs on or before September 26, 2024). In addition to these governmental actions, private plaintiffs have filed suit in the United States District Court for the Northern District of California also seeking to enjoin the transaction. That case is stayed pending resolution of the FTC’s motion for a preliminary injunction in the FTC Federal Litigation.

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**11.**SUBSEQUENT EVENTS

On August 20, 2024, the Company issued $1,000 of its 4.70% Senior Notes due 2026 (the “2026 notes”); $1,000 of its 4.60% Senior Notes due 2027 (the “2027 notes”); $1,400 of its 4.65% Senior Notes due 2029 (the “2029 notes”); $1,300 of its 4.90% Senior Notes due 2031 (the “2031 notes”); $2,200 of its 5.00% Senior Notes due 2034 (the “2034 notes”); $2,100 of its 5.50% Senior Notes due 2054 (the “2054 notes”); and $1,500 of its 5.65% Senior Notes due 2064 (the “2064 notes”). The Company expects to use the net proceeds of the issuances to pay a portion of the cash consideration for its proposed merger with Albertsons. The 2026 notes, 2027 notes, 2029 notes and the 2031 notes are subject to a special mandatory redemption (at a price equal to 101% of the aggregate principal amount of such series of notes plus accrued and unpaid interest to, but excluding, the date of the special mandatory redemption) under certain circumstances if the proposed merger is terminated or does not close by an agreed upon date. If the proposed merger with Albertsons is not completed, the Company expects to use the net proceeds of the 2034 notes, the 2054 notes and the 2064 notes for general corporate purposes. Due to the senior notes issuances, the Company terminated the commitment letter for the bridge term loan facility.

In connection with the senior notes issuances, the Company terminated treasury lock agreements with an aggregate notional amount of $5,350. Since these treasury locks were classified as cash flow hedges, the unamortized loss of $56, $43 net of tax, has been deferred in accumulated other comprehensive loss and will continue to amortize to earnings as the interest payments are made.

On August 15, 2024, the Company commenced an exchange offer for any and all outstanding notes (the “ACI Notes”) issued by Albertsons and certain of its subsidiaries for up to approximately $7,442 aggregate principal amount of new senior notes to be issued by the Company and cash. In conjunction with the exchange offers (the “Exchange Offers”), the Company concurrently solicited consents (collectively, the “Consent Solicitations”) to adopt certain proposed amendments (the “Proposed Amendments”) to each of the indentures (each an “ACI Indenture” and, collectively, the “ACI Indentures”) governing the ACI Notes.

On August 29, 2024, the Company announced that it has received the requisite number of consents to adopt the Proposed Amendments with respect to certain series of ACI Notes (the “Consented Series”) based on the early tenders in the Exchange Offers and Consent Solicitations. The applicable parties to the applicable ACI Indentures executed supplemental indentures to the applicable ACI Indentures implementing the Proposed Amendments with respect to the Consented Series, which will not become operative until the settlement of the Exchange Offers. The Company has announced that it has extended the expiration date of the Exchange Offers with respect to all series of ACI Notes, and that it has extended the expiration date of the Consent Solicitations with respect to the series of ACI Notes that had not yet received requisite consents, in each case to September 27, 2024. The Company may further extend the expiration date in its discretion.

On September 13, 2024, the Company entered into a $5,000 unsecured revolving credit facility (the “Credit Agreement”), with a termination date of September 13, 2029, unless extended as permitted under the Credit Agreement. This Credit Agreement amended the Company’s $2,750 credit facility that would otherwise have terminated on July 6, 2026. Under the Credit Agreement, the aggregate amount of initial commitments under the revolving credit facility is $2,750, which will be increased by $2,250 to $5,000 upon the closing date of the proposed merger with Albertsons. The Company also made conforming changes to its existing term loan credit agreement in connection with the foregoing.

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