Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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

CAUTIONARY STATEMENT

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 “accelerate,” “achieve,” “affect,” “anticipate,” “believe,” “committed,” “continue,” “could,” “creating,” “drive,” “enable,” “estimate,” “expect,” “future,” “goals,” “initiatives,” “maintain,” “may,” “model,” “plan,” “position,” “strategy,” “target,” “trend,” and “will,” 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.

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

	●	The extent to which our sources of liquidity are sufficient to meet our requirements may be affected by the state of the financial markets and the effect that such condition has on our ability to issue commercial paper at acceptable rates. Our ability to borrow under our committed lines of credit, including our bank credit facilities, could be impaired if one or more of our lenders under those lines is unwilling or unable to honor its contractual obligation to lend to us, or in the event that global pandemics, natural disasters or weather conditions interfere with the ability of our lenders to lend to us. Our ability to refinance maturing debt may be affected by the state of the financial markets.

	●	Our ability to achieve sales, earnings and incremental First-In, First-Out (“FIFO”) operating profit goals may be affected by: 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, and the aggressiveness of that competition; our response to these actions; the state of the economy, including interest rates, the inflationary, disinflationary and/or deflationary trends and such trends in certain commodities, products and/or operating costs; the geopolitical environment including wars and conflicts; 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, along with changes in federal policy and at regulatory agencies; 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 eCommerce; the outcome of litigation matters, including those relating to the terminated transaction with Albertsons; and the risks relating to or arising from our opioid litigation settlements, including the risk of litigation relating to persons, entities, or jurisdictions that do not participate in those settlements.

	●	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.

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

Statements elsewhere in this Form 10-Q 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 (the “Exchange Act”). 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 (“SEC”) could cause actual results to differ materially. We assume no obligation to update the information contained in this report unless required by applicable law.

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

Kroger’s proven value creation model is allowing us to deliver today and invest for the future. The foundation of our value creation model is our omnichannel retail business, including fuel and health and wellness. By executing on our go-to- market strategy built on the four pillars of Fresh, Our Brands, Personalization and eCommerce, we are creating a shopping experience that builds loyalty and grows sales. Our retail business generates traffic and data which accelerates growth in our high operating margin alternative profit businesses, like retail media. In turn, the value generated from these businesses enables us to reinvest back into our retail business.

We are focused on enhancing our pillars and delivering an exceptional customer experience to accelerate this flywheel effect. By expanding our store network and improving our eCommerce capabilities, we expect to grow households and increase sales. Our model provides various ways to generate net earnings growth.

We believe this will be achieved by:

	●	Growing identical sales without fuel. Our plan involves maximizing growth opportunities in our retail business and is supported by continued strategic investments in our associates and greater value for our customers to ensure we deliver a full, fresh and friendly experience for every customer, every time. In an effort to serve more households, we will invest in major storing projects that allow us to increase both in-store and eCommerce sales. As more and more customers incorporate eCommerce into their permanent routines, we expect eCommerce sales to grow at a double-digit rate – a faster pace than other food at home sales – over time; and

	●	Expanding operating margin through long-term initiatives in gross margin, growing alternative profit businesses and productivity and cost savings initiatives that are focused on simplifying our business and modernizing our ways of working. Together, these will enable us to improve operating margin, while balancing strategic price investments for customers and investments in associates to improve customer experience.

We expect to continue to generate strong free cash flow and are committed to being disciplined with capital deployment in support of our value creation model and stated capital allocation priorities. Our first priority is to invest in the business through attractive high return opportunities that drive long-term sustainable net earnings growth. We are committed to maintaining our current investment grade debt rating and our net total debt to adjusted EBITDA ratio target range of 2.30 to 2.50. We also expect to continue to grow our dividend over time and return excess cash to shareholders via stock repurchases, subject to Board approval.

We expect our value creation model will result in total shareholder return within our target range of 8% to 11% over time.

EXECUTIVE SUMMARY

Kroger delivered another quarter of strong results by consistently driving our strategic priorities. We continued to focus on serving our customers, running and supporting our stores and strengthening our core business. We are pleased with the continued momentum, with strong performance from eCommerce and pharmacy. We expect the outcome from our strategic review will make our eCommerce business profitable in 2026. We continue to sharpen our focus on cost structure and see opportunities to unlock additional cost savings. We are executing with greater speed and discipline and are simplifying the Company.

We believe that our strategy focusing on Fresh, Our Brands and eCommerce will continue to resonate with customers and our resilient model positions us well to navigate the current environment. We are focused on investments that will grow our core business and maximize return on invested capital over time, while remaining committed to maintaining our current investment grade rating, growing our dividend, subject to board approval, and returning excess capital to shareholders. We are confident that by executing on these key priorities, we will generate long-term growth and attractive shareholder returns.

The following table provides highlights of our financial performance:

Financial Performance Data

($ in millions, except per share amounts)


	Third Quarter Ended								Three Quarters Ended
	November 8,			Percentage		November 9,			November 8,			Percentage		November 9,
	2025			Change		2024			2025			Change		2024
Sales	$	33,859		0.7	%	$	33,634		$	112,917		0.1	%	$	112,815
Sales without fuel	$	30,689		1.3	%	$	30,299		$	102,138		1.2	%	$	100,885
Identical sales excluding fuel and Adjusted Items(1)		2.6	%	N/A			2.3	%		3.1	%	N/A			1.2	%
FIFO gross margin, excluding rent, depreciation and amortization, fuel and Adjusted Items, bps increase		0.49		N/A			0.51			0.58		N/A			0.25
OG&A rate, excluding fuel and Adjusted Items, bps increase		0.27		N/A			0.22			0.32		N/A			0.35
Operating profit (loss)	$	(1,541)		(286.1)	%	$	828		$	644		(78.1)	%	$	2,937
Adjusted FIFO operating profit	$	1,089		7.1	%	$	1,017		$	3,698		5.7	%	$	3,500
Net earnings (loss) attributable to The Kroger Co.	$	(1,320)		(313.6)	%	$	618		$	155		(92.4)	%	$	2,031
Adjusted net earnings attributable to The Kroger Co.	$	697		(3.1)	%	$	719		$	2,387		(2.5)	%	$	2,447
Net earnings (loss) attributable to The Kroger Co. per diluted common share	$	(2.02)		(340.5)	%	$	0.84		$	0.23		(91.7)	%	$	2.77
Adjusted net earnings attributable to The Kroger Co. per diluted common share	$	1.05		7.1	%	$	0.98		$	3.58		7.2	%	$	3.34
Dividends paid	$	237		2.6	%	$	231		$	659		1.2	%	$	651
Dividends paid per common share	$	0.35		9.4	%	$	0.32		$	0.99		10.0	%	$	0.90
Share repurchases(2)	$	1,404		N/A		$	9		$	1,607		N/A		$	125
Increase in total debt, including obligations under finance leases compared to prior fiscal year end	$	105		N/A		$	10,375		$	105		N/A		$	10,375

(1)	For the first quarter of 2025, identical sales, excluding fuel, were adjusted to exclude stores involved in the labor disputes in Colorado. Identical sales, excluding fuel, were excluded for the first four weeks of the first quarters of 2025 and 2024 for stores involved in this labor dispute.

(2)

The share repurchases include excise tax related to the shares repurchased, the final delivery under the ASR agreement that occurred during the third quarter of 2025 (see Note 12 to the Consolidated Financial Statements), the 1999 Repurchase Program and the resumed open market repurchases in the third quarter of 2025 under the December 2024 Repurchase Program. The 1999 Repurchase Program and the December 2024 Repurchase Program are defined in the “Common Share Repurchase Programs” section below.

OVERVIEW

Notable items for the third quarter and first three quarters of 2025 are:

Shareholder Return

	●	Net earnings (loss) attributable to The Kroger Co. per diluted common share of $(2.02) for the third quarter and $0.23 for the first three quarters of 2025. These results include $2.6 billion of fulfillment network impairment and related charges.

	●	Adjusted net earnings attributable to The Kroger Co. per diluted common share of $1.05 for the third quarter and $3.58 for the first three quarters of 2025. This represents a 7% increase for both the third quarter and first three quarters of 2025 compared to the same periods in 2024.

	●	Operating profit (loss) of $(1.5) billion for the third quarter and $644 million for the first three quarters of 2025. These results include $2.6 billion of fulfillment network impairment and related charges.

	●	Achieved adjusted FIFO operating profit of $1.1 billion for the third quarter and $3.7 billion for the first three quarters of 2025. This represents a 7% increase for the third quarter of 2025, compared to the third quarter of 2024, and a 6% increase for the first three quarters of 2025, compared to the first three quarters of 2024.

	●	Generated cash flows from operations of $4.7 billion for the first three quarters of 2025, which represents a 6% increase compared to the first three quarters of 2024.

	●	Cash and temporary cash investments of $4.0 billion as of November 8, 2025 remained consistent with the balance as of fiscal year end 2024.

	●	Returned $2.3 billion to shareholders from share repurchases and dividend payments in the first three quarters of 2025.

Other Financial Results

	●	Identical sales, excluding fuel and Adjusted Items, increased 2.6% in the third quarter and 3.1% in the first three quarters of 2025. Our sales growth was led by strong pharmacy and eCommerce sales.

	●	eCommerce sales increased 17% in the third quarter and 16% in the first three quarters of 2025, compared to the same periods of 2024. eCommerce sales include products ordered online and picked up at our stores and our Delivery and Ship solutions. Our Delivery solutions include orders delivered to customers from retail store locations, customer fulfillment centers and orders placed through third-party platforms. Our Ship solutions primarily include online orders placed through our owned platforms that are dispatched using mail service or third-party courier. eCommerce sales growth was led by strong demand for our Delivery solutions.

	●	The Last-In, First-Out (“LIFO”) charge was $44 million in the third quarter of 2025, compared to $4 million in the third quarter of 2024. The LIFO charge was $146 million in the first three quarters of 2025, compared to $66 million in the first three quarters of 2024. The increase in the LIFO charge was due to our higher expected annualized product cost inflation for 2025, compared to 2024.

Significant Events

	●	During the first quarter of 2025, we recognized store closure costs of $100 million, $77 million net of tax, related to the planned closing of approximately 60 stores. As a result of these store closures, we expect a modest financial benefit and we are committed to reinvesting these savings back into the customer experience. We will offer roles in other stores to all associates currently employed at the affected stores.

	●	During the second quarter of 2025, we approved and implemented a plan to reduce our corporate administrative team by nearly 1,000 associates, resulting in a charge for severance and related benefits of $47 million, $37 million net of tax. This reorganization is expected to increase efficiency and reduce administrative costs, enabling us to reinvest back into our retail business.

	●	During the third quarter of 2025, we completed a strategic review of our eCommerce operations with the intention of improving the customer experience while accelerating eCommerce profitability. Following this review, we identified opportunities to optimize our automated fulfillment network by closing facilities in Pleasant Prairie, Wis.; Frederick, Md.; and Groveland, Fla. in January 2026, which have not met operational or financial expectations, and canceling plans for the site in Charlotte, N.C. As a result of these closures and the automated fulfillment network not meeting operational or financial expectations, in the third quarter of 2025, we recorded impairment and related charges of $2.6 billion, $2.0 billion net of tax. We will continue to deliver eCommerce offerings using our store footprint, third-party delivery providers and automated fulfillment facilities where applicable. In geographies where we see higher density of demand, we will continue to utilize automated fulfillment to increase capacity and improve productivity. These facility closures are expected to have a positive effect on eCommerce operating profit and a neutral effect on identical sales without fuel.

USE OF NON-GAAP FINANCIAL MEASURES

The accompanying Consolidated Financial Statements, including the related notes, are presented in accordance with generally accepted accounting principles (“GAAP”). We provide non-GAAP measures, including FIFO gross margin, FIFO operating profit (loss), adjusted FIFO operating profit, adjusted net earnings and adjusted net earnings per diluted share because management believes these metrics are useful to investors and analysts. These non-GAAP financial measures should not be considered as an alternative to gross margin, operating profit (loss), net earnings (loss) and net earnings (loss) per diluted share or any other GAAP measure of performance. These measures should not be reviewed in isolation or considered as a substitute for our financial results as reported in accordance with GAAP.

We calculate FIFO gross margin as FIFO gross profit divided by sales. FIFO gross profit is calculated as sales less merchandise costs, including advertising, warehousing and transportation expenses, but excluding the LIFO charge, rent and depreciation and amortization. FIFO gross margin is an important measure used by management, and management believes FIFO gross margin is a useful metric to investors and analysts because it measures the merchandising and operational effectiveness of our go-to-market strategy.

We calculate FIFO operating profit (loss) as operating profit (loss) excluding the LIFO charge. FIFO operating profit (loss) is an important measure used by management, and management believes FIFO operating profit (loss) is a useful metric to investors and analysts because it measures the operational effectiveness of our financial model.

The adjusted net earnings, adjusted net earnings per diluted share and adjusted FIFO operating profit metrics are important measures used by management to compare the performance of core operating results between periods. We believe adjusted net earnings, adjusted net earnings per diluted share and adjusted FIFO operating profit are useful metrics to investors and analysts because they present more accurate year-over-year comparisons of our net earnings (loss), net earnings (loss) per diluted share and FIFO operating profit (loss) because adjusted items are not the result of our normal operations. Net earnings for the first three quarters of 2025 include the following, which we define as the “2025 Adjusted Items”:

	●	Charges to operating, general and administrative (“OG&A”) of $100 million, $77 million net of tax, for store closures; $144 million, $108 million net of tax, for merger-related litigation and settlement charges; $22 million, $17 million net of tax, for opioid settlement charges and vendor reserves; $47 million, $37 million net of tax, for severance charge and related benefits; $2.6 billion, $2.0 billion net of tax, for fulfillment network impairment and related charges and a credit to OG&A of $21 million, $16 million net of tax, for executive stock compensation for a former executive (the “2025 OG&A Adjusted Items”).

	●	A loss in other income (expense) of $64 million, $49 million net of tax, for the unrealized loss on investments (the “2025 Other Income (Expense) Adjusted Item”).

	●	A reduction to income tax expense of $7 million for executive stock compensation for a former executive income tax adjustment and a reduction to income tax expense of $34 million due to a held for sale income tax adjustment related to the planned sale of a certain subsidiary (the “2025 Income Tax Expense Adjusted Items”).

	●	A net charge to Sales, Merchandise costs and OG&A of $44 million, $33 million net of tax, for labor dispute charges (the “Labor Dispute”).

Net earnings (loss) for the third quarter of 2025 include the following, which we define as the “2025 Third Quarter Adjusted Items”:

	●	Charges to OG&A of $8 million, $6 million net of tax, for merger-related litigation and settlement charges and $2.6 billion, $2.0 billion net of tax, for fulfillment network impairment and related charges (the “2025 Third Quarter OG&A Adjusted Items”).

	●	A loss in other income (expense) of $101 million, $77 million net of tax, for the unrealized loss on investments (the “2025 Other Income (Expense) Third Quarter Adjusted Item”).

	●	A reduction to income tax expense of $34 million due to a held for sale income tax adjustment related to the planned sale of a certain subsidiary (the “2025 Income Tax Expense Third Quarter Adjusted Item”).

Net earnings for the first three quarters of 2024 include the following, which we define as the “2024 Adjusted Items”:

	●	Charges to OG&A of $509 million, $411 million net of tax, for merger-related costs (the “2024 OG&A Adjusted Item”).

	●	A loss in other income (expense) of $125 million, $96 million net of tax, for the unrealized loss on investments and a gain in other income (expense) of $79 million, $60 million net of tax, on the sale of Kroger Specialty Pharmacy (the “2024 Other Income (Expense) Adjusted Items”).

	●	A reduction to income tax expense of $31 million due to a held for sale income tax adjustment related to the sale of our Kroger Specialty Pharmacy business (the “2024 Income Tax Expense Adjusted Item”).

Net earnings for the third quarter of 2024 include the following, which we define as the “2024 Third Quarter Adjusted Items”:

	●	Charges to OG&A of $186 million, $145 million net of tax, for merger-related costs (the “2024 Third Quarter OG&A Adjusted Item”).

	●	A loss in other income (expense) of $20 million, $16 million net of tax, for the unrealized loss on investments and a gain in other income (expense) of $79 million, $60 million net of tax, on the sale of Kroger Specialty Pharmacy (the “2024 Third Quarter Other Income (Expense) Adjusted Items”).

Please refer to the “Net Earnings per Diluted Share excluding the Adjusted Items” table below for reconciliations of certain non-GAAP financial measures reported in this Form 10-Q to the most directly comparable GAAP financial measures and related disclosure.

The following table provides a reconciliation of net earnings (loss) attributable to The Kroger Co. to adjusted net earnings attributable to The Kroger Co. and a reconciliation of net earnings (loss) attributable to The Kroger Co. per diluted common share to adjusted net earnings attributable to The Kroger Co. per diluted common share, excluding the 2025 and 2024 Adjusted Items:

Net Earnings per Diluted Share excluding the Adjusted Items

($ in millions, except per share amounts)


	Third Quarter Ended						Three Quarters Ended
	November 8,		November 9,		Percentage		November 8,		November 9,		Percentage
	2025		2024		Change		2025		2024		Change
Net earnings (loss) attributable to The Kroger Co.	$	(1,320)	$	618			$	155	$	2,031

(Income) expense adjustments
Adjustment for loss on investments(1)(2)		77		16				49		96
Adjustment for labor dispute charges(1)(3)		—		—				33		—
Adjustment for store closures(1)(4)		—		—				77		—
Adjustment for executive stock compensation for a former executive(1)(5)		—		—				(16)		—
Adjustment for merger-related costs(1)(6)		—		145				—		411
Adjustment for merger-related litigation and settlement charges(1)(7)		6		—				108		—
Adjustment for opioid settlement charges and vendor reserves(1)(8)		—		—				17		—
Adjustment for gain on sale of Kroger Specialty Pharmacy(1)(9)		—		(60)				—		(60)
Adjustment for severance charge and related benefits(1)(10)		—		—				37		—
Adjustment for fulfillment network impairment and related charges(1)(11)		1,968		—				1,968		—
Executive stock compensation for a former executive income tax adjustment		—		—				(7)		—
Held for sale income tax adjustment		(34)		—				(34)		(31)
2025 and 2024 Adjusted Items		2,017		101				2,232		416

Adjusted net earnings attributable to The Kroger Co.	$	697	$	719	(3.1)	%	$	2,387	$	2,447	(2.5)	%

Net earnings (loss) attributable to The Kroger Co. per diluted common share	$	(2.02)	$	0.84			$	0.23	$	2.77

(Income) expense adjustments
Adjustment for loss on investments(12)		0.11		0.02				0.07		0.13
Adjustment for labor dispute charges(12)		—		—				0.05		—
Adjustment for store closures(12)		—		—				0.12		—
Adjustment for executive stock compensation for a former executive(12)		—		—				(0.03)		—
Adjustment for merger-related costs(12)		—		0.20				—		0.56
Adjustment for merger-related litigation and settlement charges(12)		0.01		—				0.16		—
Adjustment for opioid settlement charges and vendor reserves(12)		—		—				0.03		—
Adjustment for gain on sale of Kroger Specialty Pharmacy(12)		—		(0.08)				—		(0.08)
Adjustment for severance charge and related benefits(12)		—		—				0.05		—
Adjustment for fulfillment network impairment and related charges(12)		3.00		—				2.96		—
Executive stock compensation for a former executive income tax adjustment(12)		—		—				(0.01)		—
Held for sale income tax adjustment(12)		(0.05)		—				(0.05)		(0.04)
2025 and 2024 Adjusted Items		3.07		0.14				3.35		0.57

Adjusted net earnings attributable to The Kroger Co. per diluted common share	$	1.05	$	0.98	7.1	%	$	3.58	$	3.34	7.2	%

Average number of common shares used in diluted calculation		658		728				662		728

Net Earnings per Diluted Share excluding the Adjusted Items (continued)

($ in millions, except per share amounts)

(1)	The amounts presented represent the after-tax effect of each adjustment, which was calculated using discrete tax rates.

(2)	The pre-tax adjustments for loss on investments were $101 in the third quarter of 2025 and $20 in the third quarter of 2024. The pre-tax adjustments for loss on investments were $64 in the first three quarters of 2025 and $125 in the first three quarters of 2024.

(3)	The pre-tax adjustment for labor dispute charges was $44.

(4)	The pre-tax adjustment for store closures was $100.

(5)	The pre-tax adjustment for executive stock compensation for a former executive was $(21).

(6)	The pre-tax adjustments for merger-related costs were $186 in the third quarter of 2024 and $509 in the first three quarters of 2024.

(7)	The pre-tax adjustments for merger-related litigation and settlement charges were $8 in the third quarter of 2025 and $144 in the first three quarters of 2025.

(8)	The pre-tax adjustment for opioid settlement charges and vendor reserves was $22.

(9)	The pre-tax adjustment for gain on sale of Kroger Specialty Pharmacy was $(79).

(10)	The pre-tax adjustment for severance charge and related benefits was $47.

(11)	The pre-tax adjustment for fulfillment network impairment and related charges was $2,585.

(12)	The amount presented represents the net earnings (loss) per diluted common share effect of each adjustment.

RESULTS OF OPERATIONS

Sales

Total Sales

($ in millions)


	Third Quarter Ended								Three Quarters Ended
	November 8,		Percentage		November 9,		Percentage		November 8,		Percentage		November 9,		Percentage
	2025		Change(1)		2024		Change(2)		2025		Change(3)		2024		Change(4)
Total sales to retail customers without fuel(5)	$	30,362	1.1	%	$	30,023	1.5	%	$	101,116	1.1	%	$	99,995	1.0	%
Supermarket fuel sales		3,170	(4.9)	%		3,335	(18.8)	%		10,779	(9.6)	%		11,930	(9.3)	%
Other sales(6)		327	18.5	%		276	1.5	%		1,022	14.8	%		890	4.8	%

Total sales	$	33,859	0.7	%	$	33,634	(1.0)	%	$	112,917	0.1	%	$	112,815	(0.1)	%

(1)	This column represents the percentage change in the third quarter of 2025, compared to the third quarter of 2024.

(2)	This column represents the percentage change in the third quarter of 2024, compared to the third quarter of 2023.

(3)	This column represents the percentage change in the first three quarters of 2025, compared to the first three quarters of 2024.

(4)	This column represents the percentage change in the first three quarters of 2024, compared to the first three quarters of 2023.

(5)

eCommerce sales are included in the “Total sales to retail customers without fuel” line above. eCommerce sales increased 17% in the third quarter and 16% in the first three quarters of 2025, compared to the same periods of 2024. eCommerce sales include products ordered online and picked up at our stores and our Delivery and Ship solutions. Our Delivery solutions include orders delivered to customers from retail store locations, customer fulfillment centers and orders placed through third-party platforms. Our Ship solutions primarily include online orders placed through our owned platforms that are dispatched using mail service or third-party courier. eCommerce sales growth was led by strong demand for our Delivery solutions, which grew by 19% in both the third quarter and first three quarters of 2025, compared to the same periods of 2024.

(6)

Other sales primarily relate to external sales at food production plants, other pharmacy services, third-party media revenue and data analytic services. The increase in the third quarter of 2025, compared to the third quarter of 2024, is primarily due to an increase in other pharmacy services and third-party media revenue. The increase in the first three quarters of 2025, compared to the first three quarters of 2024, is primarily due to an increase in other pharmacy services, third-party media revenue and external sales at food production plants.

Total sales increased in the third quarter of 2025, compared to the third quarter of 2024, by 0.7%. The increase was primarily due to an increase in total sales to retail customers without fuel, partially offset by a decrease in supermarket fuel sales and the sale of Kroger Specialty Pharmacy. Total supermarket fuel sales decreased 4.9% in the third quarter of 2025, compared to the third quarter of 2024, primarily due to a decrease in fuel gallons sold of 4.8%. Total sales, excluding fuel and Kroger Specialty Pharmacy, increased 2.6% in the third quarter of 2025, compared to the third quarter of 2024, which was primarily due to our identical sales increase, excluding fuel, of 2.6%. Identical sales, excluding fuel, for the third quarter of 2025, compared to the third quarter of 2024, increased primarily due to increased pharmacy and eCommerce sales and increased spend per item, partially offset by a reduction in the number of units sold.

Total sales increased in the first three quarters of 2025, compared to the first three quarters of 2024, by 0.1%. The increase was primarily due to an increase in total sales to retail customers without fuel, partially offset by a decrease in supermarket fuel sales and the sale of Kroger Specialty Pharmacy. Total supermarket fuel sales decreased 9.6% in the first three quarters of 2025, compared to the first three quarters of 2024, primarily due to a decrease in the average retail fuel price of 6.4% and a decrease in fuel gallons sold of 3.5%. The decrease in the average retail fuel price was caused by a decrease in the product cost of fuel. Total sales, excluding fuel, Kroger Specialty Pharmacy and the Labor Dispute, increased 3.4% in the first three quarters of 2025, compared to the first three quarters of 2024, which was primarily due to our identical sales increase, excluding fuel and the Labor Dispute, of 3.1%. Identical sales, excluding fuel and the Labor Dispute, for the first three quarters of 2025, compared to the first three quarters of 2024, increased primarily due to increased pharmacy, eCommerce and Fresh sales and increased spend per item, partially offset by a reduction in the number of units sold.

We calculate identical sales, excluding fuel, as sales to retail customers, including sales from all departments at identical supermarket locations and Delivery and Ship solutions. We define a supermarket as identical when it has been in operation without expansion or relocation for five full quarters. We include Kroger Delivery sales from customer fulfillment centers in the identical sales calculation if the delivery occurs in an existing Kroger supermarket geography or when the location has been in operation for five full quarters. Although identical sales is a relatively standard term, numerous methods exist for calculating identical sales growth. As a result, the method used by our management to calculate identical sales may differ from methods other companies use to calculate identical sales. It is important to understand the methods used by other companies to calculate identical sales before comparing our identical sales to those of other such companies. Our identical sales results, excluding fuel, are summarized in the following tables. We used the identical sales, excluding fuel, dollar figures presented below to calculate percentage changes for the third quarter and first three quarters of 2025.

Identical Sales

($ in millions)


	Third Quarter Ended
	November 8,		Percentage		November 9,		Percentage
	2025		Change(1)		2024		Change(2)
Excluding Fuel	$	30,062	2.6	%	$	29,302	2.3	%

(1)	This column represents the percentage change in identical sales in the third quarter of 2025, compared to the third quarter of 2024.

(2)	This column represents the percentage change in identical sales in the third quarter of 2024, compared to the third quarter of 2023.


	Excluding Adjusted Items(1)
	Three Quarters Ended
	November 8,		Percentage		November 9,		Percentage
	2025		Change(2)		2024		Change(3)
Excluding Fuel	$	99,847	3.1	%	$	96,856	1.2	%

(1)	Identical sales, excluding fuel, were adjusted to exclude stores involved in the labor disputes in Colorado in the first quarter of 2025. Identical sales, excluding fuel, were excluded for the first four weeks of the first quarters of 2025 and 2024 for stores involved in this labor dispute.

(2)	This column represents the percentage change in identical sales in the first three quarters of 2025, compared to the first three quarters of 2024.

(3)	This column represents the percentage change in identical sales in the first three quarters of 2024, compared to the first three quarters of 2023.


	Three Quarters Ended
	November 8,		Percentage		November 9,		Percentage
	2025		Change(1)		2024		Change(2)
Excluding Fuel	$	100,107	3.0	%	$	97,187	1.2	%

(1)	This column represents the percentage change in identical sales in the first three quarters of 2025, compared to the first three quarters of 2024.

(2)	This column represents the percentage change in identical sales in the first three quarters of 2024, compared to the first three quarters of 2023.

Gross Margin, LIFO and FIFO Gross Margin

Our gross margin rates, as a percentage of sales, were 22.8% in the third quarter of 2025 and 22.4% in the third quarter of 2024. This increase resulted primarily from the sale of our Kroger Specialty Pharmacy business, which has a lower gross margin rate, Our Brands performance, lower shrink and lower supply chain costs, partially offset by increased pharmacy sales, which have a lower gross margin rate, increased promotional price investments and the LIFO charge.

Our gross margin rates, as a percentage of sales, were 22.8% in the first three quarters of 2025 and 22.1% in the first three quarters of 2024. This increase resulted primarily from the sale of our Kroger Specialty Pharmacy business, which has a lower gross margin rate, lower shrink, lower supply chain costs and decreased fuel sales, which have a lower gross margin rate, partially offset by increased pharmacy sales, which have a lower gross margin rate, increased promotional price investments and the LIFO charge.

The following table provides the calculation of gross profit and gross margin in accordance with GAAP:


	Third Quarter Ended						Three Quarters Ended
	November 8,			November 9,			November 8,			November 9,
	2025			2024			2025			2024
Sales	$	33,859		$	33,634		$	112,917		$	112,815
Merchandise costs, including advertising, warehousing and transportation and LIFO charge, excluding rent and depreciation and amortization		25,957			25,948			86,638			87,332
Rent		13			12			45			52
Depreciation and amortization		154			140			497			456
Gross profit	$	7,735		$	7,534		$	25,737		$	24,975

Gross margin		22.8	%		22.4	%		22.8	%		22.1	%

We define FIFO gross margin as FIFO gross profit divided by sales. FIFO gross profit is calculated as sales less merchandise costs, including advertising, warehousing and transportation expenses, but excluding the LIFO charge, rent and depreciation and amortization.

Our LIFO charge was $44 million in the third quarter of 2025, compared to $4 million in the third quarter of 2024. Our LIFO charge was $146 million in the first three quarters of 2025, compared to $66 million in the first three quarters of 2024. The increase in the LIFO charge was due to our higher expected annualized product cost inflation for 2025, compared to 2024.

Our fuel sales lower our FIFO gross margin rate due to the very low FIFO gross margin rate, as a percentage of sales, of fuel sales compared to non-fuel sales. Excluding the effect of fuel, our FIFO gross margin rate increased 49 basis points in the third quarter of 2025, compared to the third quarter of 2024. This increase resulted primarily from the sale of our Kroger Specialty Pharmacy business, which has a lower gross margin rate, Our Brands performance, lower shrink and lower supply chain costs, partially offset by increased pharmacy sales, which have a lower gross margin rate, and increased promotional price investments. Excluding the effect of fuel and Kroger Specialty Pharmacy, our FIFO gross margin rate increased 24 basis points in the third quarter of 2025, compared to the third quarter of 2024.

Excluding the effect of fuel and the Labor Dispute, our FIFO gross margin rate increased 58 basis points in the first three quarters of 2025, compared to the first three quarters of 2024. This increase resulted primarily from the sale of our Kroger Specialty Pharmacy business, which has a lower gross margin rate, lower shrink and lower supply chain costs, partially offset by increased pharmacy sales, which have a lower gross margin rate, and increased promotional price investments. Excluding the effect of fuel, Kroger Specialty Pharmacy and the Labor Dispute, our FIFO gross margin rate increased 18 basis points in the first three quarters of 2025, compared to the first three quarters of 2024.

Operating, General and Administrative Expenses

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

OG&A expenses, as a percentage of sales, were 25.0% in the third quarter of 2025 and 17.5% in the third quarter of 2024. The increase in the third quarter of 2025, compared to the third quarter of 2024, resulted primarily from the sale of our Kroger Specialty Pharmacy business, which has a lower OG&A rate to sales, the 2025 Third Quarter OG&A Adjusted Items, increased healthcare costs and planned investment in associates, partially offset by the 2024 Third Quarter OG&A Adjusted Item, continued execution of broad-based cost savings initiatives that drive administrative efficiencies, including store productivity, and decreased incentive plan costs.

OG&A expenses, as a percentage of sales, were 19.8% in the first three quarters of 2025 and 17.2% in the first three quarters of 2024. The increase in the first three quarters of 2025, compared to the first three quarters of 2024, resulted primarily from the effect of decreased fuel sales, which increases our OG&A rate, as a percentage of sales, the sale of our Kroger Specialty Pharmacy business, which has a lower OG&A rate to sales, the 2025 OG&A Adjusted Items, increased healthcare costs and increased multi-employer pension contributions, partially offset by the 2024 OG&A Adjusted Item and continued execution of broad-based cost savings initiatives that drive administrative efficiencies, including store productivity.

Our fuel sales lower our OG&A rate, as a percentage of sales, due to the very low OG&A rate, as a percentage of sales, of fuel sales compared to non-fuel sales. Excluding the effect of fuel, the 2025 Third Quarter OG&A Adjusted Items and the 2024 Third Quarter OG&A Adjusted Item, our OG&A rate increased 27 basis points in the third quarter of 2025, compared to the third quarter of 2024. This increase resulted primarily from the sale of our Kroger Specialty Pharmacy business, which has a lower OG&A rate to sales, increased healthcare costs and planned investment in associates, partially offset by continued execution of broad-based cost savings initiatives that drive administrative efficiencies, including store productivity, and decreased incentive plan costs.

Excluding the effect of fuel, Kroger Specialty Pharmacy, the 2025 Third Quarter OG&A Adjusted Items and the 2024 Third Quarter OG&A Adjusted Item, our OG&A rate increased 9 basis points in the third quarter of 2025, compared to the third quarter of 2024. In addition to the recurring multi-employer pension contributions we make in the normal course of business, in the third quarter of 2025, we made an accelerated contribution of $24 million, $18 million net of tax, to multi-employer pension plans, helping stabilize future associate benefits and allowing us to pre-fund future requirements. This accelerated multi-employer pension contribution drove an 8 basis point increase in our OG&A rate, excluding fuel and Adjusted Items, in the third quarter of 2025, compared to the third quarter of 2024.

Excluding the effect of fuel, the 2025 OG&A Adjusted Items, the Labor Dispute and the 2024 OG&A Adjusted Item, our OG&A rate increased 32 basis points in the first three quarters of 2025, compared to the first three quarters of 2024. This increase resulted primarily from the sale of our Kroger Specialty Pharmacy business, which has a lower OG&A rate to sales, increased healthcare costs and increased multi-employer pension contributions, partially offset by continued execution of broad-based cost savings initiatives that drive administrative efficiencies, including store productivity.

Excluding the effect of fuel, Kroger Specialty Pharmacy, the 2025 OG&A Adjusted Items, the Labor Dispute and the 2024 OG&A Adjusted Item, our OG&A rate increased 2 basis points in the first three quarters of 2025, compared to the first three quarters of 2024.

Rent Expense

Rent expense remained relatively consistent, as a percentage of sales, for the third quarter and first three quarters of 2025, compared to the same periods of 2024.

Depreciation and Amortization Expense

Depreciation and amortization expense increased, as a percentage of sales, in the third quarter and first three quarters of 2025, compared to the same periods of 2024. This increase was primarily due to the sale of our Kroger Specialty Pharmacy business, which has a lower depreciation & amortization rate to sales.

Operating Profit (Loss) and FIFO Operating Profit (Loss)

Operating profit (loss) was $(1.5) billion, or (4.55)% of sales, for the third quarter of 2025, compared to $828 million, or 2.46% of sales, for the third quarter of 2024. The results for the third quarter of 2025 include $2.6 billion of fulfillment network impairment and related charges. Operating profit, as a percentage of sales, decreased 701 basis points in the third quarter of 2025, compared to the third quarter of 2024, primarily due to increased OG&A, depreciation and amortization expenses and the LIFO charge, as a percentage of sales, partially offset by a higher FIFO gross margin rate.

Operating profit was $644 million, or 0.57% of sales, for the first three quarters of 2025, compared to $2.9 billion, or 2.60% of sales, for the first three quarters of 2024. The results for the first three quarters of 2025 include $2.6 billion of fulfillment network impairment and related charges. Operating profit, as a percentage of sales, decreased 203 basis points in the first three quarters of 2025, compared to the first three quarters of 2024, primarily due to increased OG&A expenses, depreciation and amortization expenses and the LIFO charge, as a percentage of sales, partially offset by a higher FIFO gross margin rate.

FIFO operating profit (loss) was $(1.5) billion, or (4.42)% of sales, for the third quarter of 2025, compared to $832 million, or 2.47% of sales, for the third quarter of 2024. The results for the third quarter of 2025 include $2.6 billion of fulfillment network impairment and related charges. FIFO operating profit, as a percentage of sales, excluding the 2025 and 2024 Third Quarter Adjusted Items, increased 21 basis points in the third quarter of 2025, compared to the third quarter of 2024, primarily due to a higher FIFO gross margin rate, partially offset by increased OG&A and depreciation and amortization expenses, as a percentage of sales.

FIFO operating profit was $790 million, or 0.70% of sales, for the first three quarters of 2025, compared to $3.0 billion, or 2.66% of sales, for the first three quarters of 2024. The results for the first three quarters of 2025 include $2.6 billion of fulfillment network impairment and related charges. FIFO operating profit, as a percentage of sales, excluding the 2025 and 2024 Adjusted Items, increased 17 basis points in the first three quarters of 2025, compared to the first three quarters of 2024, primarily due to a higher FIFO gross margin rate, partially offset by increased OG&A and depreciation and amortization expenses, as a percentage of sales.

Specific factors contributing to the trends driving operating profit (loss) and FIFO operating profit (loss) identified above are discussed earlier in this section.

The following table provides a reconciliation of operating profit (loss) to FIFO operating profit (loss), and to Adjusted FIFO operating profit, excluding the 2025 and 2024 Adjusted Items:

Operating Profit (Loss) excluding the Adjusted Items

($ in millions)


	Third Quarter Ended				Three Quarters Ended
	November 8,		November 9,		November 8,		November 9,
	2025		2024		2025		2024
Operating profit (loss)	$	(1,541)	$	828	$	644	$	2,937
LIFO charge		44		4		146		66

FIFO Operating profit (loss)		(1,497)		832		790		3,003

Adjustment for merger-related costs(1)		—		186		—		509
Adjustment for merger-related litigation and settlement charges		8		—		144		—
Adjustment for opioid settlement charges and vendor reserves		—		—		22		—
Adjustment for labor dispute charges		—		—		44		—
Adjustment for store closures		—		—		100		—
Adjustment for executive stock compensation for a former executive		—		—		(21)		—
Adjustment for severance charge and related benefits		—		—		47		—
Adjustment for fulfillment network impairment and related charges		2,585		—		2,585		—
Other		(7)		(1)		(13)		(12)

2025 and 2024 Adjusted items		2,586		185		2,908		497

Adjusted FIFO operating profit excluding the adjusted items above	$	1,089	$	1,017	$	3,698	$	3,500

(1)	Merger-related costs primarily include third-party professional fees and credit facility fees associated with the terminated merger with Albertsons Companies, Inc. (“Albertsons”).

Net Interest Expense

Net interest expense totaled $146 million in the third quarter of 2025, compared to $86 million in the third quarter of 2024. Net interest expense totaled $490 million in the first three quarters of 2025, compared to $294 million in the first three quarters of 2024. This increase resulted primarily from increased average total outstanding debt in the first three quarters of 2025, compared to the first three quarters of 2024, from the net proceeds of the senior notes issuance during the third quarter of 2024, and decreased interest income earned due to decreased balances of cash and temporary cash investments in the first three quarters of 2025, compared to the first three quarters of 2024, primarily due to the $5.0 billion we funded in 2024 under the accelerated share repurchase (“ASR”) transaction and the payment we made in 2024 to redeem $4.7 billion aggregate principal amount of the senior notes that included a special mandatory redemption feature following the termination of the merger with Albertsons.

Income Taxes

The effective income tax rate was 26.5% for the third quarter of 2025 and 23.3% for the third quarter of 2024. The effective income tax rate was (94.0)% for the first three quarters of 2025 and 21.8% for the first three quarters of 2024. The effective income tax rate for the third quarter of 2025, which represents a tax benefit on a net loss before income tax expense, differed from the federal statutory rate due to a tax benefit related to classifying a certain subsidiary as held for sale and the utilization of tax credits and deductions, partially offset by the effect of state income taxes. The effective income tax rate for the first three quarters of 2025, which represents a tax benefit on net earnings before income tax expense, differed from the federal statutory rate due to a tax benefit related to classifying a certain subsidiary as held for sale and the utilization of tax credits and deductions including the benefit from share based payments, which includes $7 million for executive stock compensation for a former executive, partially offset by the effect of state income taxes. The effective income tax rate for the third 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 income tax rate for the first three 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.

Net Earnings (Loss) and Net Earnings (Loss) Per Diluted Share

Our net earnings (loss) are based on the factors discussed in the Results of Operations section.

Net earnings (loss) of $(2.02) per diluted share for the third quarter of 2025 represented a decrease compared to net earnings of $0.84 per diluted share for the third quarter of 2024. Excluding the 2025 and 2024 Third Quarter Adjusted Items, adjusted net earnings of $1.05 per diluted share for the third quarter of 2025 represented an increase of 7% compared to adjusted net earnings of $0.98 per diluted share for the third quarter of 2024. The increase in adjusted net earnings per diluted share resulted primarily from increased adjusted FIFO operating profit, excluding fuel, lower income tax expense and lower common shares outstanding, partially offset by increased net interest expense and an increased LIFO charge.

Net earnings of $0.23 per diluted share for the first three quarters of 2025 represented a decrease of 92% compared to net earnings of $2.77 per diluted share for the first three quarters of 2024. Excluding the 2025 and 2024 Adjusted Items, adjusted net earnings of $3.58 per diluted share for the first three quarters of 2025 represented an increase of 7% compared to adjusted net earnings of $3.34 per diluted share for the first three quarters of 2024. The increase in adjusted net earnings per diluted share resulted primarily from increased adjusted FIFO operating profit, excluding fuel, lower income tax expense and lower common shares outstanding, partially offset by increased net interest expense, decreased fuel earnings and an increased LIFO charge.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow Information

The following table summarizes our net (decrease) increase in cash and temporary cash investments for the first three quarters of 2025 and 2024:



	Three Quarters Ended
	November 8,		November 9,
	2025		2024
Net cash provided by (used in)
Operating activities	$	4,658	$	4,390
Investing activities		(3,015)		(2,402)
Financing activities		(1,646)		9,487
Net (decrease) increase in cash and temporary cash investments	$	(3)	$	11,475

Net cash provided by operating activities

We generated $4.7 billion of cash from operations in the first three quarters of 2025 compared to $4.4 billion in the first three quarters of 2024. The change in net earnings including noncontrolling interests is discussed in the Results of Operations section. Other significant items affecting net cash provided by operating activities include the following:

	●	The fulfillment network impairment and related charges as a result of certain facility closures and the automated fulfillment network not meeting operational or financial expectations;

	●	A decrease in deferred income taxes due to the fulfillment network impairment and related charges; and

	●	Cash flows from inventory were less favorable in the first three quarters of 2025, compared to the first three quarters of 2024, due to strategic forward buys made during 2025.

Cash paid for net interest increased in the first three quarters of 2025, compared to the first three quarters of 2024, primarily due to increased interest payments related to the $5.8 billion aggregate principal amount of senior notes issued in the third quarter of 2024 and not redeemed in the fourth quarter of 2024.

Net cash used by investing activities

Investing activities used cash of $3.0 billion in the first three quarters of 2025, compared to $2.4 billion in the first three quarters of 2024. The amount of cash used by investing activities increased in the first three quarters of 2025, compared to the first three quarters of 2024, primarily due to a decrease in the proceeds from the sale of assets due to the sale of an equity investment and the sale of our Kroger Specialty Pharmacy business in the first three quarters of 2024 and the letter of credit drawdown by Ocado in the second quarter of 2025 under the Amended and Restated Partnership Framework Agreement, partially offset by a decrease in payments for property and equipment, including payments for lease buyouts, in the first three quarters of 2025, compared to the first three quarters of 2024.

Net cash used by financing activities

Cash provided (used) by financing activities was $(1.6) billion in the first three quarters of 2025, compared to $9.5 billion in the first three quarters of 2024. The amount of cash used by financing activities decreased in the first three quarters of 2025, compared to the first three quarters of 2024, primarily due to decreased proceeds from the issuance of long-term debt and an increase in treasury stock purchases.

Capital Investments

Capital investments, including changes in construction-in-progress payables and excluding the purchase of leased facilities, remained relatively consistent in the first three quarters of 2025, compared to the first three quarters of 2024, and totaled $2,863 million for the first three quarters of 2025, compared to $2,816 million for the first three quarters of 2024. During the rolling four quarter period ended with the third quarter of 2025, we opened, expanded, relocated or acquired 29 supermarkets and completed 199 remodels. We define a remodel as a project that is greater than or equal to a cost of $8 per square foot. Total supermarket square footage at the end of the third quarter of 2025 decreased 0.6% from the end of the third quarter of 2024. Excluding mergers, acquisitions and operational closings, total supermarket square footage at the end of the third quarter of 2025 increased 1.2% over the end of the third quarter of 2024.

Debt Management

As of November 8, 2025, we maintained a $2.75 billion (with the ability to increase by $2.0 billion, subject to certain conditions), unsecured revolving credit facility that, unless extended, terminates on September 13, 2029. Outstanding borrowings under the credit facility, commercial paper borrowings and some outstanding letters of credit reduce funds available under the credit facility. As of November 8, 2025, we had no outstanding commercial paper and no outstanding borrowings under our revolving credit facility. The outstanding letters of credit that reduce funds available under our revolving credit facility totaled $3 million as of November 8, 2025.

Our credit agreement and the indentures underlying our publicly issued debt contain a financial covenant. As of November 8, 2025, we were in compliance with the financial covenant. Furthermore, management believes it is not reasonably likely that we will fail to comply with this financial covenant in the future.

Total debt, including both the current and long-term portions of obligations under finance leases, increased $105 million as of November 8, 2025, compared to our fiscal year end 2024 debt of $17.9 billion, due to a net increase in obligations under finance leases and property transactions. During the first three quarters of 2025, we did not have any payments or issuances of senior notes or borrowings or payments that occurred on our revolving credit facility.

Common Share Repurchase Programs

On December 11, 2024, we announced our Board of Directors approved a $7.5 billion share repurchase program to reacquire shares via open market purchase or privately negotiated transactions, including ASR transactions, block trades, or pursuant to trades intending to comply with Rule 10b5-1 under the Exchange Act (the “December 2024 Repurchase Program”).

On December 6, 1999, our Board of Directors approved a share repurchase program 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”). This program is solely funded by proceeds from stock option exercises and the tax benefit from these exercises.

For the first three quarters of 2025, we invested $947 million to repurchase 14.0 million Kroger common shares at an average price of $67.47 per share, which includes excise tax related to the shares repurchased. In addition, the final delivery under the ASR agreement occurred during the third quarter of 2025, which included the settlement of 10.0 million Kroger common shares. The shares repurchased in the first three quarters of 2025 were reacquired under the December 2024 Repurchase Program and the 1999 Repurchase Program.

On December 19, 2024, we entered into an ASR agreement with two financial institutions to reacquire, in aggregate, $5.0 billion in shares of Kroger common stock. During 2024, we funded $5.0 billion and received a $4.0 billion initial delivery of approximately 65.6 million Kroger common shares at an average price of $61.54 per share, which includes excise tax on the shares repurchased. Final delivery under the ASR agreement occurred during the third quarter of 2025. In total, we invested $5.0 billion to repurchase 75.6 million Kroger common shares at an average price of $66.68 per share, which includes excise tax on the shares repurchased. The ASR agreement was completed under the December 2024 Repurchase Program. We resumed open market repurchases in the third quarter of 2025 after final settlement of the ASR agreement.

As of November 8, 2025, there was $1.8 billion remaining under the December 2024 Repurchase Program, which excludes excise tax on share repurchases in excess of issuances. Amounts available under the 1999 Repurchase Program are dependent upon option exercise activity. The authority remaining under the December 2024 Repurchase Program and the 1999 Repurchase Program do not have expiration dates but may be suspended or terminated by our Board of Directors at any time.

Liquidity Needs

We held cash and temporary cash investments of $4.0 billion as of November 8, 2025. We actively manage our cash and temporary cash investments in order to internally fund operating activities, support and invest in our core businesses, make scheduled interest and principal payments on our borrowings and return cash to shareholders through cash dividend payments and share repurchases. Our current levels of cash, borrowing capacity and balance sheet leverage provide us with the operational flexibility to adjust to changes in economic and market conditions. We remain committed to our dividend, and growing our dividend over time, subject to Board approval, as well as share repurchase programs, and we will continue to evaluate the optimal use of any excess free cash flow, consistent with our capital allocation strategy.

We expect to meet our short-term and long-term liquidity needs with cash and temporary cash investments on hand as of November 8, 2025, cash flows from our operating activities and other sources of liquidity, including borrowings under our commercial paper program and bank credit facility. Our short-term and long-term liquidity needs include anticipated requirements for working capital to maintain our operations, pension plan commitments, interest payments and scheduled principal payments of debt and commercial paper, servicing our lease obligations, self-insurance liabilities, capital investments, scheduled opioid settlement payments and other purchase obligations. We may also require additional capital in the future to fund organic growth opportunities, increased capacity in our customer fulfillment network, joint ventures or other business partnerships, property development, acquisitions, dividends and share repurchases. In addition, we generally operate with a working capital deficit due to our efficient use of cash in funding operations and because we have consistent access to the capital markets. We believe we have adequate coverage of our debt covenants to continue to maintain our current investment grade debt ratings and to respond effectively to competitive conditions.

For additional information about our debt activity in the first three quarters of 2025, see Note 2 to the Consolidated Financial Statements.

CRITICAL ACCOUNTING ESTIMATES

We have chosen accounting policies that we believe are appropriate to report accurately and fairly our operating results and financial position, and we apply those accounting policies in a consistent manner. Our critical accounting policies are summarized in Note 1 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2025.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. We base our estimates on historical experience and other factors we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could vary from those estimates. There has been no material change to our critical accounting estimates since the filing of our Annual Report on Form 10-K for the fiscal year ended February 1, 2025.

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