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The Kroger Co THE KROGER CO. 2011 Fact Book CDTT .. aaa a JlHA ... MACV ~l~ @F£l __-...... BakerS.FoooJ!Ess.' ~fan ..-. loanJug' ..... KwikShop ..-. TomThumb (-. QuikStop ..~ TurkeyHili KROGER [!%S] 1'USfJW .. ~ _... - •• ~ c [ SERVICES The Kroger Co. 2435 Supermarkets North Maine Dakota South New York Dakota ABOUT THE KROGER FACT BOOK This Fact Book provides certain financial and operating information about The Kroger Co. and its consolidated subsidiaries. It is intended to provide general information about Kroger and therefore does not include the Company's consolidated financial statements and notes. On January 22,2003, the SEC issued release No. 33-8176 that set forth new requirements relating to the disclosure of non-GAAP financial measures, as defined in the release. The release allows for presentation of certain non-GAAP financial measures provided that the measures are reconciled to the most directly comparable GAAP financial measure. Any non-GAAP financial measure discussed in this Fact Book complies with this requirement. More detailed financial information can be found in Kroger's filings with the SEC. Kroger believes that the information contained in this Fact Book is correct in all material respects as of the date set forth below or such earlier date as indicated. However, such information is subject to change. Unless otherwise noted, reference to "years" is to Kroger's fiscal years. May 2012 I. Preface & Overview Page 1 • About the Kroger Fact Book • Sustainability • Shareholder Information • Corporate Overview • Financial Highlights II. Retail Operations Page 7 • Supermarkets • Convenience Stores .... Store Formats • Jewelry Stores .... Geography & Markets .... ACQuisition Strate~w III. Sales Drivers Page 22 • Corporate Brands • Retail Fuel Operations .... Kroger Manufacturing • Loyalty Data &Customer Insight • Pharmacy • Kroger Personal Finance • Natural &Organic Foods IV. Technology & Logistics Page 39 V. Financial Information Page 43 • Customer 1St Strategy • Financial Strategy • Market Share • Performance Graph • Identical &Comparable Sales • Financial &Operating Statistics The Kroger Co. Page 1 SHAREHOLDER INFORMATION CORPORATE OFFICE (513) 762-4000 1014 Vine Street www.kroger.com or Cincinnati, OH 45202 www.thekroaerco.com Shareholder Services (513) 762-4808 Investor Relations & Financial (513) 762-4366 Materials Requests e-mail: [email protected] Through 6/30/12: STOCK TRANSFER AGENT & REGISTRAR BNY Mellon Shareowner Services (866) 405-6566 [toll free] P.O. Box 358015 e-mail: [email protected] Pittsburgh, PA 15252-8015 www.bnymellon.com/shareowner Effective 7/1/12: STOCK TRANSFER AGENT & REGISTRAR Wells Fargo Shareowner Services (800) 468-9716 [toll free] P.O. Box 64874 e-mail: [email protected] St. Paul, MN 55164-0874 www.shareowneronline.com 2012 FISCAL CALENDAR First Quarter January 29 - May 19 Second Quarter May 20 - August 11 Third Quarter August 12 - November 3 Fourth Quarter November 4 - February 2, 2013 Number of Employees 339,000 Shareholders of Record as of March 23, 2012 34,573 Common Diluted Shares Outstanding (FY 2011) 593,227,890* Common Diluted Shares Outstanding (FY 2010) 638,304,483* Exchanges NYSE Ticker KR *Represents a weighted average outstanding amount during the fiscal year. HIGH, LOW & CLOSING STOCK PRICE BY QUARTER Fiscal 2011 Fiscal 2010 Quarter High Low Close High Low Close 1st $25.48 $21.29 $24.97 $23.76 $20.95 $21.26 2na $25.85 $21.52 $22.73 $22.50 $19.08 $22.00 3ra $23.78 $21.14 $22.81 $23.47 $19.67 $23.11 4th $24.83 $21.68 $24.30 $24.14 $20.53 $21.29 The Kroger Co. Page 2 FINANCIAL HIGHLIGHTS (in millions, except per share data, as reported) Calendar Year Ended December 31, 2011 2010 Change Closing market price per share $24.22 $22.36 8.3% Fiscal Year End 2011 2010 Change Closing market price per share $24.30 $21.29 14.1% Fiscal Year 2011 2010 Change Total sales $90,374 $82,049 10.1% Operating profit (GAAP) $1,278 $2,182 N/A Operating profit (excluding one-time)* $2,231 $2,200 1.4%) Net earnings attributable to The Kroger Co. per diluted common share $1.01 $1.74 N/A (GAAP) Net earnings attributable to The Kroger Co. per diluted common share $2.00 $1.76 13.6% (excluding one-time)* Average number of common shares 593 638 <7.1%> used in diluted calculation Dividends declared per common share $0.44 $0.40 10.00/0 Net cash provided by operating $2,658 $3,366 N/A activities (GAAP) Net cash provided by operating $3,280 $3,378 N/A activities (excluding one-time)* Total debt, including obligations under $8,164 $7,892 3.4% capital leases Total capital expenditures, excluding $1,958 $1,897 3.2% acquisitions Note: Percent change calculations are based on the rounded numbers as presented. * 2011 GAAP results included a one-time pension consolidation charge. 2010 GAAP results included a one-time goodwill impairment. The Kroger Co. Page 3 SUSTAINABILITY Kroger continues to make significant strides as an environmentally­ sustainable retailer. Our efforts reduce Kroger's impact on the environment and reduce business operating costs. We are pleased to report that Kroger has: • Reduced energy consumption by 31 % since 2000, progressing toward our goal of a 35% reduction by 2013. • Diverted 90% or more waste from landfills at half our 39 manufacturing plants. We continue to pursue alternative solutions to avoid unnecessary landfilling. • Improved fleet efficiency by 25.5% since 2008, progressing toward our goal of 40% by 2014. We continue to improve the efficiency of transporting food to our stores by loading trucks to capacity, increasing miles per gallon and reducing how often we drive empty trailers. • Saved nearly one billion bags from being used through more efficient bagging techniques, educating Customers and making available a variety of reusable bags. • Progressed toward our sustainable seafood goals in partnership with the World Wildlife Fund. To learn more about Kroger's environmental and social initiatives, visit our sustainabiJity website at www.kroger.com/sustainabilitv. s stai ab- ity Improving today to protect tomorrow. -~ The Kroger Co. Page 4 CORPORATE OVERVIEW OPERATIONS Headquartered in Cincinnati, Ohio, The Kroger Co. is one of the largest retailers in the United States based on annual sales, holding the #23 ranking on the Fortune 100 list published in May, 2011. Kroger was founded in 1883 and incorporated in 1902. At the end of fiscal 2011 , Kroger operated (either directly or through its subsidiaries) 2,435 supermarkets, 1,090 of which had fuel centers. Approximately 450/0 of these supermarkets were operated in Company-owned facilities, including some Company-owned buildings on leased land. See Section II of this Fact Book for more information about our supermarket operations, and Section III for more information about our supermarket fuel centers. In addition to supermarkets, Kroger operates (either directly or through its subsidiaries) 791 convenience stores and 348 fine jewelry stores. Subsidiaries operated 708 of the convenience stores, while 83 were operated through franchise agreements. Approximately 51 % of the convenience stores operated by subsidiaries were operated in Company-owned facilities. Additional information about our convenience stores and jewelry stores is contained in Section II of this Fact Book. The Company also manufactures and processes some of the food for sale in its supermarkets. As of January 28, 2012, the Company operated 39 manufacturing plants. See Section III of this Fact Book for more information about our manufacturing operations and private label products. All of the Company's operations are domestic. The Kroger Co. # of Stores % of Revenue Supermarkets 2,435 94% Convenience Stores 791 5% Jewelry Stores (A) 348 0.5% Other (8) n/a 0.50/0 Total 3,574 100% (A) Includes 159 locations operated inside our supermarkets and 189 in shopping malls. (8) Primarily represents sales by Kroger's manufacturing plants to outside customers. The Kroger Co. Page 5 ASSOCIATES The Company employs approximately 339,000 full-time and part-time associates. A majority of the Company's store employees are covered by collective bargaining agreements negotiated with local unions affiliated with one of several different international unions. There are approximately 300 such agreements, usually with terms of three to five years. The Kroger Co. Page 6 SUPERMARKETS STORE FORMATS Kroger's wide variety of store formats is among our key strengths that set us apart from competitors. We believe that our customer base is becoming increasingly diverse - not only in terms of ethnicity, but also in terms of income levels, household mix, and purchasing patterns. We are addressing customer diversity through our multiple formats and product selection. Our broad array of formats positions Kroger to take advantage of growth trends in retailing. Expanding our formats and their elements also allows us to further leverage Kroger's existing distribution and manufacturing facilities. At year-end 2011, Kroger operated 2,435 supermarkets classified under the four primary formats listed in the table below. Store Formats # of Stores 0/0 of Store Base Combination Food & Drug Stores 2,094 860/0 Multi-Department Stores 126 5% Marketplace Stores 70 3% Price Impact Warehouse Stores 145 60/0 Total Supermarkets 2,435 1000/0 The Kroger Co. Page 7 Combination Food & Drug Stores Banners • Baker's II Jay C Food Stores • QFC • City Market • King Soopers • Ralphs • Dillons • Kroger • Scott's • Fry's • Owen's • Smith's • Gerbes • Pay Less Super Markets The combination store (combo) is Kroger's primary format. This format typically draws customers from a 2.0 - 2.5 mile radius and offers them the advantage of "one-stop shopping" in convenient locations. Combo stores are designed to be a flexible format with a product selection tailored to meet the specific needs of the neighborhood's demographics. Combo stores feature a complete supermarket and pharmacy - most include service bakeries, delis, seafood, meat, and floral shops; expanded general merchandise; natural food and organic selections; pet centers, and high­ quality fresh items such as seafood and organic produce.
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