2018 KROGER FACT BOOK KROGER AT A GLANCE KROGER FACT BOOK 2018 2 SEAMLESS SHOPPING EXPERIENCE 222 AVAILABLE TO $ HEALTH CLINICS WITH 121B 1.3 MILLION TOTAL 2018 SALES VISITS LAST YEAR 91%OF CUSTOMERS 34 OF NEARLY WE COVER 44 500,000 ASSOCIATES 316MILLION 36 DISTRIBUTION COMPANY-WIDE CENTERS MEALS FOOD DONATED THROUGH PRODUCTION 100 FEEDING AMERICA FOOD BANK PARTNERS PLANTS 35 STATES 2 MILLION ARE 1600 TONS OF WASTE & THE DISTRICT PICK UP 1,537 LOCATIONS DIVERTED OF COLUMBIA SUPERMARKET FROM LANDFILLS FUEL CENTERS 100 MILLION POUNDS OF FOOD RESCUED 2,761 SUPERMARKETS & 11M 1.6 MULTI-DEPARTMENT STORES BILLION CUSTOMERS $192M KILOWATTS IN 2018 DONATIONS OF ELECTRICITY ON FORTUNE TO END HUNGER SAVED MAGAZINE'S 2018 DAILY IN OUR COMMUNITIES #6 CHANGE THE WORLD LIST KROGER FACT BOOK 2018 TABLE OF CONTENTS About 1 Overview 2 Letter to Shareholders 3 Restock Kroger and Our Priorities 8 Redefine Customer Expereince 9 Partner for Customer Value 19 Develop Talent 25 Live Our Purpose 29 Create Shareholder Value 32 Company Financial Metrics 42 Appendix 48 KROGER FACT BOOK 2018 ABOUT THE KROGER FACT BOOK This Fact Book provides certain financial and ‘‘committed,’’ ‘‘continue,’’ ‘‘deliver,’’ ‘‘effect,’’ deflation in product and operating costs; stock operating information about The Kroger Co. ‘‘future,’’ ‘‘growth,’’ ‘‘imperative,’’ ‘‘may, ‘‘plan,’’ repurchases; our ability to retain pharmacy (Kroger®) and its consolidated subsidiaries. It is ‘‘reinventing;’’ ‘‘result,’’ ‘‘strategy,’’ ‘‘strong,’’ sales from third party payors; consolidation in intended to provide general information about ‘‘sustainable,’’ ‘‘transform,’’ ‘‘trend,’’ ‘‘vision,’’ and the healthcare industry, including pharmacy Kroger and therefore does not include the ‘‘will,’’ as well as similar words or phrases. These benefit managers; our ability to negotiate Company’s consolidated financial statements statements are subject to known and unknown modifications to multi-employer pension and notes. On January 22, 2003, the SEC risks, uncertainties and other important factors plans; natural disasters or adverse weather issued release No. 33-8176 that set forth new that could cause actual results and outcomes conditions; the potential costs and risks requirements relating to the disclosure of non- to differ materially from those contained in the associated with potential cyber-attacks or GAAP financial measures, as defined in the forward-looking statements. These include the data security breaches; the success of our release. The release allows for presentation of specific risk factors identified in ‘‘Risk Factors’’ future growth plans; the ability to execute on certain non-GAAP financial measures provided and ‘‘Outlook’’ in Kroger’s Annual Report on Restock Kroger; and the successful integration that the measures are reconciled to the most Form 10-K and any subsequent filings with the of merged companies and new partnerships. directly comparable GAAP financial measure. Securities and Exchange Commission. Our ability to achieve these goals may also be Any non-GAAP financial measure discussed in affected by our ability to manage the factors Our ability to achieve sales, earnings, this Fact Book complies with this requirement. identified above. Our ability to execute our incremental FIFO operating profit, and free More detailed financial information can be financial strategy may be affected by our cash flow goals may be affected by: labor found in Kroger’s filings with the SEC. ability to generate cash flow. negotiations or disputes; changes in the types This Fact Book contains ‘‘forward-looking and numbers of businesses that compete with Kroger believes that the information contained statements’’ within the meaning of the safe us; pricing and promotional activities of existing in this Fact Book is correct in all material harbor provisions of the United States Private and new competitors, including non-traditional respects as of May 2019 or such earlier date Securities Litigation Reform Act of 1995 about competitors, and the aggressiveness of that as indicated. However, such information is future performance of Kroger, including with competition; Our response to these actions; subject to change. Unless otherwise noted, respect to Kroger’s ability to achieve short- the state of the economy, including interest reference to “years” is to Kroger’s fiscal years. and long-term sales and earnings goals, rates, the inflationary and deflationary trends sustainable long-term shareholder value, in certain commodities, changes in tariffs, and ability to execute on our growth strategy and the unemployment rate; the effect that fuel business plan, ability to execute on Restock costs have on consumer spending; volatility of Kroger, ability to increase dividends, ability fuel margins; changes in government-funded to grow market share, and ability to develop benefit programs; manufacturing commodity new brands and implement new technologies, costs; diesel fuel costs related to our logistics among other statements. These statements operations; trends in consumer spending; are based on management’s assumptions and the extent to which our customers exercise beliefs in light of the information currently caution in their purchasing in response to available to it. These statements are indicated economic conditions; the uncertain pace of by words such as ‘‘achieve,’’ ‘‘believe,’’ economic growth; changes in inflation or KROGER FACT BOOK 2018 1 RESTOCK KROGER AND OUR PRIORITIES OVERVIEW Headquartered in Cincinnati, Ohio, The Kroger All of the Company’s operations are domestic. Co. is one of the largest retailers in the United States based on annual sales, holding the #20 % of The Kroger Co. # of Stores ranking on the Fortune 100 list published in Revenue May 2019. Kroger was founded in 1883 and incorporated in 1902. Supermarkets 2,764 95.1% As of February 2, 2019, Kroger operated, Convenience Stores (1.) 0 0.8% either directly or through its subsidiaries, 2,764 supermarkets under a variety of local banner names, of which 2,270 had pharmacies Jewelry Stores (2.) 253 0.2% and 1,537 had fuel centers. We offer Pickup (formerly referred to as ClickList®) and Harris Other (3.) n/a 3.9% Teeter ExpressLane™— personalized, order Total 100% online, pick up at the store services — at 1,581 of our supermarkets and provide home 1. In April 2018 the Company completed a sale of the Convenience Store business to EG group. delivery service to 91% of Kroger households. 2. Includes 170 locations operated inside our supermarkets Approximately 54% of these supermarkets and 72 in shopping malls. were operated in Company-owned facilities, 3. Other sales primarily relate to sales at food production including some Company-owned buildings on plants to outside customers; data analytic services; variable interest entities; specialty pharmacy; in-store leased land. health clinics; digital coupon services; and online sales by Vitacost.com®. Approximately 32% of Our Brands units and 43% of the grocery category Our Brands In the fall of 2017, the Company launched units sold in our supermarkets are produced Restock Kroger at its annual Investor in our food production plants; the remaining Conference. Restock Kroger has four main Our Brands items are produced to our strict pillars, which together create shareholder specifications by outside manufacturers. We value and allow us to better serve America perform a “make or buy” analysis on Our through food inspiration and uplift. These Brands products and decisions are based pillars are: upon a comparison of market-based transfer prices versus open market purchases. As • REDEFINE THE GROCERY CUSTOMER EXPERIENCE of February 2, 2019, we operated 37 food production plants. These plants consisted of 17 • EXPAND PARTNERSHIPS TO CREATE CUSTOMER VALUE dairies, ten deli or bakery plants, five grocery product plants, two beverage plants, one meat • DEVELOP TALENT plant, and two cheese plants. • LIVE OUR PURPOSE KROGER FACT BOOK 2018 2 LETTER TO SHAREHOLDERS LETTER TO SHAREHOLDERS FELLOW SHAREHOLDERS: 2018 was year one of Restock Kroger, our three-year plan to create shareholder value by pursuing our vision to serve America through food inspiration and uplift. I’m pleased to report that Kroger achieved what we set out to do last year. We delivered over $1 billion in savings through cost controls and process improvements, invested for the future, and delivered against our operating profit and cash flow goals. Landing the first year of a three-year plan is always the toughest and most critical, since everything that follows depends on the foundation we’ve built. That foundation positions us to deliver on our 2020 Restock Kroger objectives and transform the company for long-term growth. Restock Kroger is our commitment our customers, associates and communities. By serving these stakeholders, our shareholders are rewarded. We are investing for the future while also growing today. We are introducing new ways to shop, fresh foods to savor, and new ways to save, all so that our customers will love shopping with us. We are investing in our associates more than ever before. We are establishing new ways to live our Purpose through Zero Hunger | Zero Waste. And, through it all, we are reinventing the retail growth model. Together, this will transform Kroger for the better. Of course, transformational change is hard, and we recognize that we have a lot of work to do. Just look at the Fortune 500 list. You can count about a dozen companies that have truly transformed themselves in the last 10-15 years. And fewer than a quarter of the companies who were on the list 30 years ago are here at all today. But transformation is an imperative, and we are energized by that today just as we always have been throughout our 136-year history. Stakeholder expectations continue to evolve. Customers want to shop on their terms for anything, anytime, anywhere. Associates want more opportunities to grow, both personally and professionally, and to be a part of teams that respect and care about them. Shareholders rightly want sustainable, long-term growth and profitability – plus a growing dividend. And all stakeholders want to know that we are inspired by purpose and motivated by a vision that Kroger uniquely can deliver.