Kroger Co (KR) Economic Moat Analysis—

Evidence

Kroger serves approximately 62 million households annually and because of our rewards program, over 95% of customer transactions are tethered to a Kroger loyalty card.

Business / household reach and loyalty-linked transactions · Filed 02/04/2024

Our 20 years of investment in data science capabilities is allowing us to utilize this data to create personalized experiences and value for our customers and is also enabling our fast-growing, high operating margin alternative profit businesses, including data analytic services and third-party media revenue.

Business / data-science investment and alternative profits · Filed 02/04/2024

The increase in the second quarter and first two quarters of 2026, compared to the same periods of 2025, is primarily due to an increase in third-party media revenue.

MD&A / other sales growth attributable to third-party media · Filed 18/09/2026

Excluding the effect of fulfillment center exits in markets where Kroger does not operate stores, the sale of Vitacost.com and the discontinuation of Ship Marketplace, eCommerce sales increased 20% in the second quarter and 19% in the first two quarters of 2026, compared to the same periods of 2025, led by increased demand for Delivery solutions.

MD&A / adjusted eCommerce sales growth · Filed 18/09/2026

The operating environment for the food retailing industry continues to be characterized by the proliferation of local, regional, and national retailers, including both retail and digital formats, and intense and ever-increasing competition ranging from online retailers, mass merchants, club stores, regional chains, deep discounters, dollar stores, and ethnic, specialty and natural food stores.

Risk Factors / Competitive Environment · Filed 31/03/2026

With the proliferation of grocery delivery – both by retailers and third-party delivery service providers – customers have a wide range of retailers from which to choose.

Risk Factors / retailer choice and grocery delivery · Filed 31/03/2026

If customers increasingly delegate purchasing decisions to AI agents that prioritize price, speed or other factors over retailer preference or brand loyalty, we could become disintermediated from the customer relationship.

Risk Factors / prospective agentic-shopping disintermediation · Filed 31/03/2026

Approximately 30% of Our Brands units and 43% of the grocery category Our Brands units sold in our supermarkets are produced in our food production plants; the remaining Our Brands items are produced to our strict specifications by outside manufacturers.

Business / internal production of Our Brands products · Filed 02/04/2024

We perform a “make or buy” analysis on Our Brands products and decisions are based upon a comparison of market-based transfer prices versus open market purchases.

Business / make-or-buy analysis · Filed 02/04/2024

This increase resulted primarily from the sale of our Kroger Specialty Pharmacy business, which has a lower gross margin rate, sourcing improvements, lower shrink and lower supply chain costs, partially offset by increased pharmacy sales, which have a lower gross margin rate, and increased price investments.

MD&A / fiscal 2025 FIFO gross-margin drivers · Filed 31/03/2026

Our eCommerce business, including third-party media revenue, was profitable in the second quarter and first two quarters of 2026.

MD&A / eCommerce profitability including third-party media · Filed 18/09/2026

This increase resulted primarily from planned investments in associates and supermarket sales deleverage, partially offset by continued execution of broad-based cost savings initiatives that drive administrative efficiencies, including store productivity, lower incentive plan costs and decreased multi-employer pension contributions.

MD&A / first-half underlying operating-expense drivers · Filed 18/09/2026

​ The following table provides the weighted-average lease term and discount rate for operating and finance leases: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ January 31, 2026 ​ February 1, 2025 Weighted-average remaining lease term (years) ​ ​ ​ ​ ​ ​ Operating leases ​ 13.7 ​ ​ 13.7 ​ Finance leases ​ 11.8 ​ ​ 11.5 ​ Weighted-average discount rate ​ ​ ​ ​ ​ ​ Operating leases ​ 4.8 % ​ 4.6 % Finance leases ​ 4.0 % ​ 4.7 % ​ ​ ​ ​ ​ ​ ​ ​ The following table provides supplemental cash flow information related to leases: ​ ​ ​ ​ ​ ​ ​ ​ Year-To-Date ​ Year-To-Date ​ January 31, 2026 ​ February 1, 2025 Cash paid for amounts included in the measurement of lease liabilities ​ ​ ​ ​ ​ Operating cash flows from operating leases $ 855 ​ $ 916 Operating cash flows from finance leases $ 89 ​ $ 84 Financing cash flows from finance leases(1) $ 415 ​ $ 168 Leased assets obtained in exchange for new operating lease liabilities $ 537 ​ $ 786 Leased assets obtained in exchange for new finance lease liabilities $ 197 ​ $ 157 Net gain recognized from sale and leaseback transactions(2) $ — ​ $ 39 Impairment of operating lease assets $ 52 ​ $ 13 Impairment of finance lease assets(3) $ 954 ​ $ — (1) In 2025, financing cash flows from finance leases includes cash termination payment of $246 made to Ocado for the closure and cancellation of certain fulfillment centers.

Financial statement notes / lease impairments and fulfillment termination payment · Filed 31/03/2026

This decrease resulted primarily from increased fuel sales, which have a lower gross margin rate, higher transportation costs, as a percentage of sales, higher shrink and greater value delivered for customers, partially offset by higher pharmacy margins, improved eCommerce profitability, increased third-party media revenue, sourcing improvements, egg deflation, tariff refunds, which were fully invested in value, and lower depreciation and amortization, as a percentage of sales.

MD&A / first-half 2026 gross-margin drivers · Filed 18/09/2026

​ Excluding the effect of fuel, the 2026 OG&A Adjusted Items, the 2025 OG&A Adjusted Items and the Labor Dispute, our OG&A rate increased 23 basis points in the first two quarters of 2026, compared to the first two quarters of 2025.

MD&A / first-half adjusted operating-expense rate increase · Filed 18/09/2026

Identical sales, excluding fuel, for the second quarter of 2026, compared to the second quarter of 2025, increased primarily due to increased eCommerce, natural foods, meat and seafood, bakery and pharmacy sales and increased spend per item, partially offset by a reduction in the number of units sold, and the effects from the Inflation Reduction Act of 138 basis points, a customer shift from brand to generic prescriptions of 61 basis points, the effects of the Cyclospora outbreak of approximately 35 basis points and egg deflation of 30 basis points.

MD&A / second-quarter spending per item, units and sales headwinds · Filed 18/09/2026

We are lowering prices and sharpening our promotions so value is easy to see.

CEO shareholder letter / price reductions and promotions · Filed 13/05/2026

​ Operating Profit and FIFO Operating Profit ​ Operating profit was $971 million, or 2.80% of sales, for the second quarter of 2026, compared to $863 million, or 2.54% of sales, for the second quarter of 2025.

MD&A / second-quarter operating profit · Filed 18/09/2026

Operating profit, as a percentage of sales, increased 26 basis points in the second quarter of 2026, compared to the second quarter of 2025, primarily due to decreased OG&A and depreciation and amortization expenses, as a percentage of sales, and a decreased LIFO charge, partially offset by a lower FIFO gross margin rate.

MD&A / operating-profit rate drivers · Filed 18/09/2026

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Two Quarters Ended ​ ​ ​ August 15, ​ August 16, ​ (In millions) ​ ​ ​ 2026 ​ ​ ​ 2025 Cash Flows from Operating Activities: ​ ​ ​ ​ ​ ​ ​ Net earnings including noncontrolling interests ​ $ 1,546 ​ $ 1,478 ​ Adjustments to reconcile net earnings including noncontrolling interests to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 1,726 ​ 1,829 ​ Asset impairment and store closure charges ​ ​ 66 ​ ​ 114 ​ Operating lease asset amortization ​ ​ 314 ​ ​ 318 ​ LIFO charge ​ 91 ​ 102 ​ Share-based employee compensation ​ 101 ​ 83 ​ Deferred income taxes ​ 94 ​ (31) ​ Gain on sale of assets ​ ​ (26) ​ ​ (6) ​ Gain on investments ​ ​ (20) ​ ​ (37) ​ Other ​ 15 ​ (29) ​ Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ ​ Store deposits in-transit ​ 185 ​ 179 ​ Receivables ​ (162) ​ (12) ​ Inventories ​ (460) ​ 92 ​ Prepaid and other current assets ​ (85) ​ (91) ​ Accounts payable ​ (4) ​ (14) ​ Accrued expenses ​ 38 ​ 181 ​ Income taxes receivable and payable ​ 219 ​ ​ 6 ​ Operating lease liabilities ​ ​ (367) ​ ​ (291) ​ Other ​ (186) ​ (183) ​ ​ ​ ​ ​ ​ ​ ​ ​ Net cash provided by operating activities ​ 3,085 ​ 3,688 ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flows from Investing Activities: ​ ​ ​ ​ ​ ​ ​ Payments for property and equipment, including payments for lease buyouts ​ (2,437) ​ (1,968) ​ Other ​ 42 ​ (139) ​ ​ ​ ​ ​ ​ ​ ​ ​ Net cash used by investing activities ​ (2,395) ​ (2,107) ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flows from Financing Activities: ​ ​ ​ ​ ​ ​ ​ Payments on long-term debt including obligations under finance leases ​ (604) ​ ​ (122) ​ Dividends paid ​ ​ (431) ​ ​ (422) ​ Proceeds from issuance of capital stock ​ ​ 36 ​ 163 ​ Treasury stock purchases ​ (1,271) ​ (203) ​ Other ​ ​ (78) ​ (73) ​ ​ ​ ​ ​ ​ ​ ​ ​ Net cash used by financing activities ​ (2,348) ​ (657) ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (decrease) increase in cash and temporary cash investments ​ (1,658) ​ 924 ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and temporary cash investments: ​ ​ ​ ​ ​ ​ ​ Beginning of year ​ 3,334 ​ 3,959 ​ End of period ​ $ 1,676 ​ $ 4,883 ​ ​ ​ ​ ​ ​ ​ ​ ​ Reconciliation of capital investments: ​ ​ ​ ​ ​ ​ ​ Payments for property and equipment, including payments for lease buyouts ​ $ (2,437) ​ $ (1,968) ​ Payments for lease buyouts ​ ​ 37 ​ 11 ​ Changes in construction-in-progress payables ​ (251) ​ (73) ​ Total capital investments, excluding lease buyouts ​ $ (2,651) ​ $ (2,030) ​ ​ ​ ​ ​ ​ ​ ​ ​ Disclosure of cash flow information: ​ ​ ​ ​ ​ ​ ​ Cash paid during the year for net interest ​ $ 372 ​ $ 370 ​ Cash paid during the year for income taxes ​ $ 159 ​ $ 415 ​ ​ The accompanying notes are an integral part of the Consolidated Financial Statements.

Consolidated Statements of Cash Flows / first two quarters of 2026 · Filed 18/09/2026

The increase of $5,679 in total debt was primarily due to issuing $10,500 of senior notes to pay a portion of the cash consideration for the proposed merger with Albertsons and for general corporate purposes offset by the mandatory redemption of $4,700 of senior notes following the termination of the merger.

MD&A / merger-related debt issuance and redemption · Filed 01/04/2025

After the termination of the proposed merger, these funds were primarily used to fund the $5,000 ASR program to be completed under our December 2024 Repurchase Program.

MD&A / use of financing proceeds for accelerated repurchases · Filed 01/04/2025

41 Summary of Key Compensation Practices What we do: What we do not do: ✓ Alignment of pay and performance × No special severance or change in control programs applicable only to NEOs ✓ Stock ownership guidelines for executives × No cash component in long-term incentive plans ✓ Multiple performance metrics under our short- and long-term performance-based plans discourage excessive risk taking and align with our long-term value creation strategy × No tax gross-up payments for executives, except for relocation expenses ✓ Double-trigger change in control provisions in all equity awards × No special executive life insurance benefit ✓ Double-trigger change in control provisions in cash severance benefits × No re-pricing or backdating of stock options without shareholder approval ✓ check;All long-term compensation is equity-based × No guaranteed salary increases or bonuses ✓ Engagement of an independent compensation consultant × No payment of dividends or dividend equivalents until performance units are earned ✓ Robust clawback policy × No evergreen or reload feature; no shares can be added to stock plan without shareholder approval ✓ Ban on hedging, pledging, and short sales of Kroger securities ✓ Minimal perquisites Establishing Each Component of Executive Compensation The Compensation Committee recommended, and the independent members of the Board determined, the Interim CEO’s compensation.

Compensation Discussion and Analysis / existing compensation practices · Filed 13/05/2026

These guidelines require independent directors, executive officers, and other key executives to acquire and hold a minimum dollar value of Kroger common shares as set forth below: Position Multiple Chief Executive Officer 6 times base salary President and Chief Operating Officer 4 times base salary Executive Vice Presidents and Senior Vice Presidents 3 times base salary Independent Directors 5 times annual cash retainer All covered individuals are expected to achieve the target level within five years of appointment to their positions.

Compensation Discussion and Analysis / adopted stock ownership requirements · Filed 13/05/2026

✓ All five Board Committees are fully independent.

Corporate governance practices / committee independence · Filed 13/05/2026

✓ No poison pill. ✓ Shareholders have the right to call a special meeting.

Corporate governance practices / shareholder rights · Filed 13/05/2026

As part of our ongoing dialogue with our shareholders regarding governance matters, in 2025, we requested meetings with 18 shareholders representing 37% of our outstanding shares during proxy season and off-season engagement and subsequently met with 17 shareholders representing 29% of our outstanding shares.

Executive compensation and shareholder engagement / completed meetings · Filed 13/05/2026

we achieved an increase in ID Sales, without fuel, of 2.9%, excluding adjustment items, and adjusted FIFO operating profit of $4.9 billion.

Compensation Discussion and Analysis / fiscal 2025 operating achievements · Filed 13/05/2026

Publication history

Sources

• filing-1 · Filed 31/03/2026
• filing-2 · Filed 18/09/2026
• filing-3 · Filed 13/05/2026
• filing-4 · Filed 01/04/2025
• filing-5 · Filed 02/04/2024
• filing-6 · Filed 26/06/2026