Kroger KR · USD

16. SEGMENT REPORTING​The Company operates supermarkets, multi-department stores and fulfillment centers throughout the United States. The Company’s retail operations, which represent substantially all of the Company’s consolidated sales, are its only reportable segment. The retail operations’ segment revenues are predominately earned as consumer products are sold to customers in our stores, fuel centers and via the Company’s eCommerce business. The Company aggregates its operating divisions into one reportable segment due to the operating divisions having similar economic characteristics with similar long-term financial performance. In addition, the Company’s operating divisions offer customers similar products, have similar distribution methods, operate in similar regulatory environments, purchase the majority of the merchandise for retail sale from similar (and in many cases identical) vendors on a coordinated basis from a centralized location, serve similar types of customers, and are allocated capital from a centralized location. Operating divisions are organized primarily on a geographical basis so the operating division management team can be responsive to local needs of the operating division and can execute company strategic plans and initiatives throughout the locations in their operating division. This geographical separation is the primary differentiation between these retail operating divisions. The geographical basis of organization reflects how the business is managed and how the Company’s principal executive officer, who acts as the Company’s chief operating decision maker (“CODM”), assesses performance internally. All of the Company’s operations are domestic.​​The accounting policies of the retail operations segment are the same as those described in the summary of significant accounting policies in Note 1. The Company’s CODM assesses performance and allocates resources for the retail operations segment using segment FIFO earnings before net interest expense, income tax expense and depreciation and amortization (“EBITDA”). The Company defines FIFO EBITDA as EBITDA excluding the LIFO charge.

12.COMMITMENTS AND CONTINGENCIES​The Company continuously evaluates contingencies based upon the best available evidence.​The Company believes that allowances for loss have been provided to the extent necessary and that its assessment of contingencies is reasonable. To the extent that resolution of contingencies results in amounts that vary from the Company’s estimates, future earnings will be charged or credited.​The principal contingencies are described below:​Insurance — The Company’s workers’ compensation risks are self-insured in most states. In addition, other workers’ compensation risks and certain levels of insured general liability risks are based on retrospective premium plans, deductible plans and self-insured retention plans. The liability for workers’ compensation risks is accounted for on a present value basis. Actual claim settlements and expenses incident thereto may differ from the provisions for loss. Property risks have been underwritten by a subsidiary and are all reinsured with unrelated insurance companies. Operating divisions and subsidiaries have paid premiums, and the insurance subsidiary has provided loss allowances, based upon actuarially determined estimates.​Litigation — Various claims and lawsuits arising in the normal course of business, including personal injury, contract disputes, employment discrimination, wage and hour and other regulatory claims are pending against the Company. Some of these suits purport or have been determined to be class actions and/or seek substantial damages. Although it is not possible at this time to evaluate the merits of all of these claims and lawsuits, nor their likelihood of success, the Company is of the belief that any resulting liability will not have a material effect on the Company’s financial position, results of operations, or cash flows.​The Company continually evaluates its exposure to loss contingencies arising from pending or threatened litigation and believes it has made provisions where it is reasonably possible to estimate and when an adverse outcome is probable. Nonetheless, assessing and predicting the outcomes of these matters involves substantial uncertainties. Management currently believes that the aggregate range of loss for the Company’s exposure is not material to the Company.

5.DEBT OBLIGATIONS​Long-term debt consists of:​​​​​​​​​​January 31,​February 1,​ ​ ​ ​2026 ​ ​ ​20251.70% to 8.00% Senior Notes due through 2064​$ 14,864​$ 14,854Other​ 1,011​ 1,055​​​​​​​Total debt, excluding obligations under finance leases​ 15,875​ 15,909Less current portion​ (1,366)​ (104)​​​​​​​Total long-term debt, excluding obligations under finance leases​$ 14,509​$ 15,805​In 2024, the Company issued $10,500 of senior notes to pay a portion of the cash consideration for its proposed merger with Albertsons and general corporate purposes. The Company repaid certain senior notes of $4,700 that were subject to a special mandatory redemption due to the termination of the merger. See Note 18 for additional information related to these issuances and repayments.​On September 13, 2024, the Company entered into an unsecured revolving credit facility (the “Credit Agreement”), with a termination date of September 13, 2029, unless extended as permitted under the Credit Agreement. The Credit Agreement amended the agreement governing the Company’s $2,750 credit facility that would otherwise have terminated on July 6, 2026. Under the Credit Agreement, the aggregate amount of initial commitments under the revolving credit facility is $2,750, which could have been increased by $2,250 to $5,000 upon the closing date of the proposed merger with Albertsons (such additional commitments, the “Albertsons Closing Date Additional Commitments”). Concurrently with the termination of the merger agreement (the “Merger Agreement”) with Albertsons on December 11, 2024, the Albertsons Closing Date Additional Commitments were automatically terminated in accordance with the terms of the Credit Agreement. On and after December 11, 2024, the amount of outstanding commitments under the Credit Agreement is $2,750.​Borrowings under the Credit Agreement bear interest, at the Company’s option, at either (i) adjusted Term Secured Overnight Financing Rate (“SOFR”) plus a market spread, based on the Company’s Public Debt Rating or (ii) the base rate, defined as the highest of (a) the Federal Funds Rate plus 0.5%, (b) Wells Fargo’s prime rate, and (c) one month Term SOFR plus 1.0%, plus a market rate spread based on the Company’s Public Debt Rating. The Company will also pay a Commitment Fee based on its Public Debt Rating and Letter of Credit fees equal to a market rate spread based on the Company’s Public Debt Rating.

11.STOCK-BASED COMPENSATION​The Company recognizes compensation expense for all share-based payments granted. The Company recognizes share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of the award based on the fair value at the date of the grant. ​The Company grants stock options to employees under various plans at an option price equal to the fair market value of the underlying shares on the grant date of the award. The Company accounts for stock options under the fair value recognition provisions. Stock options typically expire 10 years from the date of grant. Stock options vest between one and four years from the date of grant. ​In addition to the stock options described above, the Company awards restricted stock to employees and incentive shares to nonemployee directors under various plans. The restrictions on the restricted share awards generally lapse between one and four years from the date of the awards. The Company determines the fair value for restricted stock awards in an amount equal to the fair market value of the underlying shares on the grant date of the award.​At January 31, 2026, approximately 23 million common shares were available for future options or restricted stock grants under the 2019 Amended and Restated Long-Term Incentive Plan. Stock options granted reduce the shares available under the Plans at a ratio of one to one. Restricted stock grants reduce the shares available under the Plans at a ratio of 2.83 to one.​Equity awards granted are based on the aggregate value of the award on the grant date. This can affect the number of shares granted in a given year as equity awards. Excess tax benefits related to equity awards are recognized in the provision for income taxes. Equity awards may be approved at one of four meetings of its Board of Directors occurring shortly after the Company’s release of quarterly earnings. The 2025 primary grants were made in conjunction with the March and June meetings of the Company’s Board of Directors.​All awards become immediately exercisable upon certain changes of control of the Company.​Stock Options​Changes in stock options outstanding under the stock option plans are summarized below:​​​​​​​​​ ​ ​ ​Shares ​ ​ ​Weighted- ​​subject​average ​​to option​exercise ​ ​ ​ ​(in millions) ​ ​ ​price Outstanding, year-end 2022 16.6​$ 30.81​Granted 1.3​$ 47.23​Exercised (2.4)​$ 24.04​Canceled or Forfeited (0.1)​$ 39.

9.LEASES AND LEASE-FINANCED TRANSACTIONS​The Company leases certain store real estate, warehouses, distribution centers, fulfillment centers, office space and equipment. The Company operates in leased facilities in approximately half of its store locations, with lease terms that generally range from 10 to 20 years, and options to renew for varying terms at the Company’s sole discretion. Certain leases also include options to purchase the leased property. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Certain leases include escalation clauses and/or payment of executory costs such as property taxes, utilities or insurance and maintenance. Rent expense for leases with escalation clauses or other lease concessions are accounted for on a straight-line basis over the lease term. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Certain properties or portions thereof are subleased to others for periods generally ranging from one to 20 years.​The following table provides supplemental balance sheet classification information related to leases:​​​​​​​​​​​ ​ ​ ​​ ​ ​ ​January 31, ​ ​ ​February 1,​​Classification​2026​2025Assets​​​​​​​​Operating​Operating lease assets​$ 6,682​$ 6,839Finance​Property, plant and equipment, net(1)(2)​​ 910​​ 1,917​​​​​​​​​Total leased assets​​​$ 7,592​$ 8,756​​​​​​​​​Liabilities​​​​​​​​Current​​​​​​​​Operating ​Current portion of operating lease liabilities​$ 665​$ 599Finance​Current portion of long-term debt including obligations under finance leases(3)​​ 436​​ 168​​​​​​​​​Noncurrent​​​​​​​​Operating​Noncurrent operating lease liabilities​​ 6,461​​ 6,578Finance​Long-term debt including obligations under finance leases(3)​​ 1,255​​ 1,828​​​​​​​​​Total lease liabilities​​​$ 8,817​$ 9,173(1)Finance lease assets are recorded net of accumulated amortization of $1,038 and $915 as of January 31, 2026 and February 1, 2025, respectively. (2)In 2025, the Company recorded impairment and related charges related to the Company’s automated fulfillment network (see Note 19 for additional details). Due to this impairment, the Company did not have any net finance lease assets as of January 31, 2026 related to the automated fulfillment network.

RISK MANAGEMENT AND STRATEGY​Securing Kroger’s business information, intellectual property, customer and employee data and technology systems is essential for the continuity of our businesses, meeting applicable regulatory requirements and maintaining the trust of our stakeholders. We have adopted enterprise cybersecurity risk mitigation and governance processes, which are set forth in the Kroger Cybersecurity Risk Management (“CRM”) program, the Kroger Third-Party Cybersecurity Risk Management (“TPCRM”) program and the Kroger Cyber Incident Response Plan (“IR Plan”). Our approach is guided by the principles of the CRM program, which includes monitoring threats and vulnerabilities and assessing and monitoring related controls, supporting the Corporate Information Security function, the Chief Information Security Officer (“CISO”) and Chief Digital Officer (“CDO”). Kroger’s cybersecurity policies, standards, processes, and practices are integrated into our overarching risk management system in an effort to enhance our ability to safeguard our operations and information, which includes quarterly cybersecurity reporting to the Board, delivered by senior leadership.​Kroger Cyber Risk Management Program ​The CRM program was developed in collaboration with third-party consultants and is aligned with the National Institute of Standards and Technology (“NIST”), Risk Management Framework (“RMF”), Cybersecurity Framework (“CSF”) and the International Organization for Standardization 27001 (“ISO 27001”). However, this does not mean that we will meet, or maintain, any particular technical standard, specification, framework, or requirement in the future, but rather we use NIST, RMF, CSF and ISO 27001 as a guide to help us identify, assess and manage cybersecurity risks relevant to our business. The program includes security and privacy, risk-based controls, and incorporates lessons learned from cybersecurity incidents. Under Kroger’s CRM program, cyber risks, including cyber threats and cyber events/incidents, are assessed, treated, and monitored on a continuous basis. We integrate lessons learned from incident response and cyber risk mitigation into our cyber risk management strategy, in an effort to improve overall cybersecurity on an ongoing basis. Kroger's CRM program is spearheaded by specific management positions, chosen for their expertise in the field as further discussed below.

13.STOCK​Preferred Shares​The Company has authorized five million shares of voting cumulative preferred shares; two million shares were available for issuance at January 31, 2026. The shares have a par value of $100 per share and are issuable in series.​Common Shares​The Company has authorized two billion common shares, $1 par value per share.​Common Stock Repurchase Program​On December 23, 2025, the Company announced a $2,000 share repurchase program to reacquire shares via open market purchase or privately negotiated transactions, including accelerated stock repurchase (“ASR”) transactions, block trades, or pursuant to trades intending to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “December 2025 Repurchase Program”).​On December 11, 2024, the Company announced a $7,500 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 Securities Exchange Act of 1934, as amended (the “December 2024 Repurchase Program”). ​On December 6, 1999, the Company announced a 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”). The 1999 Repurchase Program is solely funded by proceeds from stock option exercises, and the tax benefit from these exercises.​On December 19, 2024, the Company entered into an ASR agreement with two financial institutions to reacquire, in aggregate, $5,000 in shares of Kroger common stock. During 2024, the Company funded $5,000 and received a $4,000 initial delivery of approximately 65.6 million shares of Kroger common stock at an average price of $61.54 per share, which includes excise tax on the shares repurchased. Final settlement under the ASR agreement occurred during the third quarter of 2025. In total, the Company invested $5,000 to repurchase 75.6 million shares of Kroger common stock 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.​During 2025, the Company invested $2,723 to repurchase 41.8 million shares of Kroger common stock at an average price of $65.

1.ACCOUNTING POLICIES​The following is a summary of the significant accounting policies followed in preparing these financial statements.​Description of Business, Basis of Presentation and Principles of Consolidation​The Kroger Co. (the “Company”) was founded in 1883 and incorporated in 1902. The Company is a food and drug retailer that operates 2,697 supermarkets, 2,250 pharmacies and 1,731 fuel centers in 35 states and the District of Columbia while also operating online through a digital ecosystem to offer customers an omnichannel shopping experience. The Company also manufactures and processes food for sale by its supermarkets and online. The accompanying financial statements include the consolidated accounts of the Company, its wholly-owned subsidiaries and other consolidated entities. Intercompany transactions and balances have been eliminated.​Fiscal Year​The Company’s fiscal year ends on the Saturday nearest January 31. The last three fiscal years consist of the 52-week period ended January 31, 2026, the 52-week period ended February 1, 2025 and the 53-week period ended February 3, 2024.​Pervasiveness of Estimates​The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of consolidated revenues and expenses during the reporting period is also required. Actual results could differ from those estimates.​Cash, Temporary Cash Investments and Book Overdrafts​Cash and temporary cash investments represent store cash and short-term investments with original maturities of less than three months. Book overdrafts are included in “Accounts payable” and “Accrued salaries and wages” in the Consolidated Balance Sheets.​Deposits In-Transit​Deposits in-transit generally represent funds deposited to the Company’s bank accounts at the end of the year related to sales, a majority of which were paid for with debit cards, credit cards and checks, to which the Company does not have immediate access but settle within a few days of the sales transaction.​Inventories​Inventories are stated at the lower of cost (principally on a last-in, first-out “LIFO” basis) or market.