Kroger(KR) - 2026 Q2 - Quarterly Report

Company Information This section provides essential details about The Kroger Co., including its filing status and stock exchange listing Filing Details This report is The Kroger Co.'s quarterly report (Form 10-Q) for the period ended August 16, 2025, with the company designated as a large accelerated filer - The Kroger Co.'s quarterly report (Form 10-Q) is for the period ended August 16, 2025[2] - The company's stock ticker is KR, listed on the New York Stock Exchange[3] Company Filing Status | Metric | Status | | :--- | :--- | | Large Accelerated Filer | ☒ | | Accelerated Filer | ☐ | | Non-Accelerated Filer | ☐ | | Smaller Reporting Company | ☐ | | Emerging Growth Company | ☐ | PART I – FINANCIAL INFORMATION This part contains Kroger's unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements This section presents The Kroger Co.'s unaudited consolidated financial statements, including statements of operations, comprehensive income, balance sheets, cash flows, and changes in shareholders' equity, along with related notes Consolidated Statements of Operations This section presents the company's consolidated statements of operations, detailing key financial performance metrics for the reported periods Key Financial Performance ($ million, except per share amounts) | Metric | For the 12 Weeks Ended August 16, 2025 (Second Quarter) | For the 12 Weeks Ended August 17, 2024 (Second Quarter) | For the 24 Weeks Ended August 16, 2025 (First Two Quarters) | For the 24 Weeks Ended August 17, 2024 (First Two Quarters) | | :--- | :--- | :--- | :--- | :--- | | Sales | $33,940 | $33,912 | $79,058 | $79,181 | | Operating Profit | $863 | $815 | $2,185 | $2,109 | | Net Earnings Attributable to The Kroger Co. | $609 | $466 | $1,475 | $1,413 | | Net Earnings Per Diluted Share Attributable to The Kroger Co. | $0.91 | $0.64 | $2.20 | $1.93 | - Net earnings attributable to The Kroger Co. increased by 30.7% in the second quarter of 2025 and 4.4% in the first two quarters year-over-year[6] - Diluted net earnings per share increased by 42.2% in the second quarter of 2025 (from $0.64 to $0.91) and 14.0% in the first two quarters (from $1.93 to $2.20)[6] Consolidated Statements of Comprehensive Income This section provides the consolidated statements of comprehensive income, outlining net earnings and other comprehensive income components Comprehensive Income Overview ($ million) | Metric | For the 12 Weeks Ended August 16, 2025 (Second Quarter) | For the 12 Weeks Ended August 17, 2024 (Second Quarter) | For the 24 Weeks Ended August 16, 2025 (First Two Quarters) | For the 24 Weeks Ended August 17, 2024 (First Two Quarters) | | :--- | :--- | :--- | :--- | :--- | | Net Earnings Including Noncontrolling Interests | $610 | $465 | $1,478 | $1,421 | | Total Other Comprehensive Income (Loss) | $4 | $(121) | $6 | $(51) | | Comprehensive Income Attributable to The Kroger Co. | $613 | $345 | $1,481 | $1,362 | - Total other comprehensive income (loss) shifted from a $(121) million loss in the second quarter of 2024 to a $4 million gain in the second quarter of 2025, significantly contributing to comprehensive income growth[8] Consolidated Balance Sheets This section presents the consolidated balance sheets, detailing the company's assets, liabilities, and equity at specific reporting dates Balance Sheet Highlights ($ million) | Metric | As of August 16, 2025 | As of February 1, 2025 | | :--- | :--- | :--- | | Total Assets | $53,590 | $52,616 | | Total Liabilities | $44,313 | $44,335 | | Total Equity | $9,277 | $8,281 | | Cash and Temporary Cash Investments | $4,883 | $3,959 | - Cash and temporary cash investments increased by $924 million, from $3,959 million as of February 1, 2025, to $4,883 million as of August 16, 2025[13] - The current portion of long-term debt, including financing lease obligations, significantly increased from $272 million to $827 million[13] Consolidated Statements of Cash Flows This section outlines the consolidated statements of cash flows, categorizing cash movements from operating, investing, and financing activities Cash Flow Summary ($ million) | Metric | For the 24 Weeks Ended August 16, 2025 (First Two Quarters) | For the 24 Weeks Ended August 17, 2024 (First Two Quarters) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $3,688 | $3,464 | | Net Cash Used in Investing Activities | $(2,107) | $(1,905) | | Net Cash Used in Financing Activities | $(657) | $(642) | | Net Increase in Cash and Temporary Cash Investments | $924 | $917 | - Net cash provided by operating activities increased by 6% to $3,688 million in the first two quarters[15] - Net cash used in investing activities increased, primarily due to a decrease in proceeds from asset sales, from $309 million in the first two quarters of 2024 to $36 million in the first two quarters of 2025[15] Consolidated Statements of Changes in Shareowners' Equity This section details the consolidated statements of changes in shareholders' equity, showing movements in capital, retained earnings, and other comprehensive income Shareowners' Equity Changes ($ million) | Metric | As of February 1, 2025 | As of May 24, 2025 | As of August 16, 2025 | | :--- | :--- | :--- | :--- | | Total Shareowners' Equity Attributable to The Kroger Co. | $8,281 | $8,908 | $9,277 | | Net Earnings Including Noncontrolling Interests | N/A | $868 | $610 | | Cash Dividends Declared | N/A | $(211) | $(234) | - Total shareowners' equity attributable to The Kroger Co. increased from $8,281 million as of February 1, 2025, to $9,277 million as of August 16, 2025[20] - Net earnings (including noncontrolling interests) contributed $868 million in the first quarter of 2025 and $610 million in the second quarter[20] Notes to Unaudited Consolidated Financial Statements This section provides detailed notes to the unaudited consolidated financial statements, explaining accounting policies and specific financial items 1. ACCOUNTING POLICIES This section outlines the significant accounting policies used in preparing the financial statements, including fair value measurements and financing arrangements - The financial statements are unaudited, include normal recurring adjustments, and should not be considered indicative of full-year results[24] - Fair value measurements are categorized into three levels: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[26] - The company has accounts payable financing arrangements with third parties, with $266 million outstanding under these arrangements as of August 16, 2025[32] 2. DEBT OBLIGATIONS This section details the company's debt obligations, including long-term debt, interest expenses, and hedging activities Long-Term Debt Overview ($ million) | Metric | As of August 16, 2025 | As of February 1, 2025 | | :--- | :--- | :--- | | 1.70% to 8.00% Senior Notes (due 2064) | $14,859 | $14,854 | | Total Debt Excluding Financing Lease Obligations | $15,946 | $15,909 | | Fair Value of Total Debt | $14,886 | $14,648 | | Carrying Value of Total Debt | $15,946 | $15,909 | - Interest expense on long-term debt for the first two quarters of 2025 was $485 million, higher than $265 million for the same period in 2024[36] - In the second quarter of 2024, the company terminated $5,350 million of forward interest rate swaps and entered into $5,350 million of treasury lock agreements to hedge future fixed-rate debt issuances[34][35] 3. BENEFIT PLANS This section provides information on the company's employee benefit plans, including pension and other post-retirement benefits Net Periodic Benefit Cost (Income) ($ million) | Metric | For the 12 Weeks Ended August 16, 2025 (Second Quarter) | For the 12 Weeks Ended August 17, 2024 (Second Quarter) | For the 24 Weeks Ended August 16, 2025 (First Two Quarters) | For the 24 Weeks Ended August 17, 2024 (First Two Quarters) | | :--- | :--- | :--- | :--- | :--- | | Net Periodic Benefit Cost (Income) for Pension Benefits | $4 | $(1) | $8 | $0 | | Net Periodic Benefit Cost (Income) for Other Benefits | $2 | $0 | $2 | $(1) | - The company contributed $175 million to employee 401(k) retirement savings accounts in the first two quarters of 2025, consistent with the prior year[39] 4. EARNINGS PER COMMON SHARE This section presents the calculation of basic and diluted earnings per common share, including adjustments for dilutive securities Earnings Per Share Reconciliation ($ million, except per share amounts) | Metric | For the 12 Weeks Ended August 16, 2025 (Second Quarter) | For the 12 Weeks Ended August 17, 2024 (Second Quarter) | For the 24 Weeks Ended August 16, 2025 (First Two Quarters) | For the 24 Weeks Ended August 17, 2024 (First Two Quarters) | | :--- | :--- | :--- | :--- | :--- | | Basic Net Earnings Per Common Share Attributable to The Kroger Co. | $0.91 | $0.64 | $2.22 | $1.94 | | Dilutive Effect of Stock Options (shares) | 3 | 4 | 3 | 6 | | Diluted Net Earnings Per Common Share Attributable to The Kroger Co. | $0.91 | $0.64 | $2.20 | $1.93 | | Average Number of Common Shares Used in Diluted Calculation | 665 | 727 | 664 | 728 | - Approximately 1 million shares (second quarter 2025) and 4 million shares (second quarter 2024) of options were excluded from diluted net earnings per share calculation due to their anti-dilutive effect[41] 5. COMMITMENTS AND CONTINGENCIES This section discloses the company's commitments and contingent liabilities, including legal settlements and merger-related litigation - Kroger has reached an agreement in principle to resolve most opioid claims, agreeing to pay up to $1,200 million to states and local governments, $36 million to Native American tribes, plus approximately $177 million in attorneys' fees[47] - As of August 16, 2025, the company recorded $137 million of the estimated opioid settlement liability in "Other current liabilities" and $982 million in "Other long-term liabilities"[52] - The merger agreement with Albertsons Companies, Inc. was terminated on December 11, 2024, with Albertsons suing Kroger for a $600 million termination fee and additional damages, which Kroger denies and has counterclaimed[55][56][57][58] 6. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) This section details changes in accumulated other comprehensive income (loss), reflecting non-owner changes in equity Accumulated Other Comprehensive Income (Loss) Changes ($ million, net of tax) | Metric | As of February 1, 2025 | As of August 16, 2025 | | :--- | :--- | :--- | | Balance of Accumulated Other Comprehensive Income (Loss) | $(621) | $(615) | | Net Other Comprehensive Income for the Period | $6 | $6 | - Net other comprehensive income for the period was a $6 million gain in the first two quarters of 2025, a significant improvement from a $(51) million loss in the same period of 2024[60] 7. LEASES AND LEASE-FINANCED TRANSACTIONS This section provides information on the company's lease arrangements and lease-financed transactions, including related assets and liabilities - As of August 16, 2025, net financing lease assets related to the Ocado agreement were $907 million, with total financing lease liabilities of $857 million ($111 million current and $746 million non-current)[63] - The company is conducting a comprehensive review of its e-commerce business to improve profitability, with potential significant impacts on its consolidated financial statements[64] 8. SEGMENT REPORTING This section presents financial information by business segment, focusing on the company's primary retail operations - Retail operations account for 99% of the company's consolidated sales and represent its sole reportable segment[65] Retail Segment FIFO EBITDA ($ million) | Metric | For the 12 Weeks Ended August 16, 2025 (Second Quarter) | For the 12 Weeks Ended August 17, 2024 (Second Quarter) | For the 24 Weeks Ended August 16, 2025 (First Two Quarters) | For the 24 Weeks Ended August 17, 2024 (First Two Quarters) | | :--- | :--- | :--- | :--- | :--- | | Retail Segment FIFO EBITDA | $1,521 | $1,436 | $3,717 | $3,543 | - Retail segment FIFO EBITDA increased by $85 million (5.9%) in the second quarter of 2025 and by $174 million (4.9%) in the first two quarters[67] 9. INCOME TAXES This section details the company's income tax provisions, including effective tax rates and their contributing factors Effective Income Tax Rate | Period | 2025 Effective Tax Rate | 2024 Effective Tax Rate | | :--- | :--- | :--- | | Second Quarter | 21.0% | 24.1% | | First Two Quarters | 21.2% | 21.2% | - The effective income tax rate for the second quarter of 2025 decreased, primarily because state income taxes were fully offset by tax credits and deductions, including equity-based payment benefits[69] 10. RECENTLY ISSUED ACCOUNTING STANDARDS This section discusses recently issued accounting standards and their potential impact on the company's financial statements - FASB issued ASU 2024-03, requiring disclosure of specific expense categories, effective for annual periods beginning after December 15, 2026, with the company currently evaluating its impact[70] - FASB issued ASU 2023-09, amending income tax disclosure guidance, effective for annual periods beginning after December 15, 2024, and is not expected to have a material impact on the company's consolidated financial statements[71] 11. SUBSEQUENT EVENT This section addresses subsequent events occurring after the balance sheet date, with specific disclosures marked as pending - The subsequent event section is marked as "To Be Determined" (TBD), indicating no specific disclosure information at the time of report submission[72] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's detailed analysis of Kroger's financial condition and operating results, covering forward-looking statements, value creation, operating performance, and liquidity CAUTIONARY STATEMENT This section highlights that forward-looking statements are subject to various uncertainties and risks that could cause actual results to differ materially - Forward-looking statements are subject to uncertainties including financial market conditions, labor negotiations, competition, economic trends (inflation/deflation), geopolitical events, regulatory changes, and litigation outcomes (e.g., Albertsons merger, opioid settlements)[75] - The company does not undertake any obligation to update the information contained in this report, unless required by applicable law[76] OUR VALUE CREATION MODEL – DELIVERING CONSISTENT AND ATTRACTIVE TOTAL SHAREHOLDER RETURN This section outlines Kroger's value creation model, centered on its omnichannel retail business and strategic pillars to drive customer loyalty and shareholder returns - Kroger's value creation model is centered on its omnichannel retail business, building customer loyalty and driving sales growth through four pillars: "Fresh," "Our Brands," "Personalization," and "eCommerce"[77] - The model aims to deliver a long-term total shareholder return of 8% to 11%[80] - Key strategies include achieving identical sales growth excluding fuel (especially double-digit e-commerce sales growth) and expanding operating margin through gross margin improvement, alternative profit business growth, and cost savings initiatives[81] EXECUTIVE SUMMARY This section provides an executive overview of Kroger's strong second-quarter performance, highlighting progress in organizational simplification, customer experience, and value creation - Kroger achieved strong results in the second quarter, making significant progress in simplifying its organization, improving customer experience, and focusing on value creation[82] - Sales growth was primarily driven by pharmacy, e-commerce, and fresh departments, with improved grocery volume[82] Executive Summary Financial Highlights ($ million, except per share amounts) | Metric | For the 12 Weeks Ended August 16, 2025 (Second Quarter) | % Change | For the 12 Weeks Ended August 17, 2024 (Second Quarter) | For the 24 Weeks Ended August 16, 2025 (First Two Quarters) | % Change | For the 24 Weeks Ended August 17, 2024 (First Two Quarters) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Sales | $33,940 | 0.1% | $33,912 | $79,058 | (0.2)% | $79,181 | | Sales Excluding Fuel | $30,671 | 1.3% | $30,276 | $71,449 | 1.2% | $70,587 | | Identical Sales Excluding Fuel and Adjustment Items | 3.4% | N/A | 1.2% | 3.3% | N/A | 0.8% | | Operating Profit | $863 | 5.9% | $815 | $2,185 | 3.6% | $2,109 | | Adjusted Diluted Net Earnings Per Share Attributable to The Kroger Co. | $1.04 | 11.8% | $0.93 | $2.53 | 7.2% | $2.36 | - E-commerce sales grew 16% in the second quarter and 15% in the first two quarters, driven by strong demand for delivery solutions (up 19% in Q2 and 20% in the first two quarters)[89] - In the first two quarters of 2025, the company returned $625 million to shareholders through share repurchases and dividend payments[89] USE OF NON-GAAP FINANCIAL MEASURES This section explains Kroger's use of non-GAAP financial measures like FIFO gross margin and adjusted net earnings to provide a clearer view of core operating performance - The company uses non-GAAP measures such as FIFO gross margin, FIFO operating profit, Adjusted Net Earnings, and Adjusted Diluted Net Earnings Per Share to more accurately compare core operating performance by excluding the impact of non-operating activities[90][93] Adjusted Net Earnings Attributable to The Kroger Co. ($ million) | Metric | For the 12 Weeks Ended August 16, 2025 (Second Quarter) | For the 12 Weeks Ended August 17, 2024 (Second Quarter) | For the 24 Weeks Ended August 16, 2025 (First Two Quarters) | For the 24 Weeks Ended August 17, 2024 (First Two Quarters) | | :--- | :--- | :--- | :--- | :--- | | Net Earnings Attributable to The Kroger Co. | $609 | $466 | $1,475 | $1,413 | | Adjustment Items for 2025 and 2024 | $86 | $215 | $215 | $315 | | Adjusted Net Earnings Attributable to The Kroger Co. (Excluding Adjustment Items) | $695 | $681 | $1,690 | $1,728 | Adjusted Diluted Net Earnings Per Share Attributable to The Kroger Co. | Metric | For the 12 Weeks Ended August 16, 2025 (Second Quarter) | For the 12 Weeks Ended August 17, 2024 (Second Quarter) | For the 24 Weeks Ended August 16, 2025 (First Two Quarters) | For the 24 Weeks Ended August 17, 2024 (First Two Quarters) | | :--- | :--- | :--- | :--- | :--- | | Diluted Net Earnings Per Share | $0.91 | $0.64 | $2.20 | $1.93 | | Adjustment Items for 2025 and 2024 | $0.13 | $0.29 | $0.33 | $0.43 | | Adjusted Diluted Net Earnings Per Share Attributable to The Kroger Co. (Excluding Adjustment Items) | $1.04 | $0.93 | $2.53 | $2.36 | - Key adjustment items for 2025 include $100 million in store closing costs, $136 million in merger-related litigation expenses, $47 million in severance costs, and $56 million in investment gains (second quarter)[95][97] RESULTS OF OPERATIONS This section provides a detailed analysis of Kroger's operating performance, including sales, gross margin, operating expenses, interest, and taxes Sales This section analyzes the company's sales performance, including total sales, fuel-excluded sales, and comparable store sales Total Sales ($ million) | Metric | For the 12 Weeks Ended August 16, 2025 (Second Quarter) | % Change | For the 12 Weeks Ended August 17, 2024 (Second Quarter) | For the 24 Weeks Ended August 16, 2025 (First Two Quarters) | % Change | For the 24 Weeks Ended August 17, 2024 (First Two Quarters) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Sales | $33,940 | 0.1% | $33,912 | $79,058 | (0.2)% | $79,181 | | Total Retail Customer Sales Excluding Fuel | $30,352 | 1.2% | $30,005 | $70,753 | 1.1% | $69,973 | | Supermarket Fuel Sales | $3,269 | (10.1)% | $3,636 | $7,609 | (11.5)% | $8,594 | - Identical sales excluding fuel and adjustment items grew 3.4% in the second quarter of 2025 and 3.3% in the first two quarters, driven by pharmacy, e-commerce, and fresh sales[105][106] - E-commerce sales increased by 16% in the second quarter and 15% in the first two quarters, with delivery solutions growing 19% in the second quarter and 20% in the first two quarters[103] Gross Margin, LIFO and FIFO Gross Margin This section examines the company's gross margin, including the impact of LIFO accounting and FIFO gross margin trends Gross Margin | Period | 2025 Second Quarter | 2024 Second Quarter | 2025 First Two Quarters | 2024 First Two Quarters | | :--- | :--- | :--- | :--- | :--- | | Gross Margin | 22.5% | 22.1% | 22.8% | 22.0% | - LIFO charge increased to $62 million in the second quarter of 2025 (from $21 million in Q2 2024) and to $102 million in the first two quarters (from $62 million in the first two quarters of 2024), reflecting anticipated annual product cost inflation[118] - Excluding the impact of fuel, FIFO gross margin increased by 39 basis points in the second quarter of 2025 and 62 basis points in the first two quarters, primarily due to the sale of the lower-margin Kroger Specialty Pharmacy business, reduced shrink, and lower supply chain costs[119][120] Operating, General and Administrative Expenses This section details the company's operating, general, and administrative expenses, analyzing their impact on profitability OG&A Expense as a Percentage of Sales | Period | 2025 OG&A as % of Sales | 2024 OG&A as % of Sales | | :--- | :--- | :--- | | Second Quarter | 17.6% | 17.4% | | First Two Quarters | 17.6% | 17.0% | - Excluding the impact of fuel, Kroger Specialty Pharmacy, and adjustment items, the OG&A rate decreased by 41 basis points in the second quarter of 2025 and 9 basis points in the first two quarters, driven by broad-based cost savings and administrative efficiencies[125][127] - Increased multi-employer pension contributions and healthcare costs in 2025 contributed to a higher OG&A rate in the first two quarters of 2025[123][126] Rent Expense This section discusses the company's rent expense and its stability relative to sales over the reporting periods - Rent expense as a percentage of sales remained relatively stable in the second quarter and first two quarters of 2025 compared to the same periods in 2024[128] Depreciation and Amortization Expense This section analyzes depreciation and amortization expenses, noting factors influencing their changes relative to sales - Depreciation and amortization expense as a percentage of sales increased in the second quarter and first two quarters of 2025, primarily due to the sale of the Kroger Specialty Pharmacy business, which had a lower depreciation and amortization rate[129] Operating Profit and FIFO Operating Profit This section presents the company's operating profit and FIFO operating profit, highlighting growth and contributing factors Operating Profit ($ million) | Metric | For the 12 Weeks Ended August 16, 2025 (Second Quarter) | For the 12 Weeks Ended August 17, 2024 (Second Quarter) | For the 24 Weeks Ended August 16, 2025 (First Two Quarters) | For the 24 Weeks Ended August 17, 2024 (First Two Quarters) | | :--- | :--- | :--- | :--- | :--- | | Operating Profit | $863 | $815 | $2,185 | $2,109 | | FIFO Operating Profit | $925 | $836 | $2,287 | $2,171 | | Adjusted FIFO Operating Profit (Excluding Adjustment Items) | $1,091 | $984 | $2,610 | $2,483 | - Operating profit increased by 5.9% in the second quarter of 2025 and 3.6% in the first two quarters[84] - Adjusted FIFO operating profit, excluding adjustment items, increased by 10.9% in the second quarter of 2025 and 5.1% in the first two quarters[84] Net Interest Expense This section details the company's net interest expense, explaining the drivers behind its changes Net Interest Expense ($ million) | Period | 2025 Second Quarter | 2024 Second Quarter | 2025 First Two Quarters | 2024 First Two Quarters | | :--- | :--- | :--- | :--- | :--- | | Net Interest Expense | $144 | $84 | $343 | $207 | - Net interest expense significantly increased, primarily due to higher average total outstanding debt resulting from senior notes issued in the third quarter of 2024[136] Income Taxes This section provides an overview of the company's income tax expenses and effective tax rates for the reported periods Effective Income Tax Rate | Period | 2025 Second Quarter | 2024 Second Quarter | 2025 First Two Quarters | 2024 First Two Quarters | | :--- | :--- | :--- | :--- | :--- | | Effective Income Tax Rate | 21.0% | 24.1% | 21.2% | 21.2% | - The effective income tax rate for the second quarter of 2025 decreased to 21.0%, mainly because state income taxes were fully offset by tax credits and deductions, including equity-based payment benefits[137] Net Earnings and Net Earnings Per Diluted Share This section analyzes the company's net earnings and diluted earnings per share, including adjusted figures and growth drivers Net Earnings and Diluted Net Earnings Per Share | Metric | For the 12 Weeks Ended August 16, 2025 (Second Quarter) | For the 12 Weeks Ended August 17, 2024 (Second Quarter) | For the 24 Weeks Ended August 16, 2025 (First Two Quarters) | For the 24 Weeks Ended August 17, 2024 (First Two Quarters) | | :--- | :--- | :--- | :--- | :--- | | Diluted Net Earnings Per Share | $0.91 | $0.64 | $2.20 | $1.93 | | Adjusted Diluted Net Earnings Per Share | $1.04 | $0.93 | $2.53 | $2.36 | - Diluted net earnings per share increased by 42% in the second quarter of 2025 and 14% in the first two quarters[139][140] - The growth in adjusted diluted net earnings per share was primarily driven by increased adjusted FIFO operating profit (excluding fuel), lower income tax expense, and a reduction in outstanding common shares, partially offset by higher net interest expense and lower fuel earnings[139][140] LIQUIDITY AND CAPITAL RESOURCES This section discusses Kroger's liquidity and capital resources, including cash flow, capital investments, debt management, and share repurchase programs Cash Flow Information This section summarizes the company's cash flows from operating, investing, and financing activities Cash Flow Summary ($ million) | Metric | For the 24 Weeks Ended August 16, 2025 (First Two Quarters) | For the 24 Weeks Ended August 17, 2024 (First Two Quarters) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $3,688 | $3,464 | | Net Cash Used in Investing Activities | $(2,107) | $(1,905) | | Net Cash Used in Financing Activities | $(657) | $(642) | - Net cash provided by operating activities increased by 6% to $3,688 million in the first two quarters of 2025[143] - Net cash used in investing activities increased, primarily due to reduced proceeds from asset sales, while net cash used in financing activities remained consistent[144][146] Capital Investments This section details the company's capital investments, including expenditures for new stores and renovations Capital Investments ($ million) | Metric | For the 24 Weeks Ended August 16, 2025 (First Two Quarters) | For the 24 Weeks Ended August 17, 2024 (First Two Quarters) | | :--- | :--- | :--- | | Total Capital Investments (Excluding Lease Acquisitions) | $(2,030) | $(2,076) | - Total capital investments for the first two quarters of 2025 were $2,030 million, consistent with the prior year[147] - During the rolling four-quarter period ended second quarter 2025, the company opened, expanded, relocated, or acquired 25 supermarkets and completed 203 remodels, resulting in a 0.3% year-over-year increase in total supermarket square footage[147] Debt Management This section discusses the company's debt management strategies, including total debt levels and credit facilities - As of August 16, 2025, total debt (including current and long-term financing lease obligations) increased by $54 million compared to the end of fiscal year 2024, primarily due to net increases in financing lease obligations and real estate transactions[150] - As of August 16, 2025, the company had no outstanding commercial paper and no borrowings under its revolving credit facilities[148] Common Share Repurchase Programs This section outlines the company's common share repurchase programs, including amounts and shares repurchased Share Repurchases (First Two Quarters 2025) | Metric | Amount | | :--- | :--- | | Share Repurchases | $203 million | | Shares Repurchased | 3.0 million shares | | Average Repurchase Price | $68.21/share | - The Board of Directors authorized a $7.5 billion share repurchase program on December 11, 2024, with $2.5 billion remaining under the authorization as of August 16, 2025[152][155] - In 2024, the company initiated a $5.0 billion accelerated share repurchase (ASR) agreement under the December 2024 repurchase program, with final settlement expected in the third quarter of 2025[153] Liquidity Needs This section addresses the company's liquidity needs and how they are met through cash, operations, and financing sources - The company expects to meet its short-term and long-term liquidity needs through existing cash and temporary cash investments ($4.9 billion as of August 16, 2025), cash flow from operations, and other liquidity sources, including its commercial paper program and bank credit facilities[156][157] - The company typically operates with a working capital deficit, which is supported by its efficient cash utilization and consistent access to capital markets[157] - The company is committed to maintaining its current investment grade debt ratings and effectively managing competitive conditions[157] CRITICAL ACCOUNTING ESTIMATES This section confirms that no significant changes have occurred in the company's critical accounting estimates since the last annual report - There have been no significant changes in the company's critical accounting estimates since the filing of the annual report on Form 10-K for the fiscal year ended February 1, 2025[160] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section confirms no significant changes in the company's market risk exposures since the last annual report - There have been no material changes in the company's market risks since the annual report on Form 10-K for the fiscal year ended February 1, 2025[161] - As of August 16, 2025, the company had no outstanding forward interest rate swap agreements or treasury lock agreements[161] PART II - OTHER INFORMATION This part contains additional information beyond the financial statements, including controls, legal proceedings, equity purchases, and exhibits Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures and ongoing internal control enhancements - As of August 16, 2025, disclosure controls and procedures were deemed effective, providing reasonable assurance for timely and accurate financial reporting[162] - Kroger is implementing a multi-year technology transformation project to modernize systems and improve process efficiencies, continuously evaluating the effectiveness of internal controls[163] - No significant changes in internal control over financial reporting occurred during the quarter ended August 16, 2025[164] Item 1. Legal Proceedings This section refers to the detailed disclosures on legal proceedings found in the notes to the consolidated financial statements - Information regarding legal proceedings is disclosed by reference to Note 5, "Commitments and Contingencies," in the consolidated financial statements[165] Item 5. Other Information This section provides additional information, including details on issuer purchases of equity securities during the quarter ISSUER PURCHASES OF EQUITY SECURITIES This section details the company's equity security repurchase activities, including shares bought back and remaining authorization Issuer Purchases of Equity Securities (Second Quarter 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs ($ million) | | :--- | :--- | :--- | :--- | :--- | | May 25 to June 21, 2025 | 2,999 | $66.20 | 2,999 | $2,500 | | June 22 to July 19, 2025 | 944,754 | $71.50 | 250,355 | $2,500 | | July 20 to August 16, 2025 | 60,098 | $72.35 | 60,098 | $2,500 | | Total | 1,007,851 | $71.53 | 313,452 | $2,500 | - Repurchased shares include those bought under the 1999 repurchase program and shares surrendered by employees for tax withholding on restricted stock under long-term incentive plans[170] - As of August 16, 2025, $2.5 billion remained available under the December 2024 repurchase program[155][170] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including key agreements and certification documents - Exhibits include the Merger Agreement (October 13, 2022), amended Articles of Incorporation, indentures, credit agreements, and various certification documents (e.g., Rule 13a-14(a) / 15d-14(a) Certifications)[171] SIGNATURES This section confirms the official signing of the report by the company's interim CEO and CFO - This report was signed on September 19, 2025, by Ronald L. Sargent (Interim Chief Executive Officer) and David J. C. Kennerley (Chief Financial Officer)[178]