The Kroger Company

1. The Kroger Company Module13

2. Sales Forecast • -Revising Sales Forecast: • -Earnings Q4 2013 conference call: • CEO Rodney McMullen • “ We have a lot of room to grow because the overall industry in which we operate in is expanding” • “We continue to have opportunity with our low customers because on average, we capture $0.50 of every $1 they spend on the products that we sell. ” • “Inflation was low in the fourth quarter. We expect inflation to be low in 2014 as well, which is reflected in our identical store sales guidance for the year, which Mike Schlotman will talk about shortly” • “Kroger's financial results continue to be pressured by rising health care and pension costs, which some of our competitors do not face. ”

3. More From Conference Call • “We are very pleased with our fourth quarter ID sales growth of 4.3%. This strong performance was supported by ID sales growth in every department and every supermarket division” • “We continue to see outstanding double-digit identical sales growth in our natural foods department” • “According to Nielsen POS data, Kroger's overall market share of the products we sell in the markets where we operate grew approximately 50 basis points during 2013.” • “Now I'd like to outline our specific growth objectives for fiscal 2014. Kroger anticipates identical supermarket sales growth, excluding fuel, of approximately 2.5% to 3.5% for fiscal 2014. This range takes into account the expectation of low inflation during the year and includes Harris Teeter.” • “As we report earnings during 2014, we will not break out Harris Teeter results separately, which is consistent with our treatment of all supermarket divisions today.”

4. In response to ACA questions • “When you look at '14, we really don't think at the end of the day it'll have a huge amount of effect in '14. Obviously, over time, it will have an increasing -- increasingly amount of effect. Whether that's a net positive or a negative, I think it's way too early, because obviously, on some pieces of it, it's a positive because it expands people's access to health care, which in our pharmacy business and our health care business is a positive. So I think it's way too early to tell you one thing or the other. We're working really hard to make sure that we try to minimize the effect on our associates as we transition to the new plans”

5. Health Care Response • -Kroger has to worry about how much they have to pay for new plans • -Can also affect their business model • -What will happen in the future? • -Is there a way to account for this? NO, but it is something to be concerned about

6. Biggest thing noticed when reformulating • Sales Growth # was way too high • Comes from a big pick up in 2009-2011 years • Noticed on conference call with their expectation • Revised Guidelines accordingly

8. EPM concerns and EATO concerns • -Really nothing here that I could find in 10-K or conference call that made me worried • -Even going back 6 years the average is still about the same so reformulating here was not a cause for concern

9. Old Projections

10. New Reformulated Projections

11. NEW DCF • Without Reform • EV about 40.5 B

12. NEW REI

13. NEW Abnormal

14. Minimum Wage Costs for Kroger? • -Nothing of note under legal ramifications facing the company other than a quick mention on wages • -Obama is proposing changing minimum wage and overtime pay • -This would seriously affect Kroger • -Not a measurable effect, but given industry this certainly would increase wages payable and is a concern moving forward

15. CONCLUSION • -Nothing too alarming found in the 10-K • -If numbers look drastically off in the next 10-k however, I have a good base for why they might have changed • -Kroger is a solid company with not much going on besides grocery sales • -They have small investments so not worried about fluctuation in accounting for that • -Current Enterprise Value is 33.53 B • -KROGER IS A SOLID BUY