The Kroger Co Annual Report 2019

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FY2019 Annual Report · The Kroger Co

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Notice of 2020 Annual Meeting of Shareholders

2020 Proxy Statement

and

2019 Annual Report on Form 10-K

FAMILY
OF
COMPANIES

Supermarkets

Price-Impact Stores

Multi-Department Stores

Bring it all home.

Jewelry Stores

Specialty Retailers

Services

Fellow Shareholders:

THE FOOD INDUSTRY IS SPECIAL.

It is a sentiment I have expressed more times than I can count – often on the pages of this annual letter. It is
something I deeply believe.

More importantly, it is a sentiment that has taken on new and magnified meaning as we confront the greatest health
threat to our global community in 100 years.

As I write this letter, the pandemic curve in the U.S. has not yet hit its apex. We feel for those in America and
around the world who have been affected by the disease and economic disruption. There is much we still do not
know. How long will it last? How many lives will be lost or irreversibly changed? What will be the economic impact?

What we have learned in this uncertain time is that, now more than ever, purpose matters.

At Kroger, our purpose is To Feed the Human Spirit.

Purpose has been the guidepost for every decision we have made during this crisis. Our aim has been to focus on
our most urgent priority, to provide a safe environment for associates and customers, with our responsibility and
obligation to communities to provide open stores, comprehensive digital solutions and an efficiently-operating
supply chain so that our customers always have access to fresh, affordable food and essentials.

Kroger has taken extensive measures across our businesses to safeguard associates and customers during the
COVID-19 pandemic.

In addition to activating a coronavirus task force in February to prepare for the approaching pandemic, we have
closely monitored the impact of the pandemic on food retail across global markets. I have been in regular contact
with food retail CEOs in other countries, including Italy, Singapore, China and Australia – all of which are ahead of
the U.S. in terms of the pandemic cycling through their countries.

I am grateful to this generous network of grocery leaders because our company has benefited from their earlier
experiences, which helped us anticipate the steps we needed to take to provide a safe environment in our stores,
distribution centers, food manufacturing plants and offices.

Of course, our associates are the true heroes of this story. In recognition of their incredible and selfless commitment to
our customers while serving as essential personnel, we provided special bonuses, including $2 premium pay for frontline
associates; we established new paid emergency leave guidelines; and, as of early May, Kroger has hired more than
80,000 new associates to help share the load and serve our communities during the pandemic.

Safety is not only our priority in this crisis, it is one of our core values. We enhanced daily sanitation practices in all
our facilities. In stores, this includes cleaning commonly used areas more often like cashier stations, self-
checkouts, credit card terminals, food service counters, shelves and restrooms. We are providing protective masks
and gloves, and we installed plexiglass partitions at check lanes, pharmacy and Starbucks registers across the
enterprise. We added signs and floor decals to promote physical distancing at check lanes and other counters, and
adjusted store operating hours to allow more time for our associates to rest, clean and replenish inventory.

Because of these steps, Kroger has remained a constant for our associates, customers and communities when
they needed us most. And, many of the investments we are making to address today’s urgent needs are also
strengthening our foundation for the future.

Our vision is to serve America through food inspiration and uplift, and we will continue to serve, inspire and uplift
America.

As an essential business operating nearly 2,800 grocery stores, 35 manufacturing plants and 44 distribution
centers across the country, we have learned an incredible amount from keeping our stores, supply chain and food
production plants operating safely during the pandemic. We are sharing our best practices and procedures with
other retailers, restaurants, manufacturers and logistics companies as they take steps to responsibly reopen and
get our economy working again. You can find these open-source materials at KrogerBlueprint.com.

Kroger’s response to the COVID-19 pandemic demonstrates that when a company is clear on its purpose, values, and
vision, we can navigate through any challenge together. I am confident we will emerge from this crisis even stronger.

* * *

Year Two of Restock Kroger – 2019 in Review

We embarked on the Restock Kroger journey in 2018. We have been making strategic investments to both deliver
more value for our customers today and to build long-term loyalty. This includes investments in quality products and
freshness, talent, pricing, and personalized rewards that will expand our competitive moats versus our competitors.
Fueling these investments are significant cost savings of over $1 billion in each of the past two years.

Restock Kroger is repositioning our business in four main areas – Redefine the Grocery Customer Experience,
Partner for Customer Value, Develop Talent and Live our Purpose. I’ll outline our progress in each of these areas
below. The outcome of our focus on these drivers is Shareholder Value Creation.

At Kroger we have an aspiration to deliver consistently strong and attractive total shareholder return, or TSR, year
over year.

‘‘TSR’’ isn’t language we’ve traditionally used. Our focus for the last two years, and in 2020, is on Restock Kroger and
transforming our business model. Moving forward you will hear us increasingly talk about TSR – which is a combination
of business growth, free cash flow and dividend. At the heart of Kroger’s TSR is our strategic capital deployment.

Our model for a strong and durable retail supermarket business begins with the customer and our obsession with
increasing customer loyalty. We continue to generate strong and durable free cash flow as reflected by the fact that
the company reduced debt by $1.1 billion in fiscal 2019 and continued to increase the dividend to create value for
shareholders. In total, we returned $951 million to shareholders in 2019. Our confidence that we can deliver even
stronger TSR in the future is guided by our strong free cash flow as well as sustainable net earnings growth.

Redefine the Grocery Customer Experience

Our disciplined focus on execution and continued improvements in the value and experience we deliver for
customers will drive identical sales growth across our store and digital ecosystem.

We are enhancing the customer connection by making investments to widen and deepen our competitive moats of
today – which are product freshness and quality, Our Brands, and personalized rewards – and our competitive
moat of tomorrow, the seamless ecosystem we are building.

Competitive Moats – Fresh

Fresh is a sales driver for Kroger. Our Fresh departments drive trips, loyalty and gross margin. Our product
standards, selection criteria and supply chain are core strengths and are built to deliver first to market and best of
the season fresh products across the United States. We want to be known by our customers for providing fresh,
affordable food that tastes amazing.

We debuted Kroger’s brand transformation campaign, Fresh for Everyone, celebrating our food-first culture and exciting
history as America’s favorite grocer. The campaign has been well received and is driving significant improvements in
marketing effectiveness. It is also driving more trips to our seamless ecosystem in-store and online.

Our Brands

One of many ways we demonstrate our passion for food is through Kroger’s best in class Our Brands portfolio.
While many grocers offer private-label products, Our Brands is a real differentiator for Kroger. Customers tell us
through blind taste tests that Our Brands quality is better than not only competitor private label products, but many
leading national brands as well. 2019 was Our Brands’ best year ever, exceeding $23.1 billion in sales. We also
introduced 758 new Our Brands items in 2019, which helped drive strong year-over-year sales lift across our
portfolio of brands. Since its launch in 2013, Simple Truth has become the leading natural and organic brand in the
country, with annual sales exceeding $2.5 billion in 2019.

The Private Selection brand eclipsed $2 billion in sales for the first time. The Kroger brand exceeded $13.7 billion in
sales, capitalizing on product development around key consumer trends like global and regional flavors.

Personalization

Data and personalization are competitive moats for Kroger. Many retailers have transactional data, but none have
the customer data and the insights to make meaningful suggestions to their customers, like Kroger.

Data has long been a differentiator for The Kroger Co., through our loyalty proposition, which covers over 90% of
all transactions. We have rich customer data, and knowledge of their aggregated shopping history allows us to

improve the efficiency and effectiveness of how we operate our stores. It also ensures that the experience is as
local and personal as possible. Data and personalization permeate all aspects of the business, from ensuring we
carry the most relevant products in stores, to personalizing ‘start my cart’ through the seamless digital experience,
to powering our alternative profit businesses.

Seamless Ecosystem

Kroger continues to invest in digital as we build a seamless ecosystem that combines the best of the physical store
experience with the digital customer experience for our customers. We know our customers value the greater
convenience and personalization this provides, and our data shows it is an essential component of growing overall
loyalty as customers continue to turn to Kroger’s seamless experience to meet their needs. Seamless has been a
huge help in the current environment, enabling customers to shop in the way they prefer and feel most comfortable.

We will continue to invest to make a world-class seamless experience available to our customers. We are well-
positioned because several of our grocery competitors are not taking these steps today.

Partner for Customer Value

We continue to collaborate with icons like Microsoft and Walgreens, and innovators like Ocado, in order to enhance
the customer experience and do things together that neither of us can do alone.

We continued to roll out Ocado facilities in the U.S., designing a flexible distribution network that combines store
locations with both medium- and large-sized facilities. We know Ocado’s value is not just its current capabilities, but
also in how quickly they innovate to serve a rapidly developing online consumer market. What is really exciting
about Ocado is that their model to deliver to customers is significantly less costly than our existing model. Not only
will facilities accelerate our ability to provide customers with a seamless, more convenient experience, they will also
help us do it in a much more cost-effective way.

Additionally, Kroger’s asset light, margin rich alternative profit streams are delivering as expected and have ample
runway ahead. Our diversified portfolio of alternative profit stream businesses contributed an incremental operating
profit of more than $100 million in 2019. Kroger Precision Marketing (KPM) and Kroger Personal Finance continue
to be the primary drivers of growth. Brands continue to invest in KPM because we close the loop between media
exposure and store and digital sales to make brand advertising more addressable, actionable, and accountable.

Develop Talent

Associates expect more from companies today than ever before and we support them in a variety of ways,
including investments in wages, training and development.

Investments in associate wages increased Kroger’s average hourly wage to $15 an hour in 2019, putting more
money in their pockets. When comprehensive benefits are factored in, the average associate hourly rate is over
$20, with benefits that many of our competitors don’t offer.

Feed Your Future, our industry-leading education assistance program, continues to build momentum. Among all the
participants, more than 87 percent are hourly store associates. Since inception of the program last year, we’ve
distributed over 5,000 awards – that means 5,000 more associates have taken steps to secure a more prosperous
future for themselves, their families and their communities through continued education.

We are working hard to ensure we have the right talent, teams, and structure in the right focus areas in our core
supermarket business and our alternative profit businesses. Our focus is on developing, training and promoting
internal talent, while simultaneously hiring seasoned food industry executives to drive our retail supermarket
business.

Live Our Purpose

Increasingly, customers, associates and investors are choosing to shop with, work for, and invest in companies that
are purpose driven and are actively making the world a better place.

As I noted at the start of this letter, purpose matters now more than ever – but this was true before the COVID-19
pandemic. We applauded the Business Roundtable’s announcement last year acknowledging that businesses have
a responsibility to be a positive influence on society. Kroger has always strived to be a trusted partner in our
communities while delivering growth for our shareholders.

iii

During the initial weeks of the pandemic, The Kroger Co. Zero Hunger | Zero Waste Foundation deployed more
than $7 million in hunger-relief resources to communities disproportionately impacted by the coronavirus pandemic.
This included support to nonprofit partners Feeding America and No Kid Hungry. The funding not only supported
local food banks nationwide, but also funded initiatives that ensure children, whose schools were closed, still had
access to nutritious meals.

Over the last three years, we have provided over 1 billion meals, exceeding our goal. Last year alone, we donated
nearly 500 million meals for food insecure families in our communities. We are grateful for the role shareholders
played last year as we donated a meal for every vote, and we will do the same this year.

We are also making it easy for customers to support The Kroger Co. Zero Hunger | Zero Waste Foundation’s
mission to create communities free of hunger and waste by providing options to roundup their purchases to the
nearest dollar at every self-checkout lane in America or donate online at ZeroHungerZeroWasteFoundation.org.

We are animated by purpose, and our customers want to know it and see it. For example, we’ve found that when
customers are aware of our Zero Hunger | Zero Waste social impact platform, they rank our reputation among the
best in the world.

* * *

For 137 years, Kroger has risen to meet many challenges. We’ve always held strong through the hard times and
emerged stronger, better, and with renewed resolve.

We have challenges ahead, but we’re in this together – and I have never been more confident in our future.

Sincerely,

Rodney McMullen
Chairman and CEO

Kroger Safe Harbor Statement

This letter contains ‘‘forward-looking statements’’ within the meaning of the safe harbor provisions of the United
States Private Securities Litigation Reform Act of 1995 about future performance of Kroger, including with respect
to Kroger’s ability to achieve sustainable net earnings growth, strategic capital deployment, strong and attractive
total shareholder return, strong free cash flow and ability to increase the dividend, among other statements. These
statements are based on management’s assumptions and beliefs in light of the information currently available to it.
These statements are indicated by words such as ‘‘aspiration,’’ ‘‘model,’’ and ‘‘confidence,’’ as well as similar words
or phrases. These statements are subject to known and unknown risks, uncertainties and other important factors
that could cause actual results and outcomes to differ materially from those contained in the forward-looking
statements. These include the specific risk factors identified in ‘‘Risk Factors’’ in Kroger’s Annual Report on Form
10-K and any subsequent filings with the Securities and Exchange Commission.

2019 Zero Hunger | Zero Waste Zero Hero Award

Congratulations to the Kroger Co. 2019 Zero Hunger | Zero Waste ‘‘Zero Heroes’’:

Division

Recipient

Atlanta

Central

Cincinnati

Columbus

Dallas

Delta

Dillon Stores

Fred Meyer

Fry’s

King Soopers/City Market

Louisville

Michigan

Mid-Atlantic

Nashville

Ralphs

Roundy’s

Ruler

Smith’s

84.51°

Stephanie Williams

Abby Travers

Bill Weidus

Debbie Anders

Johnny Gaines

Store #492

Hope Hoffman

Jodie Peters

Store #686

Endiya Cheeks

Store #737 Our Promise Team

Terri Strong

Ruth Johnson

Camille Davis

Marcos Hernandez

Jesse Pomeranz Graves

Jennifer Zink

Store #93

Adam Young, Connie Helmers, Sarah Golden, Amelia
Geiser, Naomi Bluesummers, Jess Aurand

Joseph Maggard

Tammy Marmol

Collette Remsen

Justin Conley

Holly Rohrer

Fellow Kroger Shareholders:

Notice of 2020 Annual Meeting of Shareholders

We are pleased to invite you to join us for Kroger’s 2020 Annual Meeting of
Shareholders on June 25, 2020 at 11:00 a.m. Eastern Time. Due to the public health
impact of the coronavirus (COVID-19), the 2020 Annual Meeting of Shareholders will be a
completely virtual meeting conducted via webcast. You will be able to participate in the
virtual meeting online, vote your shares electronically, and submit questions during the
meeting by visiting www.virtualshareholdermeeting.com/KR2020.

When:

Where:

Items of Business:

Thursday, June 25, 2020, at 11:00 a.m. eastern time.

Webcast at www.virtualshareholdermeeting.com/KR2020

1. To elect 10 director nominees.
2. To approve our executive compensation, on an advisory basis.
3. To ratify the selection of our independent auditor for fiscal year 2020.
4. To vote on two shareholder proposals, if properly presented at the meeting.
5. To transact other business as may properly come before the meeting.

Who can Vote:

Holders of Kroger common shares at the close of business on the record date
April 27, 2020 are entitled to notice of and to vote at the meeting.

How to Vote:

Your vote is important! Please vote your proxy in one of the following ways:

1. Via the internet, by visiting www.proxyvote.com.
2. By telephone, by calling the number on your proxy card, voting instruction form,

or notice.

3. By mail, by marking, signing, dating, and mailing your proxy card if you requested
printed materials, or your voting instruction form. No postage is required if mailed
in the United States.

4. By mobile device, by scanning the QR code on your proxy card, notice of internet

availability of proxy materials, or voting instruction form.
5. By voting electronically during the Virtual Annual Meeting at

www.virtualshareholdermeeting.com/KR2020.

Shareholders holding shares at the close of business on the record date may attend
the virtual meeting. You will be able to attend the Annual Meeting, vote and submit
your questions in advance of and real-time during the meeting via a live audio
webcast by visiting www.virtualshareholdermeeting.com/KR2020. To participate in the
meeting, you must have your sixteen-digit control number that is shown on your
Notice of Internet Availability of Proxy Materials or on your proxy card if you receive
the proxy materials by mail. You will not be able to attend the Annual Meeting in
person.

Attending the Meeting:

We appreciate your continued confidence in Kroger, and we look forward to your participation in our Virtual

meeting.

May 12, 2020
Cincinnati, Ohio

By Order of the Board of Directors,
Christine S. Wheatley, Secretary

Proxy Statement

May 12, 2020

We are providing this notice, proxy statement and annual report to the shareholders of The Kroger Co.
(‘‘Kroger’’, ‘‘we’’, ‘‘us’’, ‘‘our’’) in connection with the solicitation of proxies by the Board of Directors of Kroger (the
‘‘Board’’) for use at the Annual Meeting of Shareholders to be held on June 25, 2020, at 11:00 a.m. eastern time,
and at any adjournments thereof. The Annual Meeting will be held virtually and can be accessed online at
www.virtualshareholdermeeting.com/KR2020. There is no physical location for the Annual Meeting of Shareholders.

Our principal executive offices are located at 1014 Vine Street, Cincinnati, Ohio 45202-1100. Our telephone

number is 513-762-4000. This notice, proxy statement and annual report, and the accompanying proxy card were
first furnished to shareholders on May 12, 2020.

Why are you holding a virtual meeting?

In light of the COVID-19 pandemic, for the safety of all of our shareholders, associates, and community, our
2020 Annual Meeting is being held on a virtual-only basis with no physical location. Our goal for the Annual Meeting
is to enable the broadest number of shareholders to participate in the meeting, while providing substantially the
same access and exchange with the Board and Management as an in-person meeting. We believe that we are
observing best practices for virtual shareholder meetings, including by providing a support line for technical
assistance and addressing as many shareholder questions as time allows.

Who can vote?

You can vote if, as of the close of business on April 27, 2020, you were a shareholder of record of Kroger

common shares.

Who is asking for my vote, and who pays for this proxy solicitation?

Your proxy is being solicited by Kroger’s Board of Directors. Kroger is paying the cost of solicitation. We have

hired D.F. King & Co., Inc., 48 Wall Street, New York, New York, a proxy solicitation firm, to assist us in soliciting
proxies and we will pay them a fee estimated not to exceed $17,500 for base solicitation fees.

We also will reimburse banks, brokers, nominees, and other fiduciaries for postage and reasonable expenses

incurred by them in forwarding the proxy material to beneficial owners of our common shares.

Proxies may be solicited personally, by telephone, electronically via the Internet, or by mail.

Who are the members of the Proxy Committee?

Anne Gates, W. Rodney McMullen, and Ronald L. Sargent, all Kroger Directors, are the members of the Proxy

Committee for our 2020 Annual Meeting.

How do I vote my proxy?

You can vote your proxy in one of the following ways:

1. Via the internet, by visiting www.proxyvote.com.

2. By telephone, by calling the number on your proxy card, voting instruction form, or notice.

3. By mail, by marking, signing, dating, and mailing your proxy card if you requested printed materials, or

your voting instruction form. No postage is required if mailed in the United States.

4. By mobile device, by scanning the QR code on your proxy card, notice of internet availability of proxy

materials, or voting instruction form.

5. By voting electronically during the Virtual Annual Meeting at www.virtualshareholdermeeting.com/KR2020.

How can I participate and ask questions at the Annual Meeting?

We are committed to ensuring that our shareholders have substantially the same opportunities to participate in

the Virtual Annual Meeting as they would at an in-person meeting. In order to submit a question at the Annual
Meeting, you will need your 16-digit control number that is printed on the Notice or proxy card that you received in
the mail, or via email if you have elected to receive material electronically. You may log in 15 minutes before the
start of the Annual Meeting and submit questions online. You will be able to submit questions during the Annual

Meeting as well. We encourage you to submit any question that is relevant to the business of the meeting.
Questions asked during the Annual Meeting will be read and addressed during the meeting. Shareholders are
encouraged to log into the webcast at least 15 minutes prior to the start of the meeting to test their Internet
connectivity. You may also submit questions in advance of the meeting via the internet at www.proxyvote.com when
you vote your shares.

What documentation must I provide to be admitted to the Virtual Annual Meeting and how do I attend?

If your shares are registered in your name, you will need to provide your sixteen-digit control number included

on your Notice or your proxy card (if you receive a printed copy of the proxy materials) in order to be able to
participate in the meeting. If your shares are not registered in your name (if, for instance, your shares are held in
‘‘street name’’ for you by your broker, bank or other institution), you must follow the instructions printed on your
Voting Instruction Form. In order to participate in the Annual Meeting, please log on to
www.virtualshareholdermeeting.com/KR2020 at least 15 minutes prior to the start of the Annual Meeting to provide
time to register and download the required software, if needed. The webcast replay will be available at
www.virtualshareholdermeeting.com/KR2020 until the 2021 Annual Meeting of Shareholders. If you access the
meeting but do not enter your control number, you will be able to listen to the proceedings, but you will not be able
to vote or otherwise participate.

What if I have technical or other ‘‘IT’’ problems logging into or participating in the Annual Meeting
webcast?

We have provided a toll-free technical support ‘‘help line’’ that can be accessed by any shareholder who is

having challenges logging into or participating in the Virtual Annual Meeting. If you encounter any difficulties
accessing the virtual meeting during the check-in or meeting time, please call the technical support line number that
will be posted on the Virtual Annual Meeting login page.

What documentation must I provide to vote online at the Annual Meeting?

If you are a shareholder of record and provide your sixteen-digit control number when you access the meeting,

you may vote all shares registered in your name during the Annual Meeting webcast. If you are not a shareholder
of record as to any of your shares (i.e., instead of being registered in your name, all or a portion of your shares are
registered in ‘‘street name’’ and held by your broker, bank or other institution for your benefit), you must follow the
instructions printed on your Voting Instruction Form.

How do I submit a question at the Annual Meeting?

If you would like to submit a question during the Annual Meeting, once you have logged into the webcast at

www.virtualshareholdermeeting.com/KR2020, simply type your question in the ‘‘ask a question’’ box and click
‘‘submit’’. You may also submit questions in advance of the meeting via the internet at www.proxyvote.com when
you vote your shares.

When should I submit my question at the Annual Meeting?

Each year at the Annual Meeting, we hold a question-and-answer session following the formal business

portion of the meeting during which shareholders may submit questions to us. We anticipate having such a
question-and-answer session at the 2020 Annual Meeting. You can submit a question up to 15 minutes prior to the
start of the Annual Meeting and up until the time we indicate that the question-and-answer session is concluded.
However, we encourage you to submit your questions before or during the formal business portion of the meeting
and our prepared statements, in advance of the question-and-answer session, in order to ensure that there is
adequate time to address questions in an orderly manner. You may also submit questions in advance of the
meeting via the internet at www.proxyvote.com when you vote your shares.

Can I change or revoke my proxy?

The common shares represented by each proxy will be voted in the manner you specified unless your proxy is

revoked before it is exercised. You may change or revoke your proxy by providing written notice to Kroger’s
Secretary at 1014 Vine Street, Cincinnati, Ohio 45202, by executing and sending us a subsequent proxy, or by
voting your shares while logged in and participating in the 2020 Annual Meeting of Shareholders.

How many shares are outstanding?

As of the close of business on April 27, 2020, the record date, our outstanding voting securities consisted of

786,187,556 common shares.

How many votes per share?

Each common share outstanding on the record date will be entitled to one vote on each of the 10 director
nominees and one vote on each other proposal. Shareholders may not cumulate votes in the election of directors.

What voting instructions can I provide?

You may instruct the proxies to vote ‘‘For’’ or ‘‘Against’’ each proposal, or you may instruct the proxies to

‘‘Abstain’’ from voting.

What happens if proxy cards or voting instruction forms are returned without instructions?

If you are a registered shareholder and you return your proxy card without instructions, the Proxy Committee

will vote in accordance with the recommendations of the Board.

If you hold shares in street name and do not provide your broker with specific voting instructions on proposals
1, 2, 4, and 5, which are considered non-routine matters, your broker does not have the authority to vote on those
proposals. This is generally referred to as a ‘‘broker non-vote.’’ Proposal 3, ratification of auditors, is considered a
routine matter and, therefore, your broker may vote your shares according to your broker’s discretion.

The vote required, including the effect of broker non-votes and abstentions for each of the matters presented

for shareholder vote, is set forth below.

What are the voting requirements and voting recommendation for each of the proposals?

Proposals

No. 1 Election of Directors

No. 2 Advisory Vote to Approve
Executive Compensation

No. 3 Ratification of

Independent Auditors

Nos. 4 and 5 Shareholder

Proposals

Board
Recommendation

Voting Approval
Standard

Effect of
Abstention

Effect of
broker
Non-vote

FOR each
Director Nominee

FOR

AGAINST each
Proposal

More votes ‘‘FOR’’ than
‘‘AGAINST’’ since an
uncontested election

Affirmative vote of the
majority of shares
participating in the voting

No Effect

Not Applicable

No Effect

Important Notice Regarding the Availability of Proxy Materials for the Shareholder
Meeting to be Held on June 25, 2020

The Notice of 2020 Annual Meeting, Proxy Statement and 2019 Annual Report and the means to vote by internet
are available at www.proxyvote.com.

Kroger’s Corporate Governance Practices

Kroger is committed to strong corporate governance. We believe that strong governance builds trust and
promotes the long-term interests of our shareholders. Highlights of our corporate governance practices include the
following:

Board Governance Practices

✓ Strong Board oversight of enterprise risk.

✓ All director nominees are independent, except for the CEO.

✓ All five Board committees are fully independent.

✓ Robust code of ethics.

✓ Annual evaluation of the Chairman and CEO by the independent directors, led by the independent Lead

Director.

✓ Annual Board and committee self-assessments.

✓ Commitment to Board refreshment and diversity, with 4 of 10 directors nominees being women, including

the chair of the Audit Committee.

✓ Regular executive sessions of the independent directors, at the Board and committee level.

✓ Strong independent Lead Director with clearly defined role and responsibilities.

✓ High degree of Board interaction with management to ensure successful oversight and succession

planning.

Shareholder Rights

✓ All directors are elected annually with a simple majority standard for all uncontested director elections and

by plurality in contested director elections.

✓ No poison pill (shareholder rights plan).

✓ Shareholders have the right to call a special meeting.

✓ Regular engagement with shareholders to understand their perspectives and concerns on a broad array of

topics, including corporate governance matters.

✓ Responsive to shareholder feedback.

✓ Adopted proxy access for director nominees, enabling a shareholder, or group of up to 20 shareholders,
holding 3% of the Company’s common shares for at least three years to nominate candidates for the
greater of two seats or 20% of board nominees.

Compensation Governance

✓ Pay program tied to performance and business strategy.

✓ Majority of pay is long-term and at-risk with no guaranteed bonuses or salary increases.

✓ Stock ownership guidelines align executive and director interests with those of shareholders.

✓ Prohibition on all hedging, pledging, and short sales of Kroger securities by directors and executive

officers.

✓ No tax gross-up payments to executives.

Proposals to Shareholders

Item No. 1. Election of Directors

You are being asked to elect 10 director nominees for a one-year term. The Board of Directors
recommends that you vote FOR the election of all director nominees.

As of the date of this proxy statement, Kroger’s Board of Directors consists of 12 members. All 10 nominees, if
elected at the 2020 Annual Meeting, will serve until the annual meeting in 2021, or until their successors have been
elected by the shareholders or by the Board pursuant to Kroger’s Regulations, and qualified. The Board has not
nominated Mr. Jorge Montoya or Mr. James Runde for re-election as they reached their retirement dates under the
Company’s Guidelines on Issues of Corporate Governance (the ‘‘Guidelines’’) and have served an additional one-
year term at the Board’s request. In connection with Messrs. Montoya’s and Runde’s retirement, the Board will
reduce its size to 10 directors.

Kroger’s Articles of Incorporation provide that the vote required for election of a director nominee by the
shareholders, except in a contested election or when cumulative voting is in effect, is the affirmative vote of a
majority of the votes cast for or against the election of a nominee.

The experience, qualifications, attributes, and skills that led the Corporate Governance Committee and the
Board to conclude that the following individuals should serve as directors are set forth opposite each individual’s
name. The committee memberships stated below are those in effect as of the date of this proxy statement.

Nominees for Directors for Terms of Office Continuing until 2021

Nora A. Aufreiter

Age 60

Director Since 2014

Committees:
Financial Policy
Public Responsibilities

Ms. Aufreiter is Director Emeritus of McKinsey & Company, a global management consulting
firm. She retired in June 2014 after more than 27 years with McKinsey, most recently as a
director and senior partner. During that time, she worked extensively in the U.S., Canada,
and internationally with major retailers, financial institutions, and other consumer-facing
companies. Before joining McKinsey, Ms. Aufreiter spent three years in financial services
working in corporate finance and investment banking. She is a member of the Board of
Directors of The Bank of Nova Scotia. She is also on the board of a privately held company,
Cadillac Fairview, a subsidiary of Ontario Teachers Pension Plan, which is one of North
America’s largest owners, operators and developers of commercial real estate. Ms. Aufreiter
also serves on the boards of St. Michael’s Hospital and the Canadian Opera Company, and
is a member of the Dean’s Advisory Board for the Ivey Business School in Ontario, Canada.

Ms. Aufreiter has over 30 years of broad business experience in a variety of retail sectors.
Her vast experience in leading McKinsey’s North American Retail Practice, North American
Branding service line and the Consumer Digital and Omnichannel service line is of particular
value to the Board. She also brings to the Board valuable insight on commercial real estate.

Anne Gates

Age 60

Director Since 2015

Committees:
Audit*
Public Responsibilities

Ms. Gates was President of MGA Entertainment, Inc., a privately-held developer,
manufacturer, and marketer of toy and entertainment products for children, from 2014 until
her retirement in 2017. Ms. Gates held roles of increasing responsibility with The Walt
Disney Company from 1992-2012. Her roles included Executive Vice President, Managing
Director, and Chief Financial Officer for Disney Consumer Products, and Senior Vice
President of Operations, Planning and Analysis. Prior to joining Disney, Ms. Gates worked
for PepsiCo and Bear Stearns. She is currently a director of Tapestry, Inc. and Raymond
James Financial, Inc.

Ms. Gates has over 25 years of experience in the retail and consumer products industry.
She brings to Kroger financial expertise gained while serving as President of MGA and CFO
of a division of The Walt Disney Company. Ms. Gates has a broad business background in
finance, marketing, strategy and business development, including international business.
Her expertise in toy and entertainment products is of particular value to the Board.
Ms. Gates has been designated an Audit Committee financial expert and serves as Chair of
the Audit Committee.

* Denotes Committee Chair

Karen M. Hoguet

Age 63

Director since 2019

Committees:
Audit
Financial Policy

Susan J. Kropf

Age 71

Director Since 2007

Committees:
Compensation &
Talent Development
Corporate Governance

W. Rodney McMullen
Chairman and Chief
Executive Officer

Age 59

Director Since 2003

Clyde R. Moore

Age 66

Director Since 1997

Committees:
Compensation &
Talent Development*
Corporate Governance

Ms. Hoguet served as the Chief Financial Officer of Macy’s, Inc. from October 1997 until
July of 2018 when she became a strategic advisor to the Chief Executive Officer until her
retirement on February 1, 2019. Ms. Hoguet serves on the Board of Directors of Nielsen
Holdings plc. She also serves on the boards of Hebrew Union College and UCHealth. In the
past five years, she also served as a director of The Chubb Corporation.

Ms. Hoguet has over 30 years of retail and commercial experience. Her long tenure as a
senior executive of a publicly traded company with financial, audit, strategy, and risk
oversight experience is of particular value to the Board.

Ms. Kropf was President and Chief Operating Officer of Avon Products Inc., a manufacturer
and marketer of beauty care products, from 2001 until her retirement in January 2007. She
joined Avon in 1970 and, during her tenure at Avon, Ms. Kropf also served as Executive
Vice President and Chief Operating Officer, Avon North America and Global Business
Operations from 1998 to 2000 and President, Avon U.S. from 1997 to 1998. Ms. Kropf was
a member of Avon’s Board of Directors from 1998 to 2006. She is currently a director of
Tapestry, Inc., and Sherwin Williams Company. In the past five years she also served as a
director of MeadWestvaco Corporation and Avon Products, Inc.

Ms. Kropf has unique and valuable consumer insight, having led a major, publicly-traded
retailer of beauty and related consumer products. She has extensive experience in
manufacturing, marketing, supply chain operations, customer service, and product
development, all of which assist her in her role as a member of Kroger’s Board. Ms. Kropf
has a strong financial background and has significant boardroom experience through her
service on the boards of various public companies, including experience serving on
compensation, audit, and corporate governance committees. She was inducted into the
YWCA Academy of Women Achievers. Ms. Kropf received recognition from the National
Association of Corporate Directors as an NACD Directorship 100 ‘‘Class of 2016’’ member.

Mr. McMullen was elected Chairman of the Board in January 2015 and Chief Executive
Officer of Kroger in January 2014. He served as Kroger’s President and Chief Operating
Officer from August 2009 to December 2013. Prior to that, Mr. McMullen was elected to
various roles at Kroger including Vice Chairman in 2003, Executive Vice President, Strategy,
Planning, and Finance in 1999, Senior Vice President in 1997, Group Vice President and
Chief Financial Officer in June 1995, and Vice President, Planning and Capital Management
in 1989. He is a director of VF Corporation. In the past five years, he also served as a
director of Cincinnati Financial Corporation.

Mr. McMullen has broad experience in the supermarket business, having spent his career
spanning over 40 years with Kroger. He has a strong background in finance, operations,
and strategic partnerships, having served in a variety of roles with Kroger, including as our
CFO, COO, and Vice Chairman. His service as chair of Cincinnati Financial Corporation’s
compensation committee and on its executive and investment committees, as well as his
service on the audit and nominating and governance committees of VF Corporation, adds
depth to his extensive retail experience.

Mr. Moore was the Chairman of First Service Networks, a national provider of facility and
maintenance repair services, until his retirement in 2015. Prior to his retirement, he was
Chairman and Chief Executive Officer of First Service Networks from 2000 to 2014.

Mr. Moore has over 30 years of general management experience in public and private
companies. He has sound experience as a corporate leader overseeing all aspects of a
facilities management firm and numerous manufacturing companies. Mr. Moore’s expertise
broadens the scope of the Board’s experience to provide oversight to Kroger’s facilities,
digital, and manufacturing businesses. Additionally, his expertise and leadership as Chair of
the Compensation and Talent Development Committee is of particular value to the Board.

* Denotes Committee Chair

Ronald L. Sargent

Lead Director

Age 64

Director Since 2006

Committees:
Audit
Corporate Governance*
Public Responsibilities

Bobby S. Shackouls

Age 69

Director Since 1999

Committees:
Audit
Corporate Governance

Mark S. Sutton

Age 58

Director Since 2017

Committees:
Audit
Public Responsibilities

Mr. Sargent was Chairman and Chief Executive Officer of Staples, Inc., a business products
retailer, where he was employed from 1989 until his retirement in 2017. Prior to joining
Staples, Mr. Sargent spent 10 years with Kroger in various positions. He is a director of Five
Below, Inc. and Wells Fargo & Company. In the past five years, he served as a director of
Staples, Inc.

Mr. Sargent has over 35 years of retail experience, first with Kroger and then with increasing
levels of responsibility and leadership at Staples, Inc. His efforts helped carve out a new
market niche for the international retailer. His understanding of retail operations, consumer
insights, and e-commerce are of particular value to the Board. Mr. Sargent has been
designated an Audit Committee financial expert and serves as Lead Director of the Board.

Mr. Shackouls was Chairman of the Board of Burlington Resources Inc., a natural resources
business, from July 1997 until its merger with ConocoPhillips in 2006 and its President and
Chief Executive Officer from December 1995 until 2006. Mr. Shackouls was also President
and Chief Executive Officer of Burlington Resources Oil and Gas Company (formerly known
as Meridian Oil Inc.), a wholly-owned subsidiary of Burlington Resources, from 1994 to
1995. Mr. Shackouls is a director of Oasis Petroleum Inc., Quintana Energy Services, Plains
GP Holdings, L.P., and Plains All American Pipeline, L.P. Plains GP Holdings, L.P. is the
ultimate general partner of Plains All American Pipeline, L.P. and although the two are
separate publicly traded companies, they are governed by a single board, and directors
receive compensation for service on the single board.

Mr. Shackouls brings to the Board the critical thinking that comes with a chemical
engineering background, as well as his experience leading a major natural resources
company, coupled with his corporate governance expertise.

Mr. Sutton is Chairman and Chief Executive Officer of International Paper, a leading global
producer of renewable fiber-based packaging, pulp, and paper products. Prior to becoming
CEO, he served as President and Chief Operating Officer with responsibility for running the
company’s global business. Mr. Sutton joined International Paper in 1984 as an Electrical
Engineer. He held roles of increasing responsibility throughout his career, including Mill
Manager, Vice President of Corrugated Packaging Operations across Europe, the Middle
East and Africa, Vice President of Corporate Strategic Planning, and Senior Vice President
of several business units, including global supply chain, before being named CEO in 2014.
Mr. Sutton is a member of The Business Council, serves on the American Forest & Paper
Association board of directors, the Business Roundtable board of directors, and the
international advisory board of the Moscow School of Management – Skolkovo. He was
appointed chairman of the U.S. Russian Business Council. He also serves on the board of
directors of Memphis Tomorrow and the board of governors for New Memphis Institute.

Mr. Sutton has over thirty years of leadership experience with increasing levels of
responsibility and leadership at International Paper. He brings to the Board the critical
thinking that comes with an electrical engineering background as well as his experience
leading a global company. His strong strategic planning background and manufacturing and
supply chain experience are of particular value to the Board. Mr. Sutton has been
designated an Audit Committee financial expert.

* Denotes Committee Chair

Ashok Vemuri

Age 52

Director Since 2019

Committees:
Financial Policy
Public Responsibilities

Mr. Vemuri was Chief Executive Officer and a Director of Conduent Incorporated, a global
digital interactions company, since the company’s inception as a result of the spin-off from
Xerox Corporation in January 2017, until 2019. He previously served as Chief Executive
Officer of Xerox Business Services, LLC and as an Executive Vice President of Xerox
Corporation from July 2017 to December 2017. Prior to that, he was President, Chief
Executive Officer, and a member of the Board of Directors of IGATE Corporation, a New
Jersey-based global technology and services company now part of Capgemini, from 2013
to 2015. Before joining IGATE, Mr. Vemuri spent 14 years at Infosys Limited, a multinational
consulting and technology services company, in a variety of leadership and business
development roles and served on the board of Infosys from 2011 to 2013. Prior to joining
Infosys in 1999, Mr. Vemuri worked in the investment banking industry at Deutsche Bank
and Bank of America. In the past five years, he served as a director of Conduent
Incorporated.

Mr. Vemuri brings to the Board a proven track record of leading technology services
companies through growth and corporate transformations. His experience as CEO of global
technology companies is of particular value to the Board as he brings a unique operational,
financial, and client experience perspective.

The Board of Directors Recommends a Vote For Each Director Nominee.

Board Diversity and Succession Planning

Our director nominees reflect a wide array of experience, skills, and backgrounds. Each director is individually
qualified to make unique and substantial contributions to Kroger. Collectively, our directors’ diverse viewpoints and
independent-mindedness enhance the quality and effectiveness of Board deliberations and decision making. Our
Board is a dynamic group of new and experienced members, providing an appropriate balance of institutional
knowledge and fresh perspectives about Kroger due to the varied length of tenure on the Board. This blend of
qualifications, attributes, and tenure results in highly effective board leadership.

The Corporate Governance Committee considers racial, ethnic, and gender diversity to be important elements

in promoting full, open, and balanced deliberations of issues presented to the Board. The Corporate Governance
Committee considers director candidates who help the Board reflect the diversity of our shareholders, associates,
customers, and the communities in which we operate. Some consideration is also given to the geographic location
of director candidates in order to provide a reasonable distribution of members from Kroger’s operating areas.

Board succession planning is an ongoing, year-round process. The Corporate Governance Committee
recognizes the importance of thoughtful Board refreshment and engages in a continuing process of identifying
attributes sought for future Board members. The Corporate Governance Committee takes into account the Board
and committee evaluations regarding the specific qualities, skills, and experiences that would contribute to overall
Board and committee effectiveness, as well as the future needs of the Board and its committees in light of Kroger’s
current and long-term business strategies, and the skills and qualifications of directors who are expected to retire in
the future.

The Corporate Governance Committee believes that it has been successful in its efforts to promote gender

and ethnic diversity on our Board. The Corporate Governance Committee and Board believe that our director
nominees for election at our 2020 Annual Meeting bring to our Board a variety of different experiences, skills, and
qualifications that contribute to a well-functioning diverse Board that effectively oversees the Company’s strategy
and management. The charts below show the diversity of our director nominees and the skills and experience that
we consider important for our directors in light of our current business, strategy, and structure:

Business
Management

Retail

Consumer

Financial
Expertise

Risk
Management

Operations
& Technology

Sustainability

Manufacturing

Nora
Aufreiter

Anne
Gates

Karen
Hoguet

Susan
Kropf

Rodney
McMullen

Clyde
Moore

Ronald
Sargent

Bobby
Shackouls

Mark
Sutton

Ashok
Vemuri

Total
(of 10)

●

Gender Diversity

Ethnic Diversity

40%
Women

20% of
Board is
ethnically
diverse

Information Concerning the Board of Directors

Board Leadership Structure and Lead Independent Director

As of the date of this proxy statement, Kroger’s Board is composed of eleven independent non-employee
directors and one management director, Mr. McMullen, the Chairman and CEO. If all ten nominees are elected, the
Board will reduce its size to ten directors and will be composed on nine independent non-employee directors and
one management director, Mr. McMullen. Kroger has a governance structure in which independent directors
exercise meaningful and vigorous oversight.

As provided in Kroger’s Guidelines, the Board has designated one of the independent directors as Lead

Director. The Lead Director works with the Chairman to share governance responsibilities, facilitate the
development of Kroger’s strategy and grow shareholder value. The Lead Director serves a variety of roles,
consistent with current best practices, including:

•

reviewing and approving Board meeting agendas, materials, and schedules to confirm that the appropriate
topics are reviewed, with sufficient information provided to directors on each topic and appropriate time is
allocated to each;

serving as the principal liaison between the Chairman, management, and the independent directors;

presiding at the executive sessions of independent directors and at all other meetings of the Board at
which the Chairman is not present;

calling meetings of independent directors at any time; and

serving as the Board’s representative for any consultation and direct communication, following a request,
with major shareholders.

The Lead Director carries out these responsibilities in numerous ways, including:

•

facilitating communication and collegiality among the Board members;

soliciting direct feedback from non-employee directors;

overseeing the succession planning process, including meeting with a wide range of employees including
corporate and division management associates;

• meeting with the CEO frequently to discuss strategy;

•

serving as a sounding board and advisor to the CEO; and

discussing Company matters with other directors between meetings.

Unless otherwise determined by the independent members of the Board, the Chair of the Corporate

Governance Committee is designated as the Lead Director. Ronald L. Sargent, an independent director and the
Chair of the Corporate Governance Committee, was appointed Lead Director in June 2018. Mr. Sargent is an
effective Lead Director for Kroger due to, among other things:

•

his independence;

his deep strategic and operational understanding of Kroger obtained while serving as a Kroger director;

his insight into corporate governance;

his experience as the CEO of an international retailer;

his experience on the boards of other large publicly traded companies; and

his engagement and commitment to carrying out the role and responsibilities of the Lead Director.

With respect to the roles of Chairman and CEO, the Guidelines provide that the Board will determine whether it

is in the best interests of Kroger and our shareholders for the roles to be combined. The Board exercises this
judgment as it deems appropriate in light of prevailing circumstances. The Board believes that this leadership
structure improves the Board’s ability to focus on key policy and operational issues and helps the Company operate
in the long-term interest of shareholders. Additionally, this structure provides an effective balance between strong
Company leadership and appropriate safeguards and oversight by independent directors. Our CEO’s strong
background in finance, operations, and strategic partnerships is particularly important to the Board given Kroger’s
current transformation under Restock Kroger. His consistent leadership, deep industry expertise, and extensive

knowledge of the Company are also especially critical in the midst of the rapidly evolving retail landscape. The
Board believes that the structure of the Chairman and independent Lead Director position should continue to be
considered as part of the succession planning process.

Annual Board Evaluation Process

The Board and each of its committees conduct an annual evaluation to determine whether the Board is
functioning effectively both at the Board and at the committee levels. As part of this annual evaluation, the Board
assesses whether the current leadership structure and function continues to be appropriate for Kroger and its
shareholders. The Guidelines provide the flexibility for the Board to modify our leadership structure in the future as
appropriate. We believe that Kroger, like many U.S. companies, is well-served by this flexible leadership structure.

The Board recognizes that a robust evaluation process is an essential component of strong corporate
governance practices and ensuring Board effectiveness. The Corporate Governance Committee oversees an
annual evaluation process led by the Lead Independent Director (who also serves as Chair of the Corporate
Governance Committee).

Each director completes a detailed written annual evaluation of the Board and the committees on which he or

she serves and the Lead Director conducts interviews with each of the directors. These Board evaluations are
designed to assess the skills, qualifications, and experience represented on the Board and its committees, and to
determine whether the Board and its committees are functioning effectively. The process also evaluates the
relationship between management and the Board, including the level of access to management, responsiveness of
management, and the effectiveness of the Board’s evaluation of management performance. The results of this
Board evaluation are discussed by the full Board and each committee, as applicable, and changes to the Board’s
and its committees’ practices are implemented as appropriate.

Committees of the Board of Directors

To assist the Board in undertaking its responsibilities, and to allow deeper engagement in certain areas of

company oversight, the Board has established five standing committees: Audit, Compensation and Talent
Development (‘‘Compensation’’), Corporate Governance, Financial Policy, and Public Responsibilities. All
committees are composed exclusively of independent directors, as determined under the New York Stock
Exchange (‘‘NYSE’’) listing standards. The current charter of each Board committee is available on our website at
ir.kroger.com under Investors – Governance – Guidelines on Issues of Corporate Governance.

Name of Committee, Number of
Meetings, and Current Members

Committee Functions

Audit Committee

Meetings in 2019 : 5

Members:

Anne Gates, Chair
Karen M. Hoguet
Ronald L. Sargent
Bobby S. Shackouls
Mark S. Sutton

• Oversees the Company’s financial reporting and accounting matters,
including review of the Company’s financial statements and the audit
thereof, the Company’s financial reporting and accounting process,
and the Company’s systems of internal control over financial reporting

• Selects, evaluates, and oversees the compensation and work of the

independent registered public accounting firm and reviews its
performance, qualifications, and independence

• Oversees and evaluates the Company’s internal audit function,
including review of its audit plan, policies and procedures, and
significant findings

• Oversees risk assessment and risk management, including review of
cybersecurity risks as well as legal or regulatory matters that could
have a significant effect on the Company

• Reviews and monitors the Company’s compliance programs, including

the whistleblower program

Name of Committee, Number of
Meetings, and Current Members

Committee Functions

Compensation Committee

• Recommends for approval by the independent directors the

Meetings in 2019: 5

Members:

Clyde R. Moore, Chair
Susan J. Kropf
Jorge P. Montoya
James A. Runde

compensation of the CEO and approves the compensation of other
senior management

• Administers the Company’s executive compensation policies and

programs, including determining grants of equity awards under the
plans

• Has sole authority to retain and direct the committee’s compensation

consultant

• Assists the full Board with senior management succession planning

Corporate Governance Committee

• Oversees the Company’s corporate governance policies and

Meetings in 2019: 2

Members:

Ronald L. Sargent, Chair
Susan J. Kropf
Clyde R. Moore
Bobby S. Shackouls

procedures

• Develops criteria for selecting and retaining directors, including

identifying and recommending qualified candidates to be director
nominees

• Designates membership and Chairs of Board committees

• Reviews the Board’s performance and director independence

• Establishes and reviews the practices and procedures by which the

Board performs its functions

Financial Policy Committee

• Reviews and recommends financial policies and practices

Meetings in 2019: 2

Members:

James A. Runde, Chair
Nora A. Aufreiter
Karen M. Hoguet
Ashok Vemuri

• Oversees management of the Company’s financial resources

• Reviews the Company’s annual financial plan, significant capital

investments, plans for major acquisitions or sales, issuance of new
common or preferred stock, dividend policy, creation of additional debt
and other capital structure considerations including additional leverage
or dilution in ownership

• Monitors the investment management of assets held in pension and

profit sharing plans administered by the Company

Public Responsibilities Committee

• Reviews the Company’s policies and practices affecting its social and

Meetings in 2019: 2

Members:

Jorge P. Montoya, Chair
Nora A. Aufreiter
Anne Gates
Ronald L. Sargent
Mark S. Sutton
Ashok Vemuri

public responsibility as a corporate citizen, including: community
relations, charitable giving, supplier diversity, sustainability,
government relations, political action, consumer and media relations,
food and pharmacy safety and the safety of customers and employees

• Reviews and examines the Company’s evaluation of and response to
changing public expectations and public issues affecting the business

Director Nominee Selection Process

The Corporate Governance Committee is responsible for recommending to the Board a slate of nominees for

election at each annual meeting of shareholders. The Corporate Governance Committee recruits candidates for
Board membership through its own efforts and through recommendations from other directors and shareholders. In
addition, the Corporate Governance Committee retains an independent search firm to assist in identifying and
recruiting director candidates who meet the criteria established by the Corporate Governance Committee.

These criteria are:

•

demonstrated ability in fields considered to be of value to the Board in the deliberation and long-term
planning of the Board and Kroger, including business management, public service, education, science,
technology, e-commerce, law, and government;

•

experience in high growth companies and nominees whose business experience can help the Company
innovate and derive new value from existing assets;

highest standards of personal character and conduct;

willingness to fulfill the obligations of directors and to make the contribution of which he or she is capable,
including regular attendance and participation at Board and committee meetings, and preparation for all
meetings, including review of all meeting materials provided in advance of the meeting; and

ability to understand the perspectives of Kroger’s customers, taking into consideration the diversity of our
customers, including regional and geographic differences.

The Corporate Governance Committee also considers the specific experience and abilities of director

candidates in light of our current business, strategy and structure, and the current or expected needs of the Board
in its identification and recruitment of director candidates.

Shareholder Engagement

Maintaining ongoing relationships with our shareholders, and understanding our shareholders’ views, is a

priority for both our Board and management team. We have a longstanding history of engaging with our
shareholders through our investor relations team’s year-round outreach program. At the direction of our Board, we
expanded our shareholder engagement program in 2016 to include outreach to our largest shareholders’
governance teams. In 2019, we requested meetings with shareholders representing 43% of our outstanding shares
during proxy season and off-season engagement and ultimately engaged with shareholders representing 36% of
our outstanding shares.

During these engagements, some of which included the participation of our Lead Director, we discussed and

solicited feedback on a range of topics, including business strategy, corporate governance, executive
compensation and sustainability. In addition, we attended industry events to further engage with shareholders and
subject matter experts. These conversations provided valuable insights into our shareholders’ perspectives and
their feedback was shared with, and considered by, our full Board. Please see page 36 for a discussion of actions
taken by our Compensation Committee and Board of Directors based, in part, on these engagements.

Candidates Nominated by Shareholders

The Corporate Governance Committee will consider shareholder recommendations for director nominees for
election to the Board. If shareholders wish to nominate a person or persons for election to the Board at our 2021
annual meeting, written notice must be submitted to Kroger’s Secretary, and received at our executive offices, in
accordance with Kroger’s Regulations, not later than March 28, 2021. Such notice should include the name, age,
business address and residence address of such person, the principal occupation or employment of such person,
the number of Kroger common shares owned of record or beneficially by such person and any other information
relating to the person that would be required to be included in a proxy statement relating to the election of directors.
The Secretary will forward the information to the Corporate Governance Committee for its consideration. The
Corporate Governance Committee will use the same criteria in evaluating candidates submitted by shareholders as
it uses in evaluating candidates identified by the Corporate Governance Committee, as described above. See
‘‘Director Nominee Selection Process.’’

Eligible shareholders have the ability to submit director nominees for inclusion in our proxy statement for the
2021 annual meeting of shareholders. To be eligible, shareholders must have owned at least 3% of our common
shares for at least three years. Up to 20 shareholders are able to aggregate for this purpose. Nominations must be
submitted to our Corporate Secretary at our principal executive offices no earlier than December 13, 2020 and no
later than January 12, 2021.

Corporate Governance Guidelines

The Board has adopted the Guidelines which include copies of the current charters for each of the five
standing committees of the Board. The Guidelines are available on our website at ir.kroger.com under Investors –
Governance – Guidelines on Issues of Corporate Governance. Shareholders may also obtain a copy of the
Guidelines by making a written request to Kroger’s Secretary at our executive offices.

Independence

The Board has determined that all of the non-employee directors have no material relationships with Kroger
and satisfy the criteria for independence set forth in Rule 303A.02 of the NYSE Listed Company Manual. Therefore,
all non-employee directors are independent for purposes of the NYSE listing standards. The Board made its
determination based on information furnished by all members regarding their relationships with Kroger and its
management, and other relevant information. The Board considered, among other things, that

•

the value of any business transactions between Kroger and entities with which the directors are affiliated
falls below the thresholds identified by the NYSE listing standards, and

none had any material relationships with Kroger other than serving on our Board.

Audit Committee Expertise

The Board has determined that Anne Gates, Karen M. Hoguet, Ronald L. Sargent and Mark S. Sutton,

independent directors who are members of the Audit Committee, are ‘‘audit committee financial experts’’ as defined
by applicable Securities and Exchange Commission (‘‘SEC’’) regulations and that all members of the Audit
Committee are ‘‘financially literate’’ as that term is used in the NYSE listing standards and are independent in
accordance with Rule 10A-3 of the Securities Exchange Act of 1934.

Code of Ethics

The Board has adopted The Kroger Co. Policy on Business Ethics, applicable to all officers, employees and
directors, including Kroger’s principal executive, financial and accounting officers. The Policy on Business Ethics is
available on our website at ir.kroger.com under Investors – Governance – Policy on Business Ethics. Shareholders
may also obtain a copy of the Policy on Business Ethics by making a written request to Kroger’s Secretary at our
executive offices.

Communications with the Board

The Board has established two separate mechanisms for shareholders and interested parties to communicate

with the Board. Any shareholder or interested party who has concerns regarding accounting, improper use of
Kroger assets, or ethical improprieties may report these concerns via the toll-free hotline (800-689-4609) or website
(ethicspoint.com) established by the Board’s Audit Committee. The concerns are investigated by Kroger’s Vice
President, Chief Ethics and Compliance Officer and the Vice President of Internal Audit and reported to the Audit
Committee as deemed appropriate.

Shareholders or interested parties also may communicate with the Board in writing directed to Kroger’s
Secretary at our executive offices. Communications relating to personnel issues, ordinary business operations, or
companies seeking to do business with us, will be forwarded to the business unit of Kroger that the Secretary
deems appropriate. All other communications will be forwarded to the Chair of the Corporate Governance
Committee for further consideration. The Chair of the Corporate Governance Committee will take such action as he
or she deems appropriate, which may include referral to the full Corporate Governance Committee or the entire
Board.

Attendance

The Board held five meetings in fiscal year 2019. During fiscal 2019, all incumbent directors attended at least

75% of the aggregate number of meetings of the Board and committees on which that director served. Members of
the Board are expected to use their best efforts to attend all annual meetings of shareholders. All 12 of the then
current members attended last year’s annual meeting.

Independent Compensation Consultants

The Compensation Committee directly engages a compensation consultant to advise the Compensation
Committee in the design of Kroger’s executive compensation. The Committee retained Korn Ferry Hay (US) (‘‘Korn
Ferry’’) beginning in December 2017. Retained by and reporting directly to the Compensation Committee, Korn
Ferry provided the Committee with assistance in evaluating Kroger’s executive compensation programs and
policies.

In fiscal 2019, Kroger paid Korn Ferry $523,769 for work performed for the Compensation Committee. Kroger,

on management’s recommendation, retained Korn Ferry to provide other services for Kroger in fiscal 2019 for
which Kroger paid $311,868. These other services primarily related to consulting on administrative management

and compensation structure redesign. The Compensation Committee expressly approved Korn Ferry performing
these additional services. After taking into consideration the NYSE’s independence standards and the SEC rules,
the Compensation Committee determined that Korn Ferry was independent, and their work has not raised any
conflict of interest.

The Compensation Committee may engage an additional compensation consultant from time to time as it

deems advisable.

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee was an officer or employee of Kroger during fiscal 2019, and no

member of the Compensation Committee is a former officer of Kroger or was a party to any related person
transaction involving Kroger required to be disclosed under Item 404 of Regulation S-K. During fiscal 2019, none of
our executive officers served on the board of directors or on the compensation committee of any other entity that
has or had executive officers serving as a member of Kroger’s Board of Directors or Compensation Committee of
the Board.

Board Oversight of Enterprise Risk

While risk management is primarily the responsibility of Kroger’s management team, the Board is responsible

for strategic planning and overall supervision of our risk management activities. The Board’s oversight of the
material risks faced by Kroger occurs at both the full Board level and at the committee level.

The Board receives presentations throughout the year from various department and business unit leaders that
include discussion of significant risks as necessary, including newly identified and evolving high priority risks, such
as those presented by the COVID-19 pandemic. At each Board meeting, the Chairman and CEO addresses
matters of particular importance or concern, including any significant areas of risk that require Board attention.
Additionally, through dedicated sessions focusing entirely on corporate strategy, the full Board reviews in detail
Kroger’s short- and long-term strategies, including consideration of significant risks facing Kroger and their potential
impact. The independent directors, in executive sessions led by the Lead Director, address matters of particular
concern, including significant areas of risk, that warrant further discussion or consideration outside the presence of
Kroger employees. At the committee level, reports are given by management subject matter experts to each
committee on risks within the scope of their charters.

The Audit Committee has oversight responsibility not only for financial reporting of Kroger’s major financial

exposures and the steps management has taken to monitor and control those exposures, but also for the
effectiveness of management’s processes that monitor and manage key business risks facing Kroger, as well as
the major areas of risk exposure, and management’s efforts to monitor and control the major areas of risk exposure
including cybersecurity risk. The Audit Committee incorporates its risk oversight function into its regular reports to
the Board and also discusses with management its policies with respect to risk assessment and risk management.

Management provides regular updates throughout the year to the respective Board committees regarding
management of the risks they oversee. For example, our Vice President, Chief Ethics and Compliance Officer
provides regular updates to the Audit Committee on our compliance risks and actions taken to mitigate that risk;
and our Senior Vice President and Chief Information Officer and our Chief Information Security Officer provide
regular updates on our cybersecurity risks and actions taken to mitigate that risk to the Audit Committee. The Audit
Committee reports on risk to the full Board at each regular meeting of the Board.

We believe that our approach to risk oversight, as described above, optimizes our ability to assess inter-

relationships among the various risks, make informed cost-benefit decisions, and approach emerging risks in a
proactive manner for Kroger. We also believe that our risk structure complements our current Board leadership
structure, as it allows our independent directors, through the five fully independent Board committees, and in
executive sessions of independent directors led by the Lead Director, to exercise effective oversight of the actions
of management, led by Mr. McMullen as Chairman and CEO, in identifying risks and implementing effective risk
management policies and controls.

Environmental, Sustainability, and Governance Oversight

We are aligned with the desire of our customers, associates, and shareholders that we engage in our

communities and reduce our impacts on the environment while continuing to create positive economic value over
the long-term. Given the breadth of topics and their importance to us, most of our Board committees have direct
oversight of environmental, sustainability and governance (‘‘ESG’’) topics. Among the other key responsibilities for

each committee: the Audit Committee oversees risk management and compliance with legal, financial and
regulatory requirements; the Public Responsibilities Committee oversees our responsibilities as a corporate citizen
and efforts to engage stakeholders and manage issues that affect our business, including sustainability, supplier
diversity and food safety, among other topics; the Corporate Governance Committee oversees our good
governance practices; and the Compensation and Talent Development Committee oversees talent development.
We discuss the responsibilities of each committee further above. Throughout the year, Kroger leaders update the
Public Responsibilities Committee on important ESG topics, which may relate to our sustainability initiatives such
as our Zero Hunger|Zero Waste campaign, our food safety programs, and community and customer engagement.
At each Board meeting, Kroger’s Chairman and CEO addresses matters of particular importance or concern,
including any significant areas of risk that require Board attention.

For the past thirteen years, our Company has prepared and produced an annual report describing our

progress and initiatives regarding sustainability and other ESG matters. For the most recent information regarding
our ESG initiatives and related matters, please visit http://sustainability.kroger.com. The information on, or
accessible through, this website is not part of, or incorporated by reference into, this proxy statement.

In addition, our full Board oversees issues related to diversity and inclusion within the Kroger workplace.
Diversity and inclusion have been deeply rooted in Kroger’s values for decades. We are committed to fostering an
environment of inclusion in the workplace, marketplace, and workforce where the diversity of cultures,
backgrounds, experiences, perspectives and ideas are valued and appreciated. Kroger’s corporate team and retail
divisions have strategic partnerships with universities, educational institutions and community partners to improve
how we attract candidates from all backgrounds and ethnicities for jobs at all levels. Diversity and inclusion will
continue to be a key ingredient in feeding Kroger’s innovation, long-term sustainability and the human spirit.

The Kroger family of companies provides inclusion training to all management and many hourly associates.
Most work locations (stores, plants, distribution centers and offices) have an inclusion-focused team, called Our
Promise team. The teams work on projects that reflect Kroger’s values, offer leaders valuable feedback and
suggestions on improving diversity and inclusion, and facilitate communication to champion business priorities.

Director Compensation

2019 Director Compensation

The following table describes the 2019 compensation for non-employee directors. Mr. McMullen does not

receive compensation for his Board service.

Name

Nora A. Aufreiter
Robert D. Beyer(4)

Anne Gates
Karen M. Hoguet(5)

Susan J. Kropf

Jorge P. Montoya

Clyde R. Moore

James A. Runde

Ronald L. Sargent

Bobby S. Shackouls

Mark S. Sutton

Ashok Vemuri

Fees
Earned or
Paid in
Cash

Stock
Awards(1)

Option
Awards(2)

Change in Pension
Value
And Nonqualified
Deferred Compensation
Earnings(3)

$ 89,723

$176,530

$ 36,964

—

$124,615

$176,530

$ 16,954

$102,084

$ 89,723

$176,530

$104,677

$176,530

$109,661

$176,530

$104,677

$176,530

$152,030

$176,530

$ 99,692

$176,530

$ 99,692

$176,530

$ 89,723

$176,530

—

39,000

26,000

39,000

—

$ 12,308

$145,359

$ 4,042

Total

$266,253

$ 49,272

$301,145

$119,038

$266,253

$281,207

$431,550

$281,207

$332,602

$276,222

$266,253

(1) Amounts reported in the Stock Awards column represent the aggregate grant date fair value of the annual

incentive share award, computed in accordance with FASB ASC Topic 718. On July 15, 2019, each non-
employee director then serving received 7,995 incentive shares with a grant date fair value of $176,530.
Ms. Hoguet received a prorated award of 3,620 shares with a grant date fair value of $102,084 on
December 12, 2019 when she joined the Board.

(2) Options are no longer granted to non-employee directors. The aggregate number of previously granted stock

options that remained unexercised and outstanding at fiscal year-end was as follows: Mr. Runde held
26,000 options and Messrs. Montoya, Moore, and Sargent and Ms. Kropf each held 39,000 options.

(3) The amounts reported for Mr. Beyer and Mr. Sargent represent preferential earnings on nonqualified deferred
compensation. For a complete explanation of preferential earnings, please refer to footnote 5 to the Summary
Compensation Table. The amount reported for Mr. Moore represents the change in actuarial present value of
his accumulated benefit under the pension plan for non-employee directors. Pension values may fluctuate
significantly from year to year depending on a number of factors, including age, average annual earnings, and
the assumptions used to determine the present value, such as the discount rate. The increase in the actuarial
present value of his accumulated pension benefit for 2019 is primarily due to the decrease in the discount rate,
partially offset by the change in value of the benefit due to aging and mortality project scale updates.

(4) Because Mr. Beyer retired from the Board on June 27, 2019, he received a prorated cash retainer.

(5) Because Ms. Hoguet was appointed to the Board on December 12, 2019, she received a prorated cash

retainer.

Annual Compensation

Each non-employee director receives an annual cash retainer of $90,000. The Lead Director receives an

additional annual retainer of $37,500 per year; the members of the Audit Committee each receive an additional
annual retainer of $10,000; the Chair of the Audit Committee receives an additional annual retainer of $25,000; the
Chair of Compensation Committee receives an additional annual retainer of $20,000; and the Chair of each of the
other committees receives an additional annual retainer of $15,000. Each non-employee director also receives an
annual grant of incentive shares (Kroger common shares) with a value of approximately $175,000.

The Board has determined that compensation of non-employee directors must be competitive on an ongoing

basis to attract and retain directors who meet the qualifications for service on the Board. Non-employee director
compensation was adjusted in 2018 and will be reviewed from time to time as the Corporate Governance
Committee deems appropriate.

Pension Plan

Non-employee directors first elected prior to July 17, 1997 receive an unfunded retirement benefit equal to the

average cash compensation for the five calendar years preceding retirement. Only Mr. Moore is eligible for this
benefit. Benefits begin at the later of actual retirement or age 65.

Nonqualified Deferred Compensation

We also maintain a deferred compensation plan for non-employee directors. Participants may defer up to
100% of their cash compensation and/or the receipt of all (and not less than all) of the annual award of incentive
shares.

Cash Deferrals

Cash deferrals are credited to a participant’s deferred compensation account. Participants may elect from

either or both of the following two alternative methods of determining benefits:

•

interest accrues until paid out at the rate of interest determined prior to the beginning of the deferral year
to represent Kroger’s cost of ten-year debt; and/or

amounts are credited in ‘‘phantom’’ stock accounts and the amounts in those accounts fluctuate with the
price of Kroger common shares.

In both cases, deferred amounts are paid out only in cash, based on deferral options selected by the

participant at the time the deferral elections are made. Participants can elect to have distributions made in a lump
sum or in quarterly installments, and may make comparable elections for designated beneficiaries who receive
benefits in the event that deferred compensation is not completely paid out upon the death of the participant.

Incentive Share Deferrals

Participants may also defer the receipt of all (and not less than all) of the annual award of incentive shares.

Distributions will be made by delivery of Kroger common shares within 30 days after the date which is six months
after the participant’s separation of service.

Beneficial Ownership of Common Stock

The following table sets forth the common shares beneficially owned as of April 1, 2020 by Kroger’s directors,

the NEOs, and the directors and executive officers as a group. The percentage of ownership is based on
777,408,444 of Kroger common shares outstanding on April 1, 2020. Shares reported as beneficially owned include
shares held indirectly through Kroger’s defined contribution plans and other shares held indirectly, as well as
shares subject to stock options exercisable on or before May 31, 2020. Except as otherwise noted, each beneficial
owner listed in the table has sole voting and investment power with regard to the common shares beneficially
owned by such owner.

Name

Amount and Nature
of Beneficial
Ownership(1)
(a)

Options Exercisable
on or before
May 31,
2020 – included
in column (a)
(b)

Stuart Aitken(2)
Nora A. Aufreiter(3)

Yael Cosset

Michael J. Donnelly
Anne Gates(3)
Karen M. Hoguet(4)

Susan J. Kropf

W. Rodney McMullen

Gary Millerchip
Jorge P. Montoya(5)

Clyde R. Moore

James A. Runde
Ronald L. Sargent(3)

J. Michael Schlotman
Bobby S. Shackouls(3)
Mark S. Sutton(3)

Ashok Vemuri

246,295

34,096

221,313

807,014

28,724

5,695

135,166

4,775,861

245,101

108,059

153,566

128,578

179,767

296,954

88,974

24,189

11,043

95,590

—

79,307

470,029

—

39,000

1,819,463

75,974

39,000

26,000

39,000

195,804

—

Directors and executive officers as a group (28 persons, including

those named above)

10,607,159

4,552,369

(1) No director or officer owned as much as 1% of Kroger common shares. The directors and executive officers as

a group beneficially owned 1.36% of Kroger common shares.

(2) This amount includes 3,018 shares held by Mr. Aitken’s spouse. He disclaims beneficial ownership of these

shares.

(3) This amount includes incentive share awards that were deferred under the deferred compensation plan for

independent directors in the following amounts: Ms. Aufreiter, 9,447; Ms. Gates, 7,669; Mr. Sargent, 39,129;
Mr. Shackouls, 39,129; Mr. Sutton, 6,503.

(4) This amount includes 2,075 shares held by Ms. Hoguet’s spouse. She disclaims beneficial ownership of these

shares.

(5) This amount includes 22,000 shares held in Mr. Montoya’s trust. He disclaims beneficial ownership of these

shares.

The following table sets forth information regarding the beneficial owners of more than five percent of Kroger

common shares as of April 1, 2020 based on reports on Schedule 13G filed with the SEC.

Name

Address

BlackRock, Inc.

State Street Corporation

Vanguard Group Inc.

55 East 52nd St.
New York, NY 10055

State Street Financial Center
One Lincoln Street
Boston, MA 02111

100 Vanguard Blvd.
Malvern, PA 19355

Amount and Nature
of Ownership

Percentage
of Class

57,998,196(1)

7.20%

40,494,591(2)

5.06%

69,103,533(3)

8.63%

(1) Reflects beneficial ownership by BlackRock Inc., as of December 31, 2019, as reported on Amendment No. 10

to Schedule 13G filed with the SEC on February 5, 2020, reporting sole voting power with respect to
48,728,989 common shares, and sole dispositive power with regard to 57,998,196 common shares.

(2) Reflects beneficial ownership by State Street Corporation as of December 31, 2019 as reported on Schedule

13G filed with the SEC on February 13, 2020, reporting shared voting power with respect to
34,718,821 common shares, and shared dispositive power with respect to 40,494,591 common shares.

(3) Reflects beneficial ownership by Vanguard Group Inc. as of December 31, 2019, as reported on Amendment
No. 5 to Schedule 13G filed with the SEC on February 12, 2020, reporting sole voting power with respect to
1,195,599 common shares, shared voting power with respect to 241,812 common shares, sole dispositive
power of 67,741,558 common shares, and shared dispositive power of 1,361,975 common shares.

Related Person Transactions

The Board has adopted a written policy requiring that any Related Person Transaction may be consummated

or continue only if the Audit Committee approves or ratifies the transaction in accordance with the policy. A ‘‘Related
Person Transaction’’ is one (a) involving Kroger, (b) in which one of our directors, nominees for director, executive
officers, or greater than five percent shareholders, or their immediate family members, have a direct or indirect
material interest; and (c) the amount involved exceeds $120,000 in a fiscal year.

The Audit Committee will approve only those Related Person Transactions that are in, or not inconsistent with,

the best interests of Kroger and its shareholders, as determined by the Audit Committee in good faith in
accordance with its business judgment. No director may participate in any review, approval or ratification of any
transaction if he or she, or an immediate family member, has a direct or indirect material interest in the transaction.

Where a Related Person Transaction will be ongoing, the Audit Committee may establish guidelines for

management to follow in its ongoing dealings with the related person and the Audit Committee will review and
assess the relationship on an annual basis to ensure it complies with such guidelines and that the Related Person
Transaction remains appropriate.

Compensation Discussion and Analysis

Executive Summary

Named Executive Officers

This Compensation Discussion and Analysis provides a discussion and analysis of our compensation program

for our named executive officers (‘‘NEOs’’). For the 2019 fiscal year ended February 1, 2020, the NEOs were:

Name

W. Rodney McMullen
Gary Millerchip
Stuart Aitken
Yael Cosset
Michael J. Donnelly
J. Michael Schlotman

Title

Chairman and Chief Executive Officer
Senior Vice President and Chief Financial Officer
Senior Vice President, Alternative Business
Senior Vice President and Chief Information Officer
Executive Vice President and Chief Operating Officer
Executive Vice President and Retired Chief Financial Officer

Mr. Schlotman, who had been in his role for nearly 20 years, stepped down as Chief Financial Officer on
April 3, 2019. He remained Executive Vice President until his retirement from the Company on December 31, 2019,
during which time he continued to receive the same compensation and to participate in the Company’s annual and
long-term incentive programs. Mr. Millerchip succeeded Mr. Schlotman as Chief Financial Officer on April 4, 2019.

Summary of Key Compensation Practices

What we do:

What we do not do:

✓ Align pay and performance

✘ No employment contracts with executives

✓ Significant share ownership guidelines of 5x salary

✘ No special severance or change in control

for our CEO

programs applicable only to executive officers

✓ Multiple performance metrics under our short- and
long-term performance-based plans discourage
excessive risk taking at the expense of long-term
results

✓ Double trigger change in control provisions in all

equity awards beginning in 2019

✓ All long-term compensation is equity-based

beginning in 2019

✘ No single-trigger cash severance benefits upon

a change in control

✘ No cash component of the new long-term incentive

plan

✘ No tax gross-up payments for executives

✘ No special executive life insurance benefit

✘ No re-pricing or backdating of options without

✓ Engagement of an independent compensation

shareholder approval

consultant

✓ Robust clawback policy

✓ Ban on hedging, pledging and short sales of Kroger

securities

✓ Minimal perquisites

✘ No guaranteed salary increases or bonuses

✘ No payment of dividends or dividend equivalents

until performance units are earned

Summary of Fixed and At-Risk Pay Elements

The fixed and at-risk pay elements of the NEO compensation plan for 2019 are reflected in the following table

and charts.

Fiscal Year 2019 CEO Compensation Decisions

In fiscal year 2019, the Compensation Committee made the following key decisions about Mr. McMullen’s

compensation:

•

No increase to base salary

No increase to the target annual cash bonus

Elimination of the cash component of the long-term incentive plan

An increase to the total long-term incentive opportunity from $10 million to $10.5 million

A long-term incentive compensation value mix comprised of 50% performance units, 30% restricted stock,
and 20% stock options

A total increase to target total direct compensation of 3.6%

The table below compares fiscal 2019 to 2018 target direct compensation. Target total direct compensation is a

more accurate reflection of how the Compensation Committee benchmarks and establishes CEO compensation
than the disclosure provided in the Summary Compensation Table, which table includes a combination of actual
compensation earned in the fiscal year, the current value of at-risk equity compensation to be earned in future fiscal
years, and the actuarial value of future pension benefits. The Compensation Committee establishes Mr. McMullen’s
target direct compensation such that only 9% of his compensation is fixed. The remaining 91% of target
compensation is at-risk, meaning that the actual compensation Mr. McMullen receives will depend on the extent to
which the Company achieves the performance metrics set by the Compensation Committee, and with respect to all
of the equity vehicles, the future value of Kroger common shares.

($000s)

Year

2019

2018

Base
Salary

Target
Annual
Incentive

Long-Term
Cash
Bonus

Performance
Units

Restricted
Stock

Stock
Options

Total
LTI

Target
TDC Increase

$1,316

$2,500

—

$1,316

$2,500

$2,632

$5,250

$2,632

$3,150

$2,368

$2,100 $10,500 $14,316

3.6%

$2,368 $10,000 $13,816

As shown in the table above, and discussed in more detail on page 33, in fiscal 2019, the Compensation
Committee made the decision to eliminate the cash portion of the long-term performance-based bonus program
and grant 100% of long-term performance-based incentives in equity. This was done in order to increase
performance orientation of the plan, to align with market practices, and to further align the interests of executives
with shareholders. In addition, the Committee combined time-based and performance-based long-term equity into
one program with consistent guidelines and rebalanced the forms of equity as follows: 50% performance units,
30% restricted stock, and 20% stock options. The Compensation Committee made these decisions after reviewing
Mr. McMullen’s compensation relative to peer group CEOs and evaluating the Company’s performance. These
decisions resulted in target total direct compensation for the CEO to be positioned at the median relative to peer
group CEOs.

The CEO and several other NEOs are participants in Kroger’s grandfathered pension plan, details of which are
provided in the Summary Compensation Table and further in the section titled, ‘‘Pension Plan and Excess Plan’’ on
page 47. The Summary Compensation Table provides the change in value of the future pension benefit for each
fiscal year, in accordance with disclosure rules and actuarial standards. The value disclosed in the Summary
Compensation Table in the Change in Pension Value column and footnote 4 to the table, for the CEO shows a
significant increase, from $335,955 in fiscal 2018 to $6,962,485 in fiscal 2019. However, it is important to note that
this does not represent an amount paid to the CEO in the fiscal year but is an estimate of the change in the present
value of the future pension benefit based on standardized actuarial assumptions. The increase in value in 2019 is
attributed to the change in the discount rate from 2018 to 2019, which resulted in an increase in the actuarially
determined value, and the increase in Mr. McMullen’s average annual earnings as calculated under the pension
plan.

Lastly, on December 31, 2019, Kroger froze the compensation and service periods used to calculate pension
benefits for all active employees, including the CEO and other NEO participants. Beginning January 1, 2020, the
CEO and others, will no longer accrue additional benefits for future service or eligible compensation received under
these plans.

CEO and Named Executive Officer Target Pay Mix

The amounts used in the charts below are based on 2019 target total direct compensation for the CEO and the
average of other Named Executive Officers. As illustrated below, 91% of the CEO’s target total direct compensation
is at-risk. On average, 83% of the other Named Executive Officers’ compensation is at risk.

Our Compensation Philosophy and Objectives

As one of the largest retailers in the world, our executive compensation philosophy is to attract and retain the

best management talent as well as motivate these employees to achieve our business and financial goals. Kroger’s
incentive plans are designed to reward the actions that lead to long-term value creation. The Compensation
Committee believes that there is a strong link between our business strategy, the performance metrics in our short-
term and long-term incentive programs, and the business results that drive shareholder value.

We believe our strategy creates value for shareholders in a manner consistent with Kroger’s purpose: To Feed

the Human Spirit.

To achieve our objectives, the Compensation Committee seeks to ensure that compensation is competitive

and that there is a direct link between pay and performance. To do so, it is guided by the following principles:

•

A significant portion of pay should be performance-based, with the percentage of total pay tied to
performance increasing proportionally with an NEO’s level of responsibility.

Compensation should include incentive-based pay to drive performance, providing superior pay for
superior performance, including both a short- and long-term focus.

Compensation policies should include an opportunity for, and a requirement of, equity ownership to align
the interests of NEOs and shareholders.

Components of compensation should be tied to an evaluation of business and individual performance
measured against metrics that directly drive our business strategy.

Compensation plans should be clear and simple and provide a direct line of sight to company
performance.

Compensation programs should be aligned with market practices.

Compensation programs should serve to both motivate and retain talent.

The Compensation Committee has three related objectives regarding compensation:

•

First, the Compensation Committee believes that compensation must be designed to attract and retain
those individuals who are best suited to be an officer at Kroger.

Second, a majority of compensation should help align the interests of our NEOs with the interests of our
shareholders.

•

Third, compensation should create strong incentives for the NEOs to achieve the annual business plan
targets established by the Board, and to achieve Kroger’s long-term strategic objectives.

Components of Executive Compensation at Kroger

For 2019, compensation for our NEOs is comprised of the following:

•

Annual Compensation:

○

Salary

Performance-Based Annual Cash Bonus

Long-Term Compensation:

○

Performance-Based Long-Term Incentive Plan consisting only of performance units; eliminated
cash portion of plan for the 2019 program

Non-qualified stock options

Restricted stock

•

Retirement and other benefits

• Minimal perquisites

The annual and long-term performance-based compensation awards described herein were made pursuant to

our 2014 Long-Term Incentive and Cash Bonus Plan, which was approved by our shareholders in 2014. Grants
made in July 2019 and thereafter are made under the 2019 Long-Term Incentive and Cash Bonus Plan, which was
approved by our shareholders in June 2019.

Annual Compensation – Salary

Our philosophy with respect to salary is to provide a sufficient and stable source of fixed cash compensation.

All of our compensation cannot be at-risk or long-term. It is important to provide a meaningful annual salary to
attract and retain a high caliber leadership team, and to have an appropriate level of cash compensation that is not
variable.

Salaries for the NEOs (with the exception of the CEO) are established each year by the Compensation

Committee, in consultation with the CEO. The CEO’s salary is established by all of the independent directors.
Salaries for the NEOs were reviewed by the Compensation Committee in March of 2019 and increased as of
April 1, 2019.

The amount of each NEO’s salary is influenced by numerous factors including:

•

An assessment of individual contribution in the judgment of the CEO and the Compensation Committee
(or, in the case of the CEO, all of the independent directors);

Benchmarking with comparable positions at peer group companies;

Tenure in role; and

Relationship to other Kroger executives’ salaries.

The assessment of individual contribution is a qualitative determination, based on the following factors:

•

Leadership;

Contribution to the officer group;

Achievement of established objectives;

Decision-making abilities;

Performance of the areas or groups directly reporting to the NEO;

Increased responsibilities;

Strategic thinking; and

Furtherance of Kroger’s purpose: To Feed the Human Spirit.

Annual Compensation – Performance-Based Annual Cash Bonus

The NEOs participate in a corporate performance-based annual cash bonus plan. The amount of annual cash

bonus that the NEOs earn each year is based upon Kroger’s overall company performance compared to goals
established by the Compensation Committee based on the business plan adopted by the Board of Directors. The
annual cash bonus for all NEOs other than Mr. Aitken was based solely on the corporate plan metrics and
Mr. Aitken’s annual cash bonus was based half on corporate plan metrics and half on team metrics, as described
below.

A minimum level of performance must be achieved before any payouts are earned, while a payout of up to
200% of target bonus potential can be achieved for superior performance on the corporate plan metrics. There are
no guaranteed or minimum payouts; if none of the performance goals are achieved, then none of the bonus is
earned and no payout is made.

The annual cash bonus plan is designed to encourage decisions and behavior that drive the annual operating

results and the long-term success of the Company. Kroger’s success is based on a combination of factors, and
accordingly the Compensation Committee believes that it is important to encourage behavior that supports multiple
elements of our business strategy.

In 2019, the Company instituted a team metric component of the annual cash bonus plan applicable to a
portion of the associates eligible for the plan. Those associates typically received 50% of their bonus based on the
corporate results and the remaining 50% based on between one and three team metrics tied to the results of their
business unit or function. The purpose of the team metric component is to support line of sight between individual
behavior and the incentive payout, and is designed to reward high performing teams and to allow associates to
have an even more direct influence on their bonus payout. Mr. Aitken is the only NEO whose annual cash bonus
plan included team metrics, as his role supports enterprise marketing, alternative profit businesses, and 84.51,
Kroger’s data analytics business unit. His annual bonus was allocated as follows: 50% corporate annual bonus
plan metrics; 25% alternative profit streams results; and 25% supermarket identical sales results. The annual cash
bonus for all other NEOs was based 100% on the corporate plan metrics as their roles support the enterprise as a
whole.

Establishing Annual Cash Bonus Potentials

The Compensation Committee establishes annual cash bonus potentials for each NEO, other than the CEO,

whose annual cash bonus potential is established by the independent directors. Actual payouts represent the
extent to which performance meets or exceeds the goals established by the Compensation Committee.

The Compensation Committee considers multiple factors in making its determination or recommendation as to

annual cash bonus potentials:

•

The individual’s level within the organization, as the Compensation Committee believes that more senior
executives should have a more substantial part of their compensation dependent upon Kroger’s
performance;

The individual’s salary, as the Compensation Committee believes that a significant portion of a NEO’s total
cash compensation should be dependent upon Kroger’s performance;

Individual performance;

The recommendation of the CEO for the other NEOs; and

The compensation consultant’s benchmarking report regarding annual cash bonus potential and total
compensation awarded by our peer group.

2019 Annual Cash Bonus Plan Metrics

The corporate annual cash bonus plan is a broad-based plan used across the Kroger enterprise.

Approximately 53,000 associates receive bonus payouts based all or in part on the bonus plan described below.
The 2019 corporate annual cash bonus plan had the following measurable performance metrics, all of which are
interconnected:

Metric

Weight

Rationale for Use

ID Sales, excluding fuel

Adjusted FIFO Operating Profit,
including fuel

Combined
67%

Kroger Way Plans

33%

Total of 3 Metrics

100%

•

Identical Sales (‘‘ID Sales’’) represent sales, excluding fuel, at
our supermarkets that have been open without expansion or
relocation for five full quarters, plus sales growth at all other
customer-facing non-supermarket business, including Kroger
Specialty Pharmacy and ship to home solutions.
• The change in this metric from ID Supermarket Sales,

excluding fuel, to total company ID Sales, excluding fuel, is
consistent with a change in the Company’s reporting during
fiscal year 2018. We now calculate ID Sales to be more
inclusive of Company business units, and this measure
presents a comprehensive view of our performance as we
redefine the grocery customer experience, and is therefore a
more appropriate measure of company performance than ID
Supermarket Sales.

• We believe that ID sales are the best measure of real growth
of our sales across the enterprise. A key driver of our model
is ID Sales growth.

• Adjusted FIFO Operating Profit, including fuel, is a key

measure of company success. An earnings measure like this
helps track our earnings from operations, and it measures our
day-to-day operational effectiveness.

• Adjusted FIFO Operating Profit is a non-GAAP calculation
reflecting operating profit, including fuel, minus the LIFO
charge, and adjusted by excluding certain items included in
FIFO Operating Profit. This calculation is the non-GAAP
adjusted operating profit measure that we disclose, and
reconcile, in our financial statements.

• Each major business line and department created a Kroger
Way Plan – a strategic business plan to directly support one
of the four pillars of Restock Kroger; each of which outlines
both the resource allocation and the return commitment for
that plan.

• We measure the success of the Kroger Way Plans with an

internal calculation called Restock Savings & Benefits, which
is a combination of cost savings generated under our Kroger
Way Plans, incremental profits from ID sales growth, and
incremental net operating profit from our alternative profit
streams.

2019 Annual Cash Bonus Plan Results

The 2019 goals established by the Compensation Committee, the actual 2019 results, and the bonus

percentage earned for each of the performance metrics of the 2019 corporate annual bonus plan were as follows.

The first component of the corporate annual bonus plan, accounting for 67% of the payout, is ID sales,
excluding fuel, and adjusted FIFO operating profit, including fuel, determined on the following grid with payouts
interpolated for actual performance levels between the defined goals on the grid:

2019 Corporate Annual Cash Bonus Plan Metrics – ID Sales and OP

ID Sales, excluding Fuel
1.30% 1.70% 2.40% 2.70% 3.10%

Adjusted FIFO Operating Profit,

$2,750 to 3,000

15% 35%

70% 85% 105%

including Fuel

(in millions)

Greater than $3,000 to 3,100

20% 60% 130% 170% 200%

Greater than $3,100

20% 60% 130% 170% 250%

The second component of the corporate annual bonus plan, accounting for 33% of the payout is progress on

proprietary strategic business plans known as Kroger Way Plans, measured by Restock Savings & Benefits:

2019 Corporate Annual Cash Bonus Plan Metrics – Restock Savings & Benefits

Restock Savings & Benefits Results

Payout

Less than $1.36 Billion

0% payout

$1.36 Billion to $1.46 Billon

Interpolated payout between 1 and 99%

$1.46 Billon

100% payout

2019 Corporate Annual Cash Bonus Plan – Actual Results and Payout Percentages

Performance Metrics

Result

ID Sales = 2.01%
OP = $2.96 Billion

$1.41 Billion

ID Sales/OP

Kroger Way Plans

Total Earned

(1) See grids above.

Payout
Percentage1
(A)

50.5%

46.2%

Weight
(B)

67%

33%

Amount
Earned
(A) x (B)

33.84%

15.25%

49.09%

Following the close of the 2019 fiscal year, the Compensation Committee reviewed Kroger’s performance
against each of the metrics outlined above and determined the extent to which Kroger achieved those objectives.
Our performance compared to the goals established by the Compensation Committee resulted in a payout on the
2019 corporate annual bonus of 49.09% of the participant’s bonus potential for all of the NEOs except Mr. Aitken.
Mr. Aitken’s annual bonus payout of 58.0% of his bonus potential included the corporate annual plan described
above and two team metrics, as follows:

Mr. Aitken’s Corporate Plan & Team Metrics – Actual Results and Payout Percentages

Corporate Annual Bonus Plan

Alternative Profit Streams

Supermarket ID Sales

Total Earned

Payout
Percentage
(A)

49.09%

93.0 %

41.0 %

Weight
(B)

50%

25%

Amount
Earned
(A) x (B)

24.55%

23.25%

10.25%

58.0 %

In 2019, as in all years, the Compensation Committee retained the ability to reduce the annual cash bonus
payout for all executive officers, including the NEOs, if the Compensation Committee determined for any reason
that the bonus payouts were not appropriate given their assessment of Company performance – however, no
adjustments were made in 2019. The independent directors retained that discretion for the CEO’s bonus. The
Compensation Committee and the independent directors also retained the ability to adjust the goals for each metric
under the plan should unanticipated developments arise during the year – however no adjustments were made in
2019.

The actual corporate annual cash bonus percentage payout for 2019 reflects growth over 2018 in both ID
Sales, excluding fuel, and Adjusted FIFO Operating Profit, including fuel, but performance below business plan
objectives on both measures. The strong link between pay and performance is illustrated by a comparison of
earned amounts under our annual cash bonus plan in previous years, such as 2016 and 2017, when payouts were
particularly low. In those years, we failed to achieve many of our business plan objectives. A comparison of actual
percentage payouts this year and in prior years demonstrates the variability of the corporate annual cash bonus
compensation and its strong link to our performance:

Fiscal Year
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010

Annual Cash Bonus
Payout Percentage

49.09%
91.2 %
3.8 %
19.9 %
126.7 %
121.5 %
104.9 %
85.9 %
138.7 %
53.9 %

As described above, the corporate annual cash bonus payout percentage is applied to each NEO’s bonus

potential (along with team metrics for Mr. Aitken) which is determined by the Compensation Committee, and the
independent directors in the case of the CEO. The actual amounts of performance-based annual cash bonuses
paid to the NEOs for 2019 are reported in the Summary Compensation Table in the ‘‘Non-Equity Incentive Plan
Compensation’’ column and footnote 3 to that table.

Long-Term Compensation Program

The Compensation Committee believes in the importance of providing an incentive to the NEOs to achieve the

long-term goals established by the Board. As such, a majority of NEO compensation is dependent on the
achievement of the Company’s long-term goals. Long-term compensation promotes long-term value creation and
discourages the over-emphasis of attaining short-term goals at the expense of long-term growth.

The long-term incentive program is structured to be a combination of performance- and time-based

compensation that reflects elements of financial and common share performance to provide both retention value
and alignment with company performance. Each year, NEOs receive grants under the long-term compensation
program, which is structured as follows:

•

Performance-Based

○

Long-term performance-based compensation is provided under a Long-Term Incentive Plan adopted
by the Compensation Committee. The Committee adopts a new plan every year, measuring
improvement on the Company’s long-term goals over successive three-year periods. Accordingly, at
any one time there are three plans outstanding, which are summarized below.

Under the Long-Term Incentive Plans, NEOs receive grants of equity called performance units, and
until 2019 received cash ‘‘grants’’ as well. A fixed number of performance units based on level and
individual performance is awarded to each participant at the beginning of the three-year performance
period and prior to 2019 a cash bonus base was set as well.

Payouts under the plan are contingent on the achievement of certain strategic performance and
financial measures and incentivize recipients to promote long-term value creation and enhance
shareholder wealth by supporting the Company’s long-term strategic goals.

○

The payout percentage, based on the extent to which the performance metrics are achieved, is
applied to both the long-term cash bonus potential (for plans prior to 2019) and the number of
performance units awarded.

Performance units are ‘‘paid out’’ in Kroger common shares based on actual performance, along with
a cash amount equal to the dividends paid during the performance period on the number of issued
common shares.

•

Time-Based

○

Long-term time-based compensation consists of stock options and restricted stock, which are linked
to common share performance creating alignment between the NEOs’ and our shareholders’
interests.

Stock options have no initial value and recipients only realize benefits if the value of our common
shares increases following the date of grant, further aligning the NEOs’ and our shareholders’
interests.

The Compensation Committee considers several factors in determining the target value of long-term

compensation awarded to the NEOs or, in the case of the CEO, recommending to the independent directors the
amount awarded. These factors include:

•

The NEO’s level in the organization and the internal relationship of long-term compensation awards within
Kroger;

The compensation consultant’s benchmarking report regarding long-term compensation awarded by our
peer group;

Individual performance; and

The recommendation of the CEO, for the other NEOs.

Amounts of long-term compensation awards issued and outstanding for the NEOs are set forth in the

Executive Compensation Tables section.

Summary of Three Long-Term Incentive Plans Outstanding During 2019

The Compensation Committee adopts a new Long-Term Incentive Plan each year, which provides for

overlapping three-year performance periods. Additional detail regarding each of the three plans is provided below,
and a summary of the design of the plans outstanding during 2019 is as follows:

Cash Component

Performance Units and
Dividends

2017-2019 LTIP

2018-2020 LTIP

2019-2021 LTIP

Participant’s salary at the
end of FY 2016

Cash bonus potential set
by Compensation
Committee

No cash component

Performance units are equity grants which are ‘‘paid out’’ in Kroger common shares,
based on actual performance at the end of the 3-year performance period, along
with a cash amount equal to the dividends paid during the performance period on
the number of issued common shares ultimately earned.

Performance Metrics

1/3 = original metrics 2/3 =
Restock Kroger metrics

Restock Kroger metrics +
ROIC multiplier

Determination of Payout

The payout percentage, based on the extent to which
the performance metrics are achieved, is applied to
both the long-term cash bonus potential and the
number of performance units awarded.

The payout percentage,
based on the extent to
which the performance
metrics are achieved, is
applied to number of
performance units
awarded.

Maximum Payout

100%

Payout Date

March 2020

120%

March 2021

120%

March 2022

Recap of 2018 Realignment of Long-Term Plans

As previously disclosed by the Company, in October 2017, we announced Restock Kroger, our three-year plan

to redefine the food and grocery customer experience in America and to create value for our shareholders. Since
we implement a new three-year long-term incentive plan each year, at any one time, there are three outstanding
plans, as was the case in 2018. Because the 2016-2018 and 2017-2019 long-term plans were mid-cycle, we felt
strongly that we should focus on Restock Kroger metrics rather than having competing priorities. As a result, in
setting 2018 compensation, the Compensation Committee determined that the metrics of the two mid-cycle plans
should be modified to align with Restock Kroger and the payouts for the NEOs should be addressed as described
below.

The first mid-cycle plan, the 2016-2018 Long-Term Incentive Plan paid out in March 2019 and was disclosed in

our proxy statement filed in May 2019. For the second mid-cycle plan, the 2017-2019 Long-Term Incentive Plan,
fiscal year 2017 performance was measured on the pre-existing plan metrics and was applied to one-third of the
previously granted cash and performance unit bonus target amounts. Fiscal years 2018 and 2019 performance
was measured on the Restock Kroger metrics of Cumulative Restock Savings & Benefits and Cumulative Free
Cash Flow and was applied to two-thirds of the previously granted cash and performance unit bonus target
amounts.

The Restock Kroger metrics are calculated as follows:

•

Cumulative Restock Savings & Benefits is an internal calculation that is a combination of cost savings
generated under our Kroger Way Plans; incremental profits from ID sales growth; and incremental net
operating profit from our alternative profit streams.

Cumulative Free Cash Flow is an adjusted free cash flow measure calculated as net cash provided by
operating activities minus net cash used by investing activities plus or minus adjustments for certain items.

With respect to the mid-cycle plans, we did not adjust the cash bonus potentials or re-issue previously issued

performance unit grants, we did not allow the re-earning of cash and performance units that were not earned in the
completed year(s) of the outstanding plans, and we did not change the timing of the payout under the outstanding
plans.

2017-2019 Long-Term Incentive Plan – Results

The 2017 Long-Term Incentive Plan, which measured performance over the three-year period from 2017 to
2019, paid out in March 2020. The 2017 plan was modified during 2018 as described above and was calculated in
two parts as follows:

Part 1: Fiscal year 2017 performance was measured on the existing plan metrics and was applied to one-third

of the previously granted cash and performance unit bonus target amounts.

Metric
Customer 1st Strategy(1)
Improvement in Associate Engagement(1)

Reduction in Operating Cost as a

Percentage of Sales, without Fuel(2)

Return on Invested Capital(3)

Total

Baseline Result

Improvement
(A)

Payout per
Improvement
(B)

Percentage
Earned
(A) x (B)

No improvement

26.17% 27.17% No improvement

13.23% 11.20% No improvement

4.0%

0.5%

1.0%

0.0%

(1) The Customer 1st Strategy and Improvement in Associate Engagement components were established by the
Compensation Committee at the beginning of the performance period, but are not disclosed as they are
competitively sensitive.

(2) Operating Costs is a non-GAAP measure and is calculated as the sum of (i) operating, general and

administrative expenses, depreciation and amortization, and rent expense, without fuel, and (ii) warehouse
and transportation costs, shrink, and advertising expenses, for our supermarket operations, without fuel.

Operating costs exclude one-time expenses incurred in lieu of future anticipated obligations. Future expenses
that are avoided by virtue of the incurrence of the one-time expense will be deemed to be total operating costs
in the year in which they otherwise would have been incurred.

(3) Return on invested capital is a non-GAAP measure and is calculated by dividing adjusted operating profit for
the prior four quarters by the average invested capital. Adjusted operating profit is calculated by excluding
certain items included in operating profit, and adding our last-in, first out (‘‘LIFO’’) charge, depreciation and
amortization, and rent. Average invested capital is calculated as the sum of (i) the average of our total assets,
(ii) the average LIFO reserve, (iii) the average accumulated depreciation and amortization, and (iv) a rent
factor equal to total rent for the last four quarters multiplied by a factor of eight; minus (i) the average taxes
receivable, (ii) the average trade accounts payable, (iii) the average accrued salaries and wages, and (iv) the
average other current liabilities, excluding accrued income taxes.

Part 2: Fiscal year 2017 and 2018 performance was measured on the Restock Kroger metrics of Cumulative
Restock Savings & Benefits and Cumulative Free Cash Flow, with each metric accounting for 50% of the payout.
The payout percentage was applied to two-thirds of the previously granted cash and performance unit bonus target
amounts.

Cumulative Restock Savings &

Benefits

Cumulative Free Cash Flow(1)

Total Payout

Cut in = 50%
Payout

Goal = 100%
Payout

Payout

Result

Percentage Weight

$1.95B

$2.80B

$2.50B

$4.00B

$2.51B

$3.59B

100%

83%

50%

Payout
Amount

50 %

41.5%

91.5%

(1) Cumulative Free Cash Flow is a non-GAAP measure calculated as net cash provided by operating activities

minus net cash used by investing activities plus, in this case, an amount equal to cash taxes paid on the gain
on the sale of Turkey Hill Dairy and You Technology.

Accordingly, no payout was earned on one-third of the bonus target and 91.5% payout was earned on two-
thirds of the bonus target, resulting in a 61.0% overall payout. The NEOs received long-term cash bonus payments
in an amount equal to 61.0% of that executive’s long-term cash bonus potential and were issued the number of
Kroger common shares equal to 61.0% of the number of performance units awarded to that executive, along with a
cash amount equal to the dividends paid on that number of common shares during the three year performance
period.

The cash payout and dividends paid on common shares earned under the 2017-2019 Long-Term Incentive
Plan are reported in the ‘‘Non-Equity Incentive Plan Compensation’’ and ‘‘All Other Compensation’’ columns of the
Summary Compensation Table and footnotes 3 and 5 to that table, respectively, and the common shares issued
under the plan are reported in the 2019 Option Exercises and Stock Vested Table and footnote 2 to that table.

2018-2020 Long-Term Incentive Plan Metrics

Our 2018-2020 Long-Term Incentive Plan has performance metrics tied entirely to Restock Kroger goals of
Cumulative Restock Savings & Benefits and Cumulative Free Cash Flow, with a return on invested capital modifier.

Each of the following plan components account for 50% of the potential payout percentage.

Plan Component

2018-2020

Cumulative Restock Savings & Benefits

Cut in = 50% payout

Goal = 100% payout

Cut in = 50% payout

Goal = 100% payout

$3.0B

$4.450B

$4.875B

$6.5B

Cumulative Free Cash Flow

After the calculation of the two metrics above, a Return on Invested Capital multiplier is applied, as follows:

ROIC Modifier Component

ROIC Results
Less than 12.12%
12.12% - 12.32%
Greater than 12.32%

Payout Modifier

80%
100%
120%

The payout percentage is applied to the cash bonus base and the number of performance units granted under

the plan to determine the payout amount.

Long-Term Compensation – 2019 Redesign

Previously, long-term compensation was delivered via four long-term compensation vehicles: long-term cash

bonus, performance units, stock options, and restricted stock. These four elements existed in the 2017-2019 Long-
Term Incentive Plan and remain in the mid-cycle 2018-2020 Long-Term Incentive Plan.

In 2019, the Compensation Committee considered both feedback from shareholders and market practices and

made two fundamental changes to the Company’s long-term compensation program, which is applicable to all
associates who are Vice President level and higher, including NEOs:

•

The Committee eliminated the cash portion of the long-term performance-based compensation,
maintaining only equity, in the form of performance units, in the plan.

• With respect to the equity grants awarded each year, the Committee combined time-based and

performance based long-term equity into one program with consistent guidelines and rebalanced the
forms of equity as follows:

○

50% performance units

30% restricted stock

20% stock options

Accordingly, starting in 2019, all long-term compensation is equity-based, and fifty percent of equity granted

under the program is performance based.

2019-2021 Long-Term Incentive Plan Metrics

The 2019-2021 Long-Term Incentive Plan reflects existing Restock Kroger metrics for the final two years of the

2018-2020 Restock Kroger financial plan, along with an ROIC component for fiscal year 2021. Each of the
following plan components account for 50% of the potential payout percentage.

Plan Component

2019-2020

Cumulative Restock Savings & Benefits

Cut in = 50% payout
Goal = 100% payout

Cumulative Free Cash Flow

$2.050B
$3.434B

$3.675B
$4.640B

After the calculation of the two metrics above, a 2021 Return on Invested Capital multiplier is applied, as

follows:

ROIC Modifier Component

FY 2021 ROIC Results
Less than 12.24%
12.24% - 12.44%
Greater than 12.44%

Payout Modifier

80%
100%
120%

The payout percentage is applied to the number of performance units granted under the plan to determine the

payout amount.

Stock Options and Restricted Stock

Stock options and restricted stock continue to play an important role in rewarding NEOs for the achievement of

long-term business objectives and providing incentives for the creation of shareholder value. Awards based on
Kroger’s common shares are granted annually to the NEOs. Kroger historically has distributed time-based equity
awards widely, aligning the interests of employees with your interest as shareholders.

The options permit the holder to purchase Kroger common shares at an option price equal to the closing price

of Kroger common shares on the date of the grant. Options are granted only on one of the four dates of Board
meetings conducted after Kroger’s public release of its quarterly earnings results.

The Compensation Committee determines the vesting schedule for stock options and restricted stock.
During 2019, the Compensation Committee granted to the NEOs stock options and restricted stock, each with a
four-year ratable vesting schedule, with the exception of promotion awards with three-year ratable vesting
schedules.

As discussed below under Stock Ownership Guidelines, covered individuals, including the NEOs, must hold
100% of common shares issued pursuant to performance units earned, the shares received upon the exercise of
stock options or upon the vesting of restricted stock, except those necessary to pay the exercise price of the
options and/or applicable taxes, until applicable stock ownership guidelines are met, unless the disposition is
approved in advance by the CEO, or by the Board or Compensation Committee for the CEO.

Retirement and Other Benefits

Kroger maintains several defined benefit and defined contribution retirement plans for its employees.

The NEOs participate in one or more of these plans, as well as one or more excess plans designed to make up the
shortfall in retirement benefits created by limitations under the Internal Revenue Code (the ‘‘Code’’) on benefits to
highly compensated individuals under qualified plans. Additional details regarding certain retirement benefits
available to the NEOs can be found below in footnote 4 to the Summary Compensation Table and the 2019
Pension Benefits Table and the accompanying narrative.

Kroger also maintains an executive deferred compensation plan in which some of the NEOs participate.
This plan is a nonqualified plan under which participants can elect to defer up to 100% of their cash compensation
each year. Additional details regarding our nonqualified deferred compensation plans available to the NEOs can be
found below in the 2019 Nonqualified Deferred Compensation Table and the accompanying narrative.

Kroger also maintains The Kroger Co. Employee Protection Plan (‘‘KEPP’’), which covers all of our

management employees who are classified as exempt under the federal Fair Labor Standards Act and certain
administrative or technical support personnel who are not covered by a collective bargaining agreement, with at
least one year of service. KEPP has a double-trigger change in control provision and it provides for severance
benefits and extended Kroger-paid health care, as well as the continuation of other benefits as described in the
plan, when an employee is actually or constructively terminated without cause within two years following a ‘‘change
in control’’ of Kroger (as defined in KEPP). Participants are entitled to severance pay of up to 24 months’ salary and
target annual bonus. The actual amount is dependent upon pay level and years of service. KEPP can be amended
or terminated by the Board at any time prior to a change in control.

With respect to awards prior to 2019, performance-based long-term cash bonus, performance unit, stock
option, and restricted stock agreements with award recipients provide that those awards ‘‘vest,’’ with 50% of the
long-term cash bonus potential being paid, common shares equal to 50% of the performance units being awarded,
options becoming immediately exercisable, and restrictions on restricted stock lapsing upon a change in control as
described in the grant agreements. Grants made in 2019 have double trigger change in control provisions and the
‘‘vesting’’ described above is only triggered if an employee is actually or constructively terminated without cause
within two years following a change in control of Kroger (as defined in the grant agreement, and consistent with
KEPP).

None of the NEOs are party to an employment agreement.

Perquisites

Our NEOs receive limited perquisites as the Compensation Committee does not believe that it is necessary for
the attraction or retention of management talent to provide executives a substantial amount of compensation in the
form of perquisites.

Process for Establishing Executive Compensation

The Compensation Committee of the Board has the primary responsibility for establishing the compensation of

our executive officers, including the NEOs, with the exception of the CEO. The Compensation Committee’s role
regarding the CEO’s compensation is to make recommendations to the independent members of the Board; those
members of the Board establish the CEO’s compensation.

The Compensation Committee directly engaged Korn Ferry as a compensation consultant to advise the
Compensation Committee in the design of compensation for executive officers, through the 2019 compensation
planning cycle.

Korn Ferry conducted an annual competitive assessment of executive positions at Kroger for the

Compensation Committee. The assessment is one of several bases, as described above, on which the
Compensation Committee determines compensation. The consultant assessed:

•

base salary;

target performance-based annual cash bonus;

target annual cash compensation (the sum of salary and annual cash bonus potential);

long-term incentive compensation, comprised of performance units, stock options and restricted stock;
and

total direct compensation (the sum of target annual cash compensation and long-term compensation).

In addition to the factors identified above, the consultant also reviewed actual payout amounts against the

targeted amounts.

The consultant compared these elements against those of other companies in a group of publicly traded

companies selected by the Compensation Committee. For 2019, our peer group consisted of:

Best Buy
Cardinal Health
Costco Wholesale
CVS Health
Express Scripts

Home Depot
Johnson & Johnson
Lowes
Procter & Gamble
Sysco

Target
TJX Companies
Wal-Mart
Walgreens Boots Alliance

The make-up of the compensation peer group is reviewed annually and modified as circumstances warrant. The

Compensation Committee modified the peer group in 2016 because of industry consolidation and other competitive
forces. In addition, the Compensation Committee considered data from ‘‘general industry’’ companies provided by its
independent compensation consultant, a representation of major publicly-traded companies of similar size and scope
from outside the retail industry. This data provided reference points, particularly for senior executive positions where
competition for talent extends beyond the retail sector. The peer group includes a combination of food and drug
retailers, other large retailers based on revenue size, and large consumer-facing companies. Median 2019 revenue
for the peer group was $96 billion, compared to our 2019 revenue of $121 billion.

Considering the size of Kroger in relation to other peer group companies, the Compensation Committee
believes that salaries paid to our NEOs should be competitively positioned relative to amounts paid by peer group
companies for comparable positions. The Compensation Committee also aims to provide an annual cash bonus
potential to our NEOs that, if achieved at superior levels, would cause total cash compensation to be meaningfully
above the median. Actual payouts may be as low as zero if performance does not meet the baselines established
by the Compensation Committee.

The independent members of the Board have the exclusive authority to determine the amount of the CEO’s

compensation. In setting total compensation, the independent directors consider the median compensation of the
peer group’s CEOs. With respect to the annual bonus, the independent directors make two determinations: (1) the
annual cash bonus potential that will be multiplied by the corporate annual cash bonus payout percentage earned

that is applicable to the NEOs and (2) the annual cash bonus amount paid to the CEO by retaining discretion to
reduce the annual cash bonus percentage payout the CEO would otherwise receive under the formulaic plan.

The Compensation Committee performs the same function and exercises the same authority as to the other

NEOs. In its annual review of compensation for the NEOs, the Compensation Committee:

•

Conducts an annual review of all components of compensation, quantifying total compensation for the
NEOs including a summary for each NEO of salary; performance-based annual cash bonus; long-term
performance-based equity comprised of performance units, stock options and restricted stock.

Considers internal pay equity at Kroger to ensure that the CEO is not compensated disproportionately.
The Compensation Committee has determined that the compensation of the CEO and that of the other
NEOs bears a reasonable relationship to the compensation levels of other executive positions at Kroger
taking into consideration performance and differences in responsibilities.

Reviews a report from the Compensation Committee’s compensation consultant reflecting a
comprehensive review of each element of pay mix, both annual and long-term and comparing NEO
compensation with that of other companies, including both our peer group of competitors and a larger
general industry group, to ensure that the Compensation Committee’s objectives of competitiveness are
met.

Takes into account a recommendation from the CEO (except in the case of his own compensation) for
salary, annual cash bonus potential and long-term compensation awards for each of the senior officers
including the other NEOs. The CEO’s recommendation takes into consideration the objectives established
by and the reports received by the Compensation Committee as well as his assessment of individual job
performance and contribution to our management team.

The Compensation Committee does not make use of a formula, but both qualitatively and quantitatively

considers each of the factors identified above in setting compensation.

Looking Ahead – 2020 Compensation

As of the date of this Proxy Statement, Kroger’s operations have been affected by the COVID-19 pandemic.
Numerous uncertainties have been created by the pandemic, and certain aspects of our compensation programs
may later be revised or modified once the Compensation Committee has had an opportunity to fully evaluate the
impact of COVID-19 on our business. The Compensation Committee will work with its independent compensation
consultant, Korn Ferry, to evaluate any potential changes to our executive compensation design. With that
important caveat, we are providing a preview of our 2020 compensation programs.

•

Our 2020 Annual Cash Bonus Plan is likely to have the following components: ID sales, excluding fuel and
adjusted FIFO operating profit, including fuel, with an associate experience kicker.

• With respect to our long-term performance-based compensation, since 2018, Kroger’s metrics in its Long-
Term Incentive Plans have focused on key Restock Kroger metrics. With the three-year financial targets of
the 2018-2020 Restock Kroger plan concluding in 2020, the Compensation Committee reconsidered the
long-term incentive plan framework. In November 2019, Kroger committed to investors an 8-11% Total
Shareholder Return (TSR) target. The Committee determined that going forward, the Long-Term Incentive
Plan metrics should align with Kroger’s long-term business plans and guidance that we communicated to
shareholders. Accordingly, the 2020-2022 Long-Term Bonus Plan is likely to have the following
components which support our long term business plans: total sales without fuel + fuel gallons; cumulative
growth in net operating profit; cumulative growth in free cash flow; a fresh metric; and a total shareholder
return modifier.

Shareholder Engagement & the 2019 Advisory Vote to Approve Executive Compensation

At the 2019 annual meeting, we held our ninth annual advisory vote on executive compensation. Over 89% of

the votes cast were in favor of the advisory vote in 2019. In 2019, we also requested meetings with shareholders
representing 43% of our outstanding shares during the proxy season and off-season engagement and ultimately
engaged with shareholders representing 36% of our outstanding shares. Conversations with our shareholders in
these meetings included discussions of our compensation program, with our shareholders providing feedback that
they appreciate the pay for performance nature of our program’s structure. In light of this feedback and

benchmarking to market practices, along with the strong support for our executive compensation program at the
2019 annual meeting, the Compensation Committee made a number of changes in the structure of our
compensation programs for 2019 described above.

Stock Ownership Guidelines

To more closely align the interests of our officers and directors with your interests as shareholders, the Board
has adopted stock ownership guidelines. These guidelines require non-employee directors, executive officers, and
other key executives to acquire and hold a minimum dollar value of Kroger common shares as set forth below:

Chief Executive Officer

President and Chief Operating Officer

Position

Executive Vice Presidents and Senior Vice Presidents

Multiple

5 times base salary

4 times base salary

3 times base salary

Group Vice Presidents, Division Presidents, and Other Designated Key

2 times base salary

Executives

Non-employee Directors

5 times annual base cash retainer

All covered individuals are expected to achieve the target level within five years of appointment to their
positions. Until the requirements are met, covered individuals, including the NEOs, must hold 100% of common
shares issued pursuant to performance units earned, shares received upon the exercise of stock options and upon
the vesting of restricted stock, except those necessary to pay the exercise price of the options and/or applicable
taxes, and must retain all Kroger common shares unless the disposition is approved in advance by the CEO, or by
the Board or Compensation Committee for the CEO.

Executive Compensation Recoupment Policy (Clawback)

If a material error of facts results in the payment to an executive officer at the level of Group Vice President or

higher of an annual cash bonus or a long-term cash bonus in an amount higher than otherwise would have been
paid, as determined by the Compensation Committee, then the officer, upon demand from the Compensation
Committee, will reimburse Kroger for the amounts that would not have been paid if the error had not occurred.
This recoupment policy applies to those amounts paid by Kroger within 36 months prior to the detection and public
disclosure of the error. In enforcing the policy, the Compensation Committee will take into consideration all factors
that it deems appropriate, including:

•

the materiality of the amount of payment involved;

the extent to which other benefits were reduced in other years as a result of the achievement of
performance levels based on the error;

individual officer culpability, if any; and

other factors that should offset the amount of overpayment.

Compensation Policies as They Relate to Risk Management

As part of the Compensation Committee’s review of our compensation practices, the Compensation

Committee considers and analyzes the extent to which risks arise from such practices and their impact on Kroger’s
business. As discussed in this Compensation Discussion and Analysis, our policies and practices for compensating
employees are designed to, among other things, attract and retain high quality and engaged employees. In this
process, the Compensation Committee also focuses on minimizing risk through the implementation of certain
practices and policies, such as the executive compensation recoupment policy, which is described above.
Accordingly, we do not believe that our compensation practices and policies create risks that are reasonably likely
to have a material adverse effect on Kroger.

Prohibition on Hedging and Pledging

After considering best practices related to ownership of Kroger shares, the Board adopted a policy prohibiting
Kroger directors and executive officers from engaging, directly or indirectly, in the pledging of, hedging transactions
in, or short sales of, Kroger securities.

Section 162(m) of the Internal Revenue Code

Prior to the effective date of the Tax Cuts and Jobs Act of 2017, Section 162(m) of the Code generally
disallowed a federal tax deduction to public companies for compensation greater than $1 million paid in any tax
year to specified executive officers unless the compensation was ‘‘qualified performance-based compensation’’
under that section. Pursuant to the Tax Cuts and Jobs Act of 2017, the exception for ‘‘qualified performance-based
compensation’’ under Section 162(m) of the Code was eliminated with respect to all remuneration in excess of
$1 million other than qualified performance based compensation pursuant to a written binding contract in effect on
November 2, 2017 or earlier which was not modified in any material respect on or after such date (the legislation
providing for such transition rule, the ‘‘Transition Rule’’).

As a result, performance-based compensation that the Compensation Committee structured with the intent of

qualifying as performance-based compensation under Section 162(m) prior to the change in the law may or may
not be fully deductible, depending on the application of the Transition Rule. In addition, compensation
arrangements structured following the change in law will be subject to the Section 162(m) limitation (without any
exception for performance-based compensation). Consistent with its past practice, the Committee will continue to
retain flexibility to design compensation programs that are in the best long-term interests of the Company and our
shareholders, with deductibility of compensation being one of a variety of considerations taken into account.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with Kroger’s management the Compensation
Discussion and Analysis contained in this proxy statement. Based on its review and discussions with management,
the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be
included in Kroger’s proxy statement and incorporated by reference into its Annual Report on Form 10-K.

Compensation Committee:

Clyde R. Moore, Chair
Susan J. Kropf
Jorge P. Montoya
James A. Runde

Executive Compensation Tables

Summary Compensation Table

The following table and footnotes provide information regarding the compensation of the NEOs for the fiscal

years presented.

Name and Principal
Position

W. Rodney McMullen

Chairman and Chief
Executive Officer

Gary Millerchip

Senior Vice President
and Chief Financial Officer(6)

Stuart Aitken

Senior Vice President,
Alternative Business

Yael Cosset

Senior Vice President
and Chief Information Officer

Michael Donnelly

Executive Vice President
And Chief Operating Officer

J. Michael Schlotman

Executive Vice President and
Retired Chief Financial Officer(6)

Fiscal
Year
2019
2018
2017
2019
—
—
2019
2018
2017
2019
—
—
2019
2018
2017
2019
2018
2017

—
—

Salary
($)

Option
Awards
($)(2)

Stock
Awards
($)(1)
$1,311,849 $8,400,002 $2,100,170
$1,311,984 $4,999,996 $2,367,858
$1,318,752 $5,166,317 $2,700,116
$ 472,561 $2,350,034 $ 775,042
—
—
$ 822,460 $2,225,025 $ 600,051
$ 724,946 $1,059,224 $ 224,548
$ 721,328 $1,275,567 $ 262,612
$ 638,519 $1,825,016 $ 500,042
—
—
$ 922,516 $3,200,002 $ 800,064
$ 885,677 $2,355,780 $ 769,118
$ 817,967 $2,230,028 $ 780,637
$ 854,879 $1,792,989 $
0
$ 907,292 $2,350,843 $ 752,700
$ 898,316 $1,973,228 $1,040,846

—
—

Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(4)
$6,962,485
$ 335,955
$1,690,923
0
$
—
—
0
0
0
0
—
—
$ 4,111,824
$ 205,544
$1,032,483
$4,207,937
$ 295,994
$ 873,808

$
$
$
$

Non-Equity
Incentive Plan
Compensation
($)(3)
$2,006,450
$2,692,833
$ 359,806
$ 442,755
—
—
$ 830,446
$ 817,670
$ 160,015
$ 572,191
—
—
$1,060,269
$1,344,160
$ 183,832
$1,061,055
$1,374,160
$ 207,136

All Other
Compensation
($)(5)
$348,692
$329,246
$298,463
$101,888
—
—
$134,801
$107,830
$110,363
$110,044
—
—
$235,009
$133,014
$247,149
$550,563
$ 91,133
$242,637

Total
($)
$21,129,648
$12,037,872
$11,534,377
$ 4,142,280
—
—
$ 4,612,783
$ 2,934,218
$ 2,529,884
$ 3,645,812
—
—
$10,329,684
$ 5,693,293
$ 5,292,096
$ 8,467,423
$ 5,772,122
$ 5,235,971

(1) Amounts reflect the grant date fair value of restricted stock and performance units granted each fiscal year,
as computed in accordance with FASB ASC Topic 718. The following table reflects the value of each type of
award granted to the NEOs in 2019:

Name

Mr. McMullen
Mr. Millerchip
Mr. Aitken
Mr. Cosset
Mr. Donnelly
Mr. Schlotman

Restricted Stock
$3,150,007
$1,350,035
$ 975,026
$ 825,017
$1,200,004
0

Performance Units
$5,249,995
$ 999,999
$1,249,999
$ 999,999
$1,999,998
$1,792,989

The grant date fair value of the performance units reflected in the stock awards column and in the table above
is computed based on the probable outcome of the performance conditions as of the grant date. This amount
is consistent with the estimate of aggregate compensation cost to be recognized by the Company over the
three-year performance period of the award determined as of the grant date under FASB ASC Topic 718,
excluding the effect of estimated forfeitures. The assumptions used in calculating the valuations are set forth in
Note 12 to the consolidated financial statements in Kroger’s Form 10-K for fiscal year 2019.

Assuming that the highest level of performance conditions is achieved, the aggregate fair value of the 2019
performance unit awards at the grant date is as follows:

Name

Value of Performance Units
Assuming Maximum Performance

Mr. McMullen

Mr. Millerchip

Mr. Aitken

Mr. Cosset

Mr. Donnelly

Mr. Schlotman

$6,299,994

$1,199,999

$1,499,999

$1,199,999

$2,399,998

$2,151,587

(2) These amounts represent the aggregate grant date fair value of option awards computed in accordance with
FASB ASC Topic 718. The assumptions used in calculating the valuations are set forth in Note 12 to the
consolidated financial statements in Kroger’s Form 10-K for fiscal year 2019.

(3) Non-equity incentive plan compensation earned for 2019 consists of amounts earned under the 2019

performance-based annual cash bonus plan and the 2017-2019 Long-Term Incentive Plan.

Name

Annual Cash Bonus

Long-Term Cash Bonus

Mr. McMullen

Mr. Millerchip

Mr. Aitken

Mr. Cosset

Mr. Donnelly

Mr. Schlotman

$1,227,175

$ 254,875

$ 406,343

$ 258,651

$ 589,044

$ 543,733

$779,275

$187,880

$424,103

$313,540

$471,225

$517,322

In accordance with the terms of the 2019 performance-based annual cash bonus plan, Kroger paid 49.09% to
all of the NEOs except for Mr. Aitken who received 58.0%, reflecting results of the corporate annual bonus plan
and Mr. Aitken’s team metrics as described in the CD&A. These amounts were earned with respect to
performance in 2019 and paid in March 2020. See ‘‘2019 Annual Cash Bonus Plan Results’’ in the CD&A for
more information on this plan.

The long-term cash bonus awarded under the 2017-2019 Long-Term Incentive Plan is a performance-based
bonus plan designed to reward participants for improving the long-term performance of the Company.
See ‘‘2017-2019 Long-Term Incentive Plan – Results’’ in the CD&A for more information on this plan.

(4) For 2019, the amounts reported consist of the aggregate change in the actuarial present value of each NEO’s
accumulated benefit under a defined benefit pension plan (including supplemental plans), which applies to
Messrs. McMullen, Donnelly and Schlotman, and preferential earnings on nonqualified deferred compensation,
which applies to Messrs. McMullen and Donnelly. The remainder of the NEOs do not participate in a
nonqualified deferred compensation plan.

Mr. McMullen

Mr. Millerchip

Mr. Aitken

Mr. Cosset

Mr. Donnelly

Mr. Schlotman

Name

Change in
Pension Value

Preferential Earnings on Nonqualified
Deferred Compensation

$6,840,110

$122,375

—

$4,104,897

$4,207,937

—

$ 6,927

—

Change in Pension Value. These amounts represent the aggregate change in the actuarial present value of
accumulated pension benefits. Pension values may fluctuate significantly from year to year depending on a
number of factors, including age, years of service, average annual earnings and the assumptions used to
determine the present value, such as the discount rate. The increase in the actuarial present value of
accumulated pension benefits for 2019 compared to 2018 is due to additional benefits accrued, as applicable,
driven by an increase in average annual earnings, the decrease in the discount rate, and the decrease in
IRC 417(e) segment rates used to convert the Dillon profit sharing offset to an annuity, slightly offset by the
mortality projection scale update. Please see the 2019 Pension Benefits section for further information
regarding the assumptions used in calculating pension benefits. The Company froze the compensation and
service periods used to calculate pension benefits for active employees who participate in the affected pension
plans, including the NEO participants, as of December 31, 2019. Beginning January 1, 2020, the affected
active employees will no longer accrue additional benefits for future service and eligible compensation
received under these plans.

Preferential Earnings on Nonqualified Deferred Compensation. Messrs. McMullen and Donnelly participate in
The Kroger Co. Executive Deferred Compensation Plan (the ‘‘Deferred Compensation Plan’’). Under the plan,
deferred compensation earns interest at a rate representing Kroger’s cost of ten-year debt, as determined by

the CEO and approved by the Compensation Committee prior to the beginning of each deferral year. For each
participant, a separate deferral account is created each year and the interest rate established for that year is
applied to that deferral account until the deferred compensation is paid out. If the interest rate established by
Kroger for a particular year exceeds 120% of the applicable federal long-term interest rate that corresponds
most closely to the plan rate, the amount by which the plan rate exceeds 120% of the corresponding federal
rate is deemed to be above-market or preferential. In fifteen of the twenty-four years in which at least one NEO
deferred compensation, the rate set under the plan for that year exceeds 120% of the corresponding federal
rate. For each of the deferral accounts in which the plan rate is deemed to be above-market, Kroger calculates
the amount by which the actual annual earnings on the account exceed what the annual earnings would have
been if the account earned interest at 120% of the corresponding federal rate, and discloses those amounts as
preferential earnings. Amounts deferred in 2019 earn interest at a rate higher than 120% of the corresponding
federal rate; accordingly, there are preferential earnings on these amounts.

(5) Amounts reported in the ‘‘All Other Compensation’’ column for 2019 include Company contributions to defined

contribution retirement plans, dividend equivalents paid on earned performance units, and dividends paid on
unvested restricted stock. The following table identifies the value of each benefit.

Name

Retirement Plan
Contributions(a)

Mr. McMullen

Mr. Millerchip

Mr. Aitken

Mr. Cosset

Mr. Donnelly

Mr. Schlotman

$ 4,983

$ 43,928

$ 75,608

$ 53,890

$105,252

—

Payment of
Dividend
Equivalents
on Earned
Performance
Units

$122,129

$ 8,408

$ 10,732

$ 8,387

$ 31,906

$ 41,454

Dividends
Paid on
Unvested
Restricted
Stock

$221,580

$ 49,552

$ 48,461

$ 47,767

$ 97,851

$ 73,989

Other(b)

—

$435,120

(a) Retirement plan contributions. The Company makes automatic and matching contributions to NEOs’

accounts under the applicable defined contribution plan on the same terms and using the same formulas
as other participating employees. The Company also makes contributions to NEOs’ accounts under the
applicable defined contribution plan restoration plan, which is intended to make up the shortfall in
retirement benefits caused by the limitations on benefits to highly compensated individuals under the
defined contribution plans in accordance with the Code. The aggregate amounts in the table above
include the following additional contributions for Mr. Donnelly for 2019: a $14,000 matching contribution to
the Dillon Companies, Inc. Employees’ Profit Sharing Plan and a $87,377 matching contribution to the
Dillon Companies, Inc. Excess Benefit Profit Sharing Plan.

(b) Other. In 2019, the total amount of perquisites and personal benefits for each of the NEOs was less than
$10,000. Mr. Schlotman received $435,120 for banked vacation which was paid out upon his retirement.

(6) Mr. Schlotman served as our Chief Financial Officer until April 3, 2019 and as our Executive Vice President
until his retirement from the Company on December 31, 2019. Mr. Millerchip succeeded him as Chief
Financial Officer on April 4, 2019.

2019 Grants of Plan-Based Awards

The following table provides information about equity and non-equity incentive awards granted to the NEOs in

2019.

Estimated Possible Payouts
Under Non-Equity
Incentive Plan Awards

Target
($)
$2,500,000(1)

Maximum
($)
$5,000,000(1)

Estimated Future
Payouts Under
Equity Incentive
Plan Awards

Target
(#)(2)

Maximum
(#)(2)

All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)(3)

All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(4)

Exercise
or Base
Price of
Option
Awards
($/Sh)

Grant
Date Fair
Value of
Stock
and
Option
Awards

Name

W. Rodney McMullen

Grant
Date

3/14/2019
3/14/2019
3/14/2019

Gary Millerchip

$ 550,000(1)

$1,100,000(1)

3/14/2019
7/15/2019
3/14/2019
7/15/2019
3/14/2019

Stuart Aitken

$ 700,000(1)

$1,400,000(1)

Yael Cosset

3/14/2019
3/14/2019
3/14/2019

$ 550,000(1)

$1,100,000(1)

Michael J. Donnelly

$1,200,000(1)

$2,400,000(1)

3/14/2019
3/14/2019
3/14/2019

127,273

348,259

$24.75

212,121

254,545

40,404

48,485

50,505

60,606

40,404

48,485

82,919
51,116

$24.75
$22.08

99,503

$24.75

82,919

$24.75

33,334
23,778

39,395

33,334

48,485

80,808

96,970

132,670

$24.75

$3,150,007
$2,100,170
$5,249,995

$ 825,017
$ 525,018
$ 500,042
$ 275,000
$ 999,999

$ 975,026
$ 600,051
$1,249,999

$ 825,017
$ 500,042
$ 999,999

$1,200,004
$ 800,064
$1,999,998

$1,792,989

J. Michael Schlotman

$1,200,000(1)

$2,400,000(1)

3/14/2019

72,444

86,933

(1) These amounts relate to the 2019 performance-based annual cash incentive bonus plan. The amount listed

under ‘‘Target’’ represents the annual cash incentive bonus potential of the NEO. By the terms of the plan,
payouts are limited to no more than 200% of a participant’s annual cash incentive bonus potential; accordingly,
the amount listed under ‘‘Maximum’’ is two times that officer’s annual cash incentive bonus potential amount.
The amounts actually earned under this plan were paid in March 2020 and are included in the Summary
Compensation Table for 2019 in the ‘‘Non-Equity Incentive Plan Compensation’’ column and are described in
footnote 3 to that table under ‘‘Annual Cash Bonus.’’

(2) These amounts represent performance units awarded under the 2019 Long-Term Incentive Plan, which covers
performance during fiscal years 2019, 2020 and 2021. The amount listed under ‘‘Maximum’’ represents the
maximum number of common shares that can be earned by the NEO under the award or 120% of the target
amount. This amount is consistent with the estimate of aggregate compensation cost to be recognized by the
Company over the three-year performance period of the award determined as of the grant date under FASB
ASC Topic 718, excluding the effect of estimated forfeitures. The grant date fair value reported in the last
column is based on the probable outcome of the performance conditions as of the grant date. The aggregate
grant date fair value of these awards is included in the Summary Compensation Table for 2019 in the ‘‘Stock
Awards’’ column and described in footnote 1 to that table.

(3) These amounts represent the number of shares of restricted stock granted in 2019. The aggregate grant date
fair value reported in the last column is calculated in accordance with FASB ASC Topic 718. The aggregate
grant date fair value of these awards is included in the Summary Compensation Table for 2019 in the ‘‘Stock
Awards’’ column and described in footnote 1 to that table.

(4) These amounts represent the number of stock options granted in 2019. Options are granted with an exercise
price equal to the closing price of Kroger common shares on the grant date. The aggregate grant date fair
value reported in the last column is calculated in accordance with FASB ASC Topic 718. The aggregate grant
date fair value of these awards is included in the Summary Compensation Table for 2019 in the ‘‘Option
Awards’’ column.

The Compensation Committee, and the independent members of the Board in the case of the CEO, established
the incentive potential amounts for the performance-based annual cash incentive awards (shown in this table as
‘‘Target’’) and the number of performance units awarded for the long-term incentive awards (shown in this table as
‘‘Target’’). Amounts are payable to the extent that Kroger’s actual performance meets specific performance metrics
established by the Compensation Committee at the beginning of the performance period. There are no guaranteed
or minimum payouts; if none of the performance metrics are achieved, then none of the award is earned and no
payout is made. As described in the CD&A, actual earnings under the performance-based annual cash incentive
plan may exceed the target amount if the Company’s performance exceeds the performance goals, but are limited
to 200% of the target amount. The potential values for performance units awarded under the 2019-2021 Long-Term
Incentive Plan are more particularly described in the CD&A.

The annual restricted stock and nonqualified stock options awards granted to the NEOs vest in equal amounts on
each of the first four anniversaries of the grant date, so long as the officer remains a Kroger employee, except for
Messrs. Millerchip’s, Aitken’s, and Cosset’s March 2019 award included restricted stock awards of 9,091 shares
and 16,584 stock options as special awards granted in connection with promotions that each vest in equal amounts
on each of the first three anniversaries of the grant date. Any dividends declared on Kroger common shares are
payable on unvested restricted stock.

2019 Outstanding Equity Awards at Fiscal Year-End

The following table provides information about outstanding equity-based incentive compensation awards for
the NEOs as of the end of 2019. The vesting schedule for each award is described in the footnotes to this table.
The market value of unvested restricted stock and unearned performance units is based on the closing price of
Kroger’s common shares of $26.86 on January 31, 2020, the last trading day of fiscal 2019.

Option Awards

Stock Awards

Name
W. Rodney McMullen

Gary Millerchip

Stuart Aitken

Yael Cosset

Michael J. Donnelly

J. Michael Schlotman

Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
140,000
182,880
194,880
194,880
300,000
188,332
214,854
229,250
87,323

9,600
11,193
16,782
8,726
7,562

17,860
20,896
22,296
8,281

11,193
10,878
3,979
4,244
17,406
7,374

70,720
50,720
50,720
60,000
47,943
62,116
66,279
28,364

91,280
109,280
80,000
85,224
82,822
88,372
27,758

Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)

—
—
—
—
—

47,083(1)
143,237(2)
343,877(3)
261,970(3)
348,259(4)

—
2,799(1)
11,190(2)
26,179(3)
22,689(3)
66,335(4)
16,584(5)
51,116(6)
—
—
4,466(1)
13,932(2)
33,446(3)
24,843(3)
82,919(4)
16,584(5)

—
—
—
2,799(1)
7,252(2)
2,653(7)
6,367(8)
26,110(3)
22,125(3)
66,335(4)
16,584(5)

—
—
—
—
—
—
—
11,986(1)
41,412(2)
99,419(3)
85,092(3)
132,670(4)

—
—
—

21,307(1)
55,216(2)
132,558(3)
83,276(3)

Option
Exercise
Price
($)
$10.08
$12.37
$10.98
$18.88
$24.67
$38.33
$37.48
$22.92
$28.05
$24.75
$24.67
$38.33
$37.48
$22.92
$28.05
$24.75
$24.75
$22.08

$38.33
$37.48
$22.92
$28.05
$24.75
$24.75

$38.33
$37.48
$31.25
$28.83
$22.92
$28.05
$24.75
$24.75

$12.37
$10.98
$18.88
$24.67
$38.33
$37.48
$22.92
$28.05
$24.75
$12.37
$18.88
$24.67
$38.33
$37.48
$22.92
$28.05

Option
Expiration
Date
6/24/2020
6/23/2021
7/12/2022
7/15/2023
7/15/2024
7/15/2025
7/13/2026
7/13/2027
7/13/2028
3/14/2029
7/15/2024
7/15/2025
7/13/2026
7/13/2027
7/13/2028
3/14/2029
3/14/2029
7/15/2029

7/15/2025
7/13/2026
7/13/2027
7/13/2028
3/14/2029
3/14/2029

7/15/2025
7/13/2026
9/15/2026
3/9/2027
7/13/2027
7/13/2028
3/14/2029
3/14/2029

6/23/2021
7/12/2022
7/15/2023
7/15/2024
7/15/2025
7/13/2026
7/13/2027
7/13/2028
3/14/2029
6/23/2021
7/15/2023
7/15/2024
7/15/2025
7/13/2026
7/13/2027
7/13/2028

Market Value
of Shares
or Units of
Stock That
Have Not
Vested
($)

Number
of Shares
or Units of
Stock That
Have Not
Vested
(#)
17,219(9) $ 462,502
40,022(10) $1,074,991
98,168(11) $2,636,792
63,321(11) $1,700,802
127,273(12) $3,418,553

Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
(#)

Equity
Incentive Plan
Awards: Market
or Payout Value
of Unearned
Shares, Units
or Other Rights
That Have Not
Vested
($)

61,268(19)
95,242(20)

$1,754,095
$2,737,265

1,014(9) $
27,236
3,447(10) $
92,586
7,671(11) $ 206,043
16,362(13) $ 439,483
7,795(11) $ 209,374
24,243(12) $ 651,167
9,091(14) $ 244,184
$ 638,677

23,778(15)

1,618(9) $
43,459
4,281(10) $ 114,988
10,500(11) $ 282,030
16,362(13) $ 439,483
9,172(11) $ 246,360
30,304(12) $ 813,965
9,091(14) $ 244,184

1,014(9) $
27,236
2,074(10) $
55,708
1,280(16) $
34,381
3,330(17) $
89,444
9,163(11) $ 246,118
16,362(13) $ 439,483
12,033(11) $ 323,206
24,243(12) $ 651,167
9,091(14) $ 244,184

5,910(9) $ 158,743
11,847(10) $ 318,210
29,058(11) $ 780,498
14,135(18) $ 379,666
39,594(11) $1,063,495
48,485(12) $1,302,307

7,722(9) $ 207,413
15,795(10) $ 424,254
38,742(11) $1,040,610
38,891(11) $1,044,612

4,523(19)
18,141(20)

$ 129,503
$ 521,384

16,673(19)
22,677(20)

$ 477,349
$ 651,730

4,656(19)
18,141(20)

$ 133,298
$ 521,384

20,370(19)
36,283(20)

$ 583,184
$1,042,767

13,376(19)
10,008(20)

$ 382,955
$ 287,630

(1) Stock options vest on 7/15/2020.

(2) Stock options vest in equal amounts on 7/13/2020 and 7/13/2021.

(3) Stock options vest in equal amounts on 7/13/2020, 7/13/2021, and 7/13/2022.

(4) Stock options vest in equal amounts on 3/14/2020, 3/14/2021, 3/14/2022, and 3/14/2023.

(5) Stock options vest in equal amounts on 3/14/2020, 3/14/2021, and 3/14/2022.

(6) Stock options vest in equal amounts on 7/15/2020, 7/15/2021, 7/15/2022, and 7/15/2023.

(7) Stock options vest in equal amounts on 9/15/2020 and 9/15/2021.

(8) Stock options vest in equal amounts on 3/9/2020, 3/9/2021, and 3/9/2022.

(9) Restricted stock vests on 7/15/2020.

(10) Restricted stock vests in equal amounts on 7/13/2020 and 7/13/2021.

(11) Restricted stock vests in equal amounts on 7/13/2020, 7/13/2021, and 7/13/2022.

(12) Restricted stock vests in equal amounts on 3/14/2020, 3/14/2021, 3/14/2022, and 3/14/2023.

(13) Restricted stock vests on 7/13/2020.

(14) Restricted stock vests in equal amounts on 3/14/2020, 3/14/2021, and 3/14/2022.

(15) Restricted stock vests in equal amounts on 7/15/2020, 7/15/2021, 7/15/2022, and 7/15/2023.

(16) Restricted stock vests in equal amounts on 9/15/2020 and 9/15/2021.

(17) Restricted stock vests in equal amounts on 3/9/2020, 3/9/2021, and 3/9/2022.

(18) Restricted stock vests on 12/7/2020.

(19) Performance units granted under the 2018 long-term incentive plan are earned as of the last day of fiscal

2020, to the extent performance conditions are achieved. Because the awards earned are not currently
determinable, in accordance with SEC rules, the number of units and the corresponding market value reflect a
representative amount based on performance through 2019, including cash payments equal to projected
dividend equivalent payments. For Mr. Schlotman, the awards listed in the table reflect a representative
amount prorated based on the number of weeks of the plan he was actively employed.

(20) Performance units granted under the 2019 long-term incentive plan are earned as of the last day of fiscal

2021, to the extent performance conditions are achieved. Because the awards earned are not currently
determinable, in accordance with SEC rules, the number of units and the corresponding market value reflect a
representative amount based on performance through 2019, including cash payments equal to projected
dividend equivalent payments. For Mr. Schlotman, the awards listed in the table reflect a representative
amount prorated based on the number of weeks of the plan he was actively employed.

2019 Option Exercises and Stock Vested

The following table provides information regarding 2019 stock options exercised, restricted stock vested, and

common shares issued pursuant to performance units earned under long-term incentive plans.

Option Awards(1)

Stock Awards(2)

Number of
Shares
Acquired on
Exercise
(#)

Value
Realized on
Exercise
($)

Number
of Shares
Acquired on
Vesting
(#)

Value
Realized
on
Vesting
($)

Name

W. Rodney McMullen

130,000

$1,875,900

188,948

$4,688,674

Gary Millerchip

Stuart Aitken

Yael Cosset

Michael J. Donnelly

J. Michael Schlotman

—

40,000

159,280

$ 642,959

$2,752,418

22,463

25,122

24,223

65,978

72,762

$ 529,660

$ 598,127

$ 573,505

$1,628,211

$2,071,866

(1) Stock options have a ten-year life and expire if not exercised within that ten-year period. The value realized on

exercise is the difference between the exercise price of the option and the closing price of Kroger’s common
shares on the exercise date.

(2) The Stock Awards columns include vested restricted stock and earned performance units, as follows:

Name

Vested Restricted Stock
Number of
Shares

Value
Realized

Earned Performance Units
Number of
Shares

Value
Realized

W. Rodney McMullen

113,560

$2,493,375

75,388

Gary Millerchip

Stuart Aitken

Yael Cosset

Michael J. Donnelly

J. Michael Schlotman

17,273

18,497

19,046

46,283

47,173

$ 378,527

$ 405,207

$ 422,751

$1,054,693

$1,326,714

5,190

6,625

5,177

19,695

25,589

$2,195,299

$ 151,133

$ 192,920

$ 150,754

$ 573,518

$ 745,152

Restricted stock. The table includes the number of shares acquired upon vesting of restricted stock and the
value realized on the vesting of restricted stock, based on the closing price of Kroger common shares on the
vesting date.

Performance Units. Participants in the 2017-2019 Long-Term Incentive Plan, as modified, were awarded
performance units that were earned based on performance criteria established by the Compensation
Committee as described on page 31 in ‘‘2017-2019 Long-Term Incentive Plan – Results’’ in the CD&A. Actual
payouts were based on the level of performance achieved and were paid in common shares. The number of
common shares issued, and the value realized based on the closing price of Kroger common shares of $29.12
on March 12, 2020, the date of deemed delivery of the shares, are reflected in the table above.

2019 Pension Benefits

The following table provides information regarding pension benefits for the NEOs as of the last day of fiscal

2019.

Name

W. Rodney McMullen

Gary Millerchip

Stuart Aitken

Yael Cosset

Michael J. Donnelly

J. Michael Schlotman

Number of
Years Credited
Service
(#)

Present Value of
Accumulated
Benefit
($)(1)

Payments during
Last fiscal year
($)

$ 1,882,693

$21,170,930

—(2)

—
—(2)

—

$ 1,206,264

$ 9,812,413

$ 1,973,721

$11,467,608

—

—
—(2)

—

Plan Name

Pension Plan

Excess Plan

Pension Plan

Excess Plan

Pension Plan

Excess Plan

Pension Plan

Excess Plan

Pension Plan

Excess Plan

Pension Plan

Excess Plan

(1) The discount rate used to determine the present values was 3.00% for The Kroger Consolidated Retirement

Benefit Plan Spin Off (the ‘‘Pension Plan’’) and 3.01% for The Kroger Co. Consolidated Retirement Excess
Benefit Plan (the ‘‘Excess Plan’’), which are the same rates used at the measurement date for financial
reporting purposes. Additional assumptions used in calculating the present values are set forth in Note 15 to
the consolidated financial statements in Kroger’s 10-K for fiscal year 2019.

(2) Messrs. Millerchip, Aitken and Cosset do not participate in the Pension Plan or the Excess Plan.

Pension Plan and Excess Plan

In 2019, Messrs. McMullen, Donnelly, and Schlotman were participants in the Pension Plan, which is a
qualified defined benefit pension plan. Messrs. McMullen, Donnelly, and Schlotman also participate in the Excess
Plan, which is a nonqualified deferred compensation plan as defined in Section 409A of the Code. The purpose of
the Excess Plan is to make up the shortfall in retirement benefits caused by the limitations on benefits to highly
compensated individuals under the qualified defined benefit pension plans in accordance with the Code.

Although participants generally receive credited service beginning at age 21, certain participants in the
Pension Plan and the Excess Plan who commenced employment prior to 1986, including Messrs. McMullen, and
Schlotman, began to accrue credited service after attaining age 25 and one year of service. The Pension Plan and
the Excess Plan generally determine accrued benefits using a cash balance formula but retain benefit formulas
applicable under prior plans for certain ‘‘grandfathered participants’’ who were employed by Kroger on
December 31, 2000. Each of Messrs. McMullen, Donnelly, and Schlotman are eligible for these grandfathered
benefits.

Grandfathered Participants

Benefits for grandfathered participants are determined using formulas applicable under prior plans, including
the Kroger formula covering service to The Kroger Co. and the Dillon formula covering service to Dillon Companies,
Inc. As ‘‘grandfathered participants,’’ Mr. McMullen, Mr. Donnelly and Mr. Schlotman, who retired on December 31,
2019, will receive benefits under the Pension Plan and the Excess Plan, determined as follows:

•

11∕2% times years of credited service multiplied by the average of the highest five years of total earnings
(base salary and annual cash bonus) during the last ten calendar years of employment, reduced by 11∕4%
times years of credited service multiplied by the primary social security benefit;

normal retirement age is 65;

unreduced benefits are payable beginning at age 62; and

benefits payable between ages 55 and 62 will be reduced by 1∕3 of one percent for each of the first 24
months and by 1∕2 of one percent for each of the next 60 months by which the commencement of benefits
precedes age 62.

In 2018, we announced changes to these company-sponsored pension plans. The Company froze the
compensation and service periods used to calculate pension benefits for active employees who participate in the
affected pension plans, including the NEO participants, as of December 31, 2019. Beginning January 1, 2020,
the affected active employees will no longer accrue additional benefits for future service and eligible compensation
received under these plans.

In the event of a termination of employment other than death or disability, Messrs. McMullen and Donnelly

currently are eligible for a reduced early retirement benefit, as each has attained age 55. If a ‘‘grandfathered
participant’’ becomes disabled while employed by Kroger and after attaining age 55, the participant will receive the
full retirement benefit. If a married ‘‘grandfathered participant’’ dies while employed by Kroger, the surviving spouse
will receive benefits as though a retirement occurred on such date, based on the greater of: actual benefits payable
to the participant if he or she was over age 55, or the benefits that would have been payable to the participant
assuming he or she was age 55 on the date of death.

Offsetting Benefits

Mr. Donnelly also participates in the Dillon Companies, Inc. Employees’ Profit Sharing Plan (the ‘‘Dillon Profit

Sharing Plan’’), which is a qualified defined contribution plan under which Dillon Companies, Inc. and its
participating subsidiaries may choose to make discretionary contributions each year that are allocated to each
participant’s account. Participation in the Dillon Profit Sharing Plan was frozen in 2001 and participants are no
longer able to make employee contributions, but certain participants, including Mr. Donnelly, are still eligible for
employer contributions. Participants elect from among a number of investment options and the amounts in their
accounts are invested and credited with investment earnings in accordance with their elections. Due to offset
formulas contained in the Pension Plan, Mr. Donnelly’s accrued benefits under the Dillon Profit Sharing Plan offset
a portion of the benefit that would otherwise accrue for him under the Pension Plan for his service with Dillon
Companies, Inc. Mr. Donnelly also participates in the Dillon Companies, Inc. Excess Benefit Profit Sharing Plan

(‘‘Dillon Excess Profit Sharing Plan’’) which provides Company contributions in excess of the qualified plan limits.
The Dillon Excess Profit Sharing Plan is offset by Mr. Donnelly’s benefit from the Excess Plan. The offsets are
reflected in the Pension Benefits table above.

2019 Nonqualified Deferred Compensation

The following table provides information on nonqualified deferred compensation for the NEOs for 2019. Only

Messrs. McMullen and Donnelly participate in a nonqualified deferred compensation plan.

Name

W. Rodney McMullen

Gary Millerchip

Stuart Aitken

Yael Cosset

Michael J. Donnelly

J. Michael Schlotman

Executive Contributions
in Last FY
$10,000(3)

Aggregate Earnings
in Last FY(1)

Aggregate Balance
at Last FYE(2)

$715,358

$11,288,782

—

$ 39,042

—

707,870

—

(1) These amounts include the aggregate earnings on all accounts for each NEO, including any above-market or
preferential earnings. The following amounts earned in 2019 are deemed to be preferential earnings and are
included in the ‘‘Change in Pension Value and Nonqualified Deferred Compensation Earnings’’ column of the
Summary Compensation Table for 2019: Mr. McMullen, $122,375; and Mr. Donnelly, $6,927.

(2) The following amounts in the Aggregate Balance column were reported in the Summary Compensation Tables

covering fiscal years 2006 – 2018: Mr. McMullen, $3,273,221; and Mr. Donnelly, $238,872.

(3) This amount includes the deferral of $10,000 of his salary in fiscal 2019; this amount is included in the ‘‘Salary’’

column of the Summary Compensation Table for 2019.

Executive Deferred Compensation Plan

Messrs. McMullen and Donnelly participate in the Deferred Compensation Plan, which is a nonqualified
deferred compensation plan. Participants may elect to defer up to 100% of the amount of their salary that exceeds
the sum of the FICA wage base and pre-tax insurance and other Code Section 125 plan deductions, as well as up
to 100% of their annual and long-term cash bonus compensation. Kroger does not match any deferral or provide
other contributions. Deferral account amounts are credited with interest at the rate representing Kroger’s cost of
ten-year debt as determined by Kroger’s CEO and approved by the Compensation Committee prior to the
beginning of each deferral year. The interest rate established for deferral amounts for each deferral year will be
applied to those deferral amounts for all subsequent years until the deferred compensation is paid out. Amounts
deferred in 2019 earn interest at a rate of 4.45%. Participants can elect to receive lump sum distributions or
quarterly installments for periods up to ten years. Participants also can elect between lump sum distributions and
quarterly installments to be received by designated beneficiaries if the participant dies before distribution of
deferred compensation is completed.

Participants may not withdraw amounts from their accounts until they leave Kroger, except that Kroger has

discretion to approve an early distribution to a participant upon the occurrence of an unforeseen emergency.
Participants who are ‘‘specified employees’’ under Section 409A of the Code, which includes the NEOs, may not
receive a post-termination distribution for at least six months following separation. If the employee dies prior to or
during the distribution period, the remainder of the account will be distributed to his or her designated beneficiary in
lump sum or quarterly installments, according to the participant’s prior election.

Potential Payments upon Termination or Change in Control

Kroger does not have employment agreements that provide for payments to the NEOs in connection with a
termination of employment or a change in control of Kroger. However, KEPP, award agreements for stock options,
restricted stock and performance units, the long-term cash bonus plans, and the long-term incentive plans under
which performance units are granted provide for certain payments and benefits to participants, including the NEOs,
in the event of a termination of employment or a change in control of Kroger, as defined in the applicable plan or
agreement. Our pension plan and nonqualified deferred compensation plan also provide for certain payments and

benefits to participants in the event of a termination of employment, as described above in the 2019 Pension
Benefits section and the 2019 Nonqualified Deferred Compensation section, respectively.

The Kroger Co. Employee Protection Plan

KEPP applies to all management employees who are classified as exempt under the federal Fair Labor
Standards Act and to certain administrative or technical support personnel who are not covered by a collective
bargaining agreement, with at least one year of service, including the NEOs. KEPP provides severance benefits
when a participant’s employment is terminated actually or constructively within two years following a change in
control of Kroger, as defined in KEPP. The actual amount of the severance benefit is dependent on pay level and
years of service. Exempt employees, including the NEOs, are eligible for the following benefits:

•

a lump sum severance payment equal to up to 24 months of the participant’s annual base salary and
target annual bonus potential;

a lump sum payment equal to the participant’s accrued and unpaid vacation, including banked vacation;

continued medical and dental benefits for up to 24 months and continued group term life insurance
coverage for up to 6 months; and

up to $10,000 as reimbursement for eligible outplacement expenses.

In the event that any payments or benefits received or to be received by an eligible employee in connection

with a change in control or termination of employment (whether pursuant to KEPP or any other plan, arrangement
or agreement with Kroger or any person whose actions result in a change in control) would constitute parachute
payments within the meaning of Section 280G of the Code and would be subject to the excise tax under Section
4999 of the Code, then such payments and benefits will either be (i) paid in full or (ii) reduced to the minimum
extent necessary to ensure that no portion of such payments or benefits will be subject to the excise tax, whichever
results in the eligible employee receiving the greatest aggregate amount on an after-tax basis.

Long-Term Incentive Awards

The following table describes the treatment of long-term incentive awards following a termination of

employment or change in control of Kroger, as defined in the applicable agreement. In each case, the continued
vesting, exercisability or eligibility for the incentive awards will end if the participant provides services to a
competitor of Kroger.

Triggering Event

Stock Options

Restricted Stock

Performance Units

Involuntary

Termination

Voluntary

Termination/
Retirement

- Prior to minimum

age and five
years of
service(1)

Voluntary

Termination/
Retirement

- After minimum
age and five
years of
service(1)

Forfeit all unvested options.
Previously vested options
remain exercisable for the
shorter of one year after
termination or the
remainder of the original
10-year term.

Unvested options held
greater than 1 year
continue vesting on the
original schedule. All
options are exercisable for
remainder of the original
10-year term.

Forfeit all unvested shares

Forfeit all rights to
units for which the
three-year
performance period
has not ended

Performance-Based
Long-Term
Cash Bonus

Forfeit all rights to long-term
cash bonuses for which the
three-year performance
period has not ended

Forfeit all unvested shares

Forfeit all rights to
units for which the
three-year
performance period
has not ended

Forfeit all rights to long-term
cash bonuses for which the
three-year performance
period has not ended

Unvested shares held
greater than 1 year
continue vesting on the
original schedule

Pro rata portion(2) of
units earned based on
performance results
over the full three-year
period

Pro rata portion(2) of long-
term cash bonuses earned
based on performance
results over the full three-
year period

Triggering Event

Stock Options

Restricted Stock

Performance Units

Death

Disability

Change in

Control(3)

- For awards prior
to March 2019

Change in

Control(4)

- For awards

in March 2019
and thereafter

Unvested options are
immediately vested. All
options are exercisable for
the remainder of the
original 10-year term.

Unvested shares
immediately vest

Unvested options are
immediately vested. All
options are exercisable for
remainder of the original
10-year term.

Unvested options are
immediately vested and
exercisable.

Unvested shares
immediately vest

Unvested shares
immediately vest.

Unvested options only vest
and become exercisable
upon an actual or
constructive termination of
employment within 2 years
following a change in
control.

Unvested shares only vest
upon an actual or
constructive termination of
employment within 2 years
following a change in
control.

Performance-Based
Long-Term
Cash Bonus

Pro rata portion(2) of long-
term cash bonuses earned
based on performance
results through the end of
the fiscal year in which
death occurs. Award will be
paid following the end of
such fiscal year.

Pro rata portion(2) of
units earned based on
performance results
through the end of the
fiscal year in which
death occurs. Award
will be paid following
the end of such fiscal
year.

Pro rata portion(2) of
units earned based on
performance results
over the full three-year
period

Pro rata portion(2) of long-
term cash bonuses earned
based on performance
results over the full three-
year period

50% of the bonus granted at
the beginning of the
performance period earned
immediately

Not applicable

50% of the units
granted at the
beginning of the
performance period
earned immediately

50% of the units
granted at the
beginning of the
performance period
earned upon an actual
or constructive
termination of
employment within
2 years following a
change in control.

(1) The minimum age requirement is age 62 for stock options and restricted stock and age 55 for performance

units and the long-term cash bonus.

(2) The prorated amount is equal to the number of weeks of active employment during the performance period

divided by the total number of weeks in the performance period.

(3) These benefits are payable upon a change in control of Kroger, as defined in the applicable agreement, with or

without a termination of employment.

(4) These benefits are payable upon an actual or constructive termination of employment within two years after a

change in control, as defined in the applicable agreements.

Quantification of Payments upon Termination or Change in Control

The following table provides information regarding certain potential payments that would have been made to
the NEOs, except for Mr. Schlotman, if the triggering event occurred on the last day of the fiscal year, February 1,
2020, given compensation, age and service levels as of that date and, where applicable, based on the closing
market price per Kroger common share on the last trading day of the fiscal year ($26.86 on January 31, 2020).
Amounts actually received upon the occurrence of a triggering event will vary based on factors such as the timing
during the year of such event, the market price of Kroger common shares, and the officer’s age, length of service
and compensation level. Upon Mr. Schlotman’s retirement on December 31, 2019, he received a payment equal to
his banked vacation as described in footnote 5 to the Summary Compensation Table. Please see the Long-Term
Incentive Awards Table on page 49 for a discussion of the treatment of Mr. Schlotman’s long-term incentive awards
following his retirement, with Mr. Schlotman having reached the minimum age and service requirements.

W. Rodney McMullen

Name