94

105

116

12

13

14The Board of Directors Recommends a VoteFor Each Director Nominee.

7

Information Concerning the Board of Directors

Committees of the Board Leadership Structure and Lead Independent Director

The Board is currently composed of Directorseleven independent non-employee directors and one management director, Mr. McMullen, the Chairman and CEO. Kroger has a number of standing committees including Audit, Compensationbalanced governance structure in which independent directors exercise meaningful and Corporate Governance. All standing committees are composed exclusively of independent directors. All Board committees have charters that can be found on our corporate website at ir.kroger.com undervigorous oversight.

In addition, as provided in theGuidelines on Issues of Corporate Governance.

    The table below provides (the current membership“Guidelines”), the Board has designated one of ourthe independent directors on eachas Lead Director. The Lead Director works with the Chairman to share governance responsibilities, facilitate the development of the standing committeesKroger’s strategy and grow shareholder value. The Lead Director serves a variety of our Board of Directors.roles, consistent with current best practices, including:

    During 2013,Unless otherwise determined by the Audit Committee met five times,Board, the Compensation Committee met four times, andchair of the Corporate Governance Committee met two times. The Auditis designated as the Lead Director. Robert Beyer, an independent director and the chair of the Corporate Governance Committee, reviews financial reportingis currently the Lead Director. Mr. Beyer is an effective Lead Director for Kroger due to, among other things, his independence, his deep strategic and accounting matters pursuantoperational understanding of Kroger obtained while serving as a Kroger director, his insight into corporate governance, his experience on the boards of other large publicly traded companies, and his commitment and engagement to carrying out the roles and responsibilities of the Lead Director.

With respect to the roles of Chairman and CEO, theGuidelines provide that the Board will determine when it is in the best interests of Kroger and our shareholders for the roles to be separated or combined, and the Board exercises its charter and selects our independent accountants. The Compensation Committee recommends for determination by the independent membersdiscretion as it deems appropriate in light of prevailing circumstances. Upon retirement of our former Chairman, David B. Dillon, on December 31, 2014, the Board determined that it is in the compensationbest interests of Kroger and our shareholders for one person to serve as the Chairman and CEO, as was the case from 2004 through 2013. 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 interests of shareholders. Additionally, this structure provides an effective balance between strong Company leadership and appropriate safeguards and oversight by independent directors. The Board believes that the combination or separation of these positions should continue to be considered as part of the Chief Executive Officer, determinessuccession planning process, as was the compensationcase in 2003 and 2014 when the roles were separated.

8

---

The Board and each of Kroger’s other senior management,its committees conduct an annual self-evaluation to determine whether the Board is functioning effectively at each level. As part of this annual self-evaluation, the Board assesses whether the current leadership structure continues to be appropriate for Kroger and administers some ofits shareholders. TheGuidelines provide the flexibility for the Board to modify our incentive programs. Additional information on the Compensation Committee’s processes and procedures for consideration of executive compensation are addressedleadership structure in the future as appropriate. We believe that Kroger, like many U.S. companies, has been well-served by this flexible leadership structure.

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, DiscussionCorporate Governance, Financial Policy and Analysis below. Public Responsibilities. All committees are composed exclusively of independent directors, as determined under the NYSE listing standards. The current charter of each Board committee is available on our website at ir.kroger.com under Corporate Governance – Committee Composition.

Name of Committee, Number of Meetings, and Current Members		Committee Functions
Audit Committee Meetings in 2015:5 Members: Ronald L. Sargent,Chair Anne Gates Susan J. Kropf Susan M. Phillips Bobby S. Shackouls		●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 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
Compensation Committee Meetings in 2015:5 Members: Clyde R. Moore,Chair Jorge P. Montoya Susan M. Phillips      James A. Runde		●Recommends for approval by the independent directors the compensation of the CEO, and determines the compensation of other senior management and directors ●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

9

---

Name of Committee, Number of Meetings, and Current Members	Committee Functions
Corporate Governance Committee Meetings in 2015:2 Members:      Robert D. Beyer,Chair David B. Lewis      Clyde R. Moore      Bobby S. Shackouls	●Oversees the Company’s corporate governance policies and procedures ●Develops criteria for selecting and retaining directors and identifies and recommends qualified candidates to be director nominees ●Designates membership and chairs of Board committees ●Reviews the Board’s performance and director independence ●Reviews, along with the other independent directors, the performance of the CEO
Financial Policy Committee Meetings in 2015:2 Members: James A. Runde,Chair      Nora A. Aufreiter      Robert D. Beyer      Susan J. Kropf	●Reviews and recommends financial policies and practices ●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 Meetings in 2015:2 Members: Jorge P. Montoya,Chair Nora A. Aufreiter      Anne Gates      Ronald L. Sargent	●Reviews the Company’s policies and practices affecting its social and 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 develops criteriais responsible for selecting and retaining members ofrecommending to the Board seeks out qualifieda 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 has retained 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 in the deliberation and long-term planningof the Board, including business management, public service, education, technology, law andgovernment;
●	Highest standards of personal character and conduct;
●	Willingness to fulfill the obligations of directors and to make the contribution of which he or she iscapable, including regular attendance and participation at Board and committee meetings, andpreparation 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 diversityof our customers, including regional and geographic differences.

10

---

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 that help the Board reflect the diversity of our shareholders, associates, customers and the communities in which we operate. Some consideration also is given to the geographic location of director candidates in order to provide a reasonable distribution of members from Kroger’s operating areas.

At least annually, the Corporate Governance Committee actively engages in Board succession planning. The Corporate Governance Committee takes into account the Board and reviewscommittee evaluations regarding the performancespecific backgrounds, skills, and experiences that would contribute to overall Board and committee effectiveness as well as the future needs of the Board and along withits committees in light of Kroger’s current and future business strategies and the other independent board members,skills and qualifications of directors who are expected to retire in the CEO.future.

Director NominationsCandidates Nominated by Shareholders

The Corporate Governance Committee will consider shareholder recommendations for nominees for membership on the Board of Directors. If shareholders wish to nominate a person or persons for election to the Board of Directors at our 20152017 annual meeting, written notice must be submitted to the Company’sKroger’s Secretary, and received at our executive offices, in accordance with Kroger’s Regulations, not later than January 14, 2015.March 28, 2017. 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 of the Company 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 Committee. These criteria are:

• Demonstrated ability in fields considered to be of value in the deliberations of the Board, includingbusiness management, public service, education, science, law, and government;
  
• Highest standards of personal character and conduct;

15

---

• 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 allmeetings, 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 ofour customers, including regional and geographic differences.

    Racial, ethnic, and gender diversity is an important element in promoting full, open, and balanced deliberations of issues presented to the Board, and is considered by the Corporate Governance Committee. Some consideration also is given to the geographic location of director candidates in order to provide a reasonable distribution of members from the operating areas of the Company.

    The Corporate Governance Committee, typically recruits candidates for Board membership through its own efforts and through suggestions from other directors and shareholders. The Committee on occasion has retained an outside search firm to assist in identifying and recruiting Board candidates who meet the criteria established by the Committee.as described above.

Corporate Governance Guidelines

The Board of Directors has adopted theGuidelines on Issues of Corporate Governance. TheseTheGuidelines, which include copies of the current charters for each of the Audit, Compensation, and Corporate Governance Committees, and the otherfive standing committees of the Board, of Directors, are available on our corporate website at ir.kroger.com.ir.kroger.com under Corporate Governance – Highlights. Shareholders may obtain a copy of theGuidelines by making a written request to Kroger’s Secretary at our executive offices.

Independence

The Board of Directors has determined that all of the non-employee directors with the exception of Messrs. Dillon and McMullen, have no material relationships with Kroger and, therefore, are independent for purposes of the New York Stock Exchange 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. After reviewing the information, the Board determined that all of the non-employee directors were independent because (i) they all satisfied the independence standards set forth in Rule 10A-3because:

●	they all satisfied the criteria for independence set forth in Rule 303A.02 of the NYSE ListedCompany Manual,
●	the value of the Securities Exchange Act of 1934, (ii) they all satisfied the criteria for independence set forth in Rule 303A.02 of the New York Stock Exchange Listed Company Manual, (iii) any business transactions between Kroger and entities with which the directors areaffiliated falls below the thresholds identified by the NYSE listing standards, and
●	none had any material relationships with Kroger except for those arising directly from theirperformance of services as a director for Kroger.

In determining that Mr. Sargent is independent, the Board considered transactions during fiscal 2015 between Kroger and entities with whichStaples, Inc. (where Mr. Sargent is Chairman and CEO) and determined that the directors are affiliated, the valueamount of which fallsbusiness fell below the thresholds identifiedset by the New York Stock ExchangeNYSE listing standards,standards. The transactions involved the purchase of goods by Kroger in the ordinary course of business totaling approximately $12 million and (iv) none had any material relationships with us exceptrepresented less than 0.06% of Staples’ annual consolidated gross revenue. Kroger periodically employs a bidding process or negotiations following a benchmarking of costs of products from various vendors for those arising directlythe items purchased from their performanceStaples and awards the business based on the results of services as a director for Kroger.that process.

11

---

Audit Committee Expertise

The Board of Directors has determined that Anne Gates, Susan M. Phillips and Ronald L. Sargent, independent directors who are members of the Audit Committee, are “audit committee financial experts” as defined by applicable SEC regulations and that all members of the Audit Committee are “financially literate” as that term is used in the NYSE listing standards.standards and are independent in accordance with Rule 10A-3 of the Securities Exchange Act of 1934.

Code of Ethics

The Board of Directors has adoptedThe Kroger Co. Policy on Business Ethics, applicable to all officers, employees and members of the Board of Directors,directors, including Kroger’s principal executive, financial and accounting officers. ThePolicy is available on our corporate website at ir.kroger.com.ir.kroger.com under Corporate Governance – Highlights. Shareholders may also obtain a copy of thePolicy by making a written request to Kroger’s Secretary at our executive offices. We intend to satisfy the disclosure requirement regarding any amendment to, or a waiver from, a provision of thePolicy for our principal executive, financial and accounting officers by posting that information on our website at ir.kroger.com.

16

---

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 email address (helpline@kroger.com) established by the Board’s Audit Committee. The concerns are investigated by Kroger’s Vice President of Auditing and reported to the Audit Committee as deemed appropriate by the Vice President of Auditing.

Shareholders or interested parties also may communicate with the Board in writing directed to Kroger’s Secretary at our executive offices. The Secretary will consider the nature of the communication and determine whether to forward the communication to the chair of the Corporate Governance Committee. Communications relating to personnel issues or our ordinary business operations, or 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 of Directors held sevenfive meetings in 2013.fiscal year 2015. During 2013,fiscal year 2015, 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 fourteeneleven members then serving on the Board attended last year’s annual meeting.

Independent Compensation Consultants

The Compensation Committee directly engages a compensation consultant from Mercer Human Resource Consulting to advise the Compensation Committee in the design of compensation forKroger’s executive officers.compensation. In 2013,2015, Kroger paid that consultant $375,944$390,767 for work performed for the Compensation Committee. Kroger, on management’s recommendation, retained the parent and affiliated companies of Mercer Human Resource Consulting to provide other services for Kroger in 2013,2015, for which Kroger paid $4,743,100.$2,339,577. These other services primarily related to insurance claims (for which Kroger was reimbursed by insurance carriers as claims were adjusted), insurance brokerage and bonding commissions provided by Marsh USA Inc., and pension consulting.plan compliance and actuary services provided by Mercer Inc. Kroger also made payments to affiliated companies for insurance premiums that were collected by the affiliated companies on behalf of insurance carriers, but these amounts are not included in the totals referenced above, as the amounts were paid over to insurance carriers for services provided by those carriers.

12

---

Although neither the Compensation Committee nor the Board expressly approved the other services, after taking into consideration the NYSE’s independence standards and the SEC rules, the Compensation Committee determined that the consultant is independent and his work has not raised any conflict of interest because (a) hebecause:

●	the consultant was first engaged by the Compensation Committee before he became associatedwith Mercer;
●	the consultant works exclusively for the Compensation Committee and not for our management;
●	the consultant does not benefit from the other work that Mercer’s parent and affiliated companiesperform for Kroger; and

●	neither the consultant nor the consultant’s team perform any other services for Kroger.

The Compensation Committee before he became associated with Mercer; (b) he works exclusively for themay engage an additional compensation consultant from time to time as it deems advisable.

Compensation Committee Interlocks and not for our management; (c) he does not benefit from the other work that Mercer’s parent and affiliated companies perform for Kroger; and (d) neither the consultant nor the consultant’s team perform any other services on behalf of Kroger.Insider Participation

No member of the Compensation Committee was an officer or employee of the CompanyKroger during fiscal year 2013,2015, and no member of the Compensation Committee was formerly anis a former officer of the CompanyKroger or was a party to any disclosable related person transaction involving the Company.Kroger. During fiscal year 2013,2015, none of theour executive officers of the Company 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 theKroger’s Board of Directors or Compensation Committee of the Company.Board.

17

---

Board Oversight of Enterprise Risk

While risk management is primarily the responsibility of Kroger’s management team, the Board of Directors is responsible for thestrategic 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’s 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 that exposure. The Audit Committee also discusses with management its policies with respect to risk assessment and risk management.

    Management, including Kroger’s Chief Ethics and Compliance Officer, provides regular updates throughout the year to the respective committees regarding the management of the risks they oversee, and each of these committees reports on risk to the full Board at each regular meeting of the Board.

    In addition to the reports from the committees, the Board receives presentations throughout the year from various department and business unit leaders that include discussion of significant risks as necessary. At each Board meeting, the Chairman and the CEO addressaddresses 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 that exposure. The Audit Committee also discusses with management its policies with respect to risk assessment and risk management.

Management, including our Chief Ethics and Compliance Officer, provides regular updates throughout the year to the respective Board committees regarding management of the risks they oversee, and each of these committees 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 an independentthe Lead Director, to exercise effective oversight of the actions of management, led by Mr. McMullen as Chairman of the Board and CEO, in identifying risks and implementing effective risk management policies and controls.

Board Leadership Structure and Lead Director

    Our Board is composed of eleven independent non-employee directors, and two management directors, Mr. Dillon, the Chairman of the Board and our former Chief Executive Officer, and Mr. McMullen, our Chief Executive Officer. In addition, as provided in ourGuidelines on Issues of Corporate Governance, the Board has designated one of the independent directors as Lead Director. The Board has established five standing committees — audit, compensation, corporate governance, financial policy, and public responsibilities. Each Board committee is composed solely of independent directors, each with a different independent director serving as committee chair. The mix of experienced independent and management directors that make up our Board, along with the independent role of our Lead Director and our independent Board committees, benefits Kroger and its shareholders.

    The Board designates one of the independent directors as a Lead Director. The Lead Director serves a variety of roles, including reviewing and approving Board agendas, meeting materials and schedules to confirm the appropriate topics are reviewed and sufficient time is allocated to each; serving as liaison between the Chairman of the Board, management, and the non-management directors; presiding at the executive sessions of independent directors and at all other meetings of the Board of Directors at which the Chairman of the Board is not present; calling an executive session 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. Unless otherwise determined by the Board, the chair of the Corporate Governance Committee is designated as the Lead Director. Robert Beyer, an independent director and the chair of the Corporate Governance Committee, is currently our Lead Director. Mr. Beyer 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 and his experience on other boards.

1813

---

With respectCompensation 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 2015 fiscal year ended January 30, 2016, the NEOs were:

Name		Title
W. Rodney McMullen		Chairman and Chief Executive Officer
J. Michael Schlotman		Executive Vice President and Chief Financial Officer
Michael J. Donnelly		Executive Vice President of Merchandising
Christopher T. Hjelm		Executive Vice President and Chief Information Officer
Frederick J. Morganthall II		Executive Vice President of Retail Operations

Messrs. Schlotman, Donnelly, Hjelm and Morganthall were each promoted to the rolesposition of ChairmanExecutive Vice President effective September 1, 2015.

Executive Compensation in Context: Our Growth Plan, Financial Strategy and CEO,Fiscal Year 2015 Results

Kroger’s growth plan includes four key performance indicators: positive identical supermarket sales without fuel (“ID Sales”) growth, slightly expanding non-fuel first in, first out (“FIFO”) operating margin, growing return on invested capital (“ROIC”), and annual market share growth. In 2015, we met or exceeded our goals for each of these performance indicators:

●	ID Sales.ID Sales increased 5.0% from 2014. Through 2015, we have achieved 49 consecutivequarters of positive ID Sales growth.
●	ROIC.Our ROIC for 2015 was 13.93%, compared to 13.76% for 2014, excluding Roundy’s (acquiredin December 2015).
●	Non-Fuel FIFO Operating Margin.We exceeded our commitment to slightly expand FIFO operatingmargin, excluding fuel and Roundy’s on a rolling four quarters basis.
●	Market Share.Our market share grew for an eleventh consecutive year.
	Other highlights of the year include:
●	Net earnings per diluted share were $2.06.
●	We exceeded our long-term, net earnings per diluted share growth rate of 8-11% in 2015.
●	We reduced operating costs excluding fuel as a percentage of sales for the eleventh consecutive year.
	Also during 2015, we met all of our objectives with regard to our financial strategy:
●	Maintain our current investment grade debt rating.Our net total debt to adjusted EBITDA ratiodecreased, even while investing approximately $870 million in our merger with Roundy’s late inthe year.
●	Repurchase shares. In 2015, we repurchased $703 million in Kroger common shares.
●	Fund the dividend. We returned $385 million to shareholders through our dividend in 2015, and weincreased our dividend for the ninth consecutive year since we reinstated our dividend in 2006.
●	Increase capital investments. Our 2015 cash flow generation was strong, allowing us to make$3.3 billion in capital investments during the year, excluding mergers, acquisitions and purchases ofleased facilities.

The compensation of our NEOs in 2015 reflects Kroger’s short-term and long-term goals and outcomes. Total compensation for the year is an indicator of how well Kroger performed compared to our business plan, reflecting how our compensation program responds to business challenges and the marketplace.

14

---

GuidelinesSummary of Key Compensation Practices

What we do:

What we do not do:

✓Align pay and performance ✓Significant share ownership guidelines of 5x salary for our CEO ✓Multiple performance metrics under our short- and long-term performance-based plans discourage excessive risk taking ✓Balance between short-term and long-term compensation discourages short-term risk taking at the expense of long-term results ✓Engagement of an independent compensation consultant ✓Robust clawback policy ✓Ban on hedging and pledging of Kroger securities ✓Limited perquisites

×No employment contracts with executives ×No special severance or change of control programs applicable only to executive officers ×No gross-up payments were made to executives under Kroger plans ×No re-pricing or backdating of options ×No guaranteed salary increases or bonuses ×No payment of dividends or dividend equivalents until performance units are earned ×No single-trigger cash severance benefits upon a change in control

provide that the Board will determine when it isSummary of Fixed and At-Risk Pay Elements

The fixed and at-risk pay elements of NEO compensation are reflected in the best interests of Krogerfollowing table and its shareholders for the roles to be separated or combined, and the Board exercises its discretion as it deems appropriate in light of prevailing circumstances. As part of the succession planning process, theGuidelines provide that upon the selection of a new Chief Executive Officer, the Board will determine whether a separation of the offices is appropriate.charts. The Board believes that the combination or separation of these positions should continue to be considered as part of the succession planning process, as was the case in 2003, and again in 2014, when the roles were separated.

    Our Board and each of its committees conduct an annual evaluation to determine whether they are functioning effectively. As part of this annual self-evaluation, the Board assesses whether the current leadership structure continues to be appropriate for Kroger and its shareholders. OurGuidelines provide the flexibility for our Board to modify our leadership structureamounts used in the future as appropriate. We believe that Kroger, like many U.S. companies, has been well-served by this flexible leadership structure.charts are based on the amounts reported in the Summary Compensation Table for 2015, excluding the Change in Pension Value and Nonqualified Deferred Compensation Earnings column.

	Fixed			At-Risk
	‹—————————— Annual —————		———————›	‹—————— Long-Term ——————›
Pay	Base Salary	All Other	Annual Cash	Long-Term	Restricted Stock
Element		Compensation	Bonus	Cash Bonus and	and Stock Options
				Performance Units	(time-based
				(the “Long-Term	equity awards)
				Incentive Plan”)
Description	●Fixed cash compensation ●Reviewed annually ●No automatic or guaranteed increases	●Insurance premiums paid by the Company ●Dividends paid on unvested restricted stock ●Matching and automatic contributions to defined contribution benefit plans	●Variable cash compensation ●Payout depends on actual performance against annually established goals	●Variable compensation payable as long-term cash bonus and performance units ●3-year performance period ●Payout depends on actual performance against established goals	●Stock options vest over 5 years ●Exercise price of stock options is closing price on day of grant ●Restricted stock vests over 3 or 5 years

1915

---

	Compensation DiscussionFixed			At-Risk
	‹———————————— Annual ————		———————›	‹—————— Long-Term ——————›
Purpose	●Provide a base level of cash compensation ●Recognize individual performance, scope of responsibility and Analysisexperience	●Provide benefits competitive with peers	●Metrics and targets align with annual business goals ●Rewards and incentivizes approximately 13,000 Kroger employees, including NEOs, for annual performance on key financial and operational measures	●Metrics and targets align with long-term business strategy ●Rewards and incentivizes approximately 160 key employees, including the NEOs, for long-term performance on key financial and operational measures ●Drives sustainable performance that ties to long-term value creation for shareholders	●Retain executive talent ●Align the interests of executives with long-term shareholder value ●Provide direct alignment to stock price appreciation

CEO 87% of CEO pay is At Risk		Average of Other NEOs 82% of Other NEO pay is At Risk
CEO 68% of CEO pay is Long-Term		Average of Other NEOs 68% of Other NEO pay is Long-Term

Executive16

---

CEO 60% of CEO pay is Equity

Average of Other NEOs 55% of Other NEO pay is Equity

The following discussion and analysis addresses the compensation of the NEOs and the factors considered by the Compensation – OverviewCommittee in setting compensation for the NEOs and, in the case of the CEO’s compensation, making recommendations to the independent directors. Additional detail is provided in the compensation tables and the accompanying narrative disclosures that follow this discussion and analysis.

Our Compensation Philosophy and Objectives

As one of the largest retailers in the world, our executive compensation philosophy remainsis to attract and retain the best management talent and to 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 our focus on our core values: honesty, integrity, respect, inclusion, diversity and safety.

To achieve our objectives, ourthe 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, increasing proportionally with an executive’slevel of responsibility;
  
• Compensation should include incentive-based pay to drive performance, providing superior pay forsuperior performance, including both a short- and long-term focus;
  
• Compensation policies should include an opportunity for, and a requirement of, equity ownership; and
  
• Components of compensation should be tied to an evaluation of business and individual performancemeasured against metrics that align with our business strategy.

    The compensation of our senior executives in fiscal year 2013 reflects these principles. Total compensation for the year is an indicator of how well Kroger performed compared to our business plan, reflecting how our compensation program responds to business challenges and the marketplace. We continue to deliver sales growth and positive earnings results.

• A key metric, identical supermarket sales, excluding the 53^rdweek in 2012 and fuel, increased 3.6% from2012. Through fiscal 2013, we have achieved 41 consecutive quarters of positive identical sales growth.
  
• Net earnings per diluted share were $2.90, and even after taking into account several items that webelieve are necessary to make these results comparable to fiscal 2012, our results still exceeded ourguidance range.
  
• In September 2013, the Board of Directors raised the quarterly cash dividend by 10%, to $0.165 per share.
  
• Kroger’s stock price increased 29.4% in fiscal year 2013.

    The Committee believes our management produced outstanding results in 2013, measured against increasingly aggressive business plan objectives for sales, earnings, and our strategic plan. The compensation paid to our named executive officers reflected this fact as the annual performance-based cash bonus paid out at 104.949% of bonus potentials. The strong link between pay and performance is illustrated by a comparison of the 2012 annual cash bonus, with an 85.881% payout. In 2012, we performed well but did not achieve all of our business plan objectives. In 2013, all of our business plan goals were exceeded (with the exception of our sales goal, which fell slightly short), resulting in an annual bonus payout that exceeded 100% of potentials.

    In keeping with our overall compensation philosophy, we endeavor to ensure that our compensation practices conform to best practices. In particular, over the past several years we have:

• put in place significant stock ownership guideline levels to reinforce the link between the interests ofour named executive officers and those of our shareholders;
  
• adopted claw-back policies under which the repayment of bonuses may be required incertain circumstances;
  
• eliminated tax gross-ups;
  
• adopted the recommendation of shareholders that they be permitted annually, on an advisory basis, tovote on executive compensation; and
  
• adopted a policy prohibiting hedging and short sales, and restricting pledging, of Kroger common sharesby our officers and directors.

2017

    In addition, beginning in 2010, fifty percent of the time-based equity awards that otherwise would have been granted to the named executive officers as restricted stock have been replaced with performance units that are earned only to the extent that performance objectives are achieved. Equity compensation awards continue to play an important role in rewarding named executive officers for the achievement of long-term business objectives and providing incentives for the creation of shareholder value.

    The following discussion and analysis addresses the compensation of the named executive officers, and the factors considered by the Committee in setting compensation for the named executive officers and making recommendations to the independent Board members in the case of the CEO’s compensation. Additional detail is provided in the compensation tables and the accompanying narrative disclosures that follow this discussion and analysis.

Executive Compensation – Objectives

    The Committee has several related objectives regarding compensation. First, the Committee believes that compensation must be designed to attract and retain those best suited to fulfill the challenging roles that executive officers play at Kroger. Second, some elements of compensation should help align the interests of the officers with your interests as shareholders. Third, compensation should create strong incentives for the officers (a) to achieve the annual business plan targets established by the Board, and (b) to achieve Kroger’s long-term strategic objectives. In developing compensation programs and amounts to meet these objectives, the Committee exercises judgment to ensure that executive officer compensation is appropriate and competitive in light of Kroger’s performance and the needs of the business.

Share Ownership Guidelines

    To more closely align the interests of the officers with your interests as shareholders, the Board of Directors has adopted stock ownership guidelines. These guidelines require non-employee directors, officers and some other key executives to acquire and hold a minimum dollar value of Kroger common shares. The guidelines require the CEO to acquire and maintain ownership of Kroger shares equal to five times his base salary; the Chief Operating Officer at four times his base salary; Executive Vice Presidents, Senior Vice Presidents and non-employee directors at three times their base salaries or annual base cash retainers; and other officers and key executives at two times their base salaries. Covered individuals are expected to achieve the target level within five years of appointment to their position. Kroger shares, including equity awards from Kroger, may not be sold by covered individuals prior to achieving holdings required by the guidelines (other than to pay for the exercise price of options and the taxes associated with equity awards), without the approval of Kroger’s CEO.

Results of 2013 Advisory Vote to Approve Executive Compensation

    At the 2013 Annual Meeting of Shareholders, we held our third annual advisory vote on executive compensation. Over 97% of the votes cast were in favor of the advisory proposal in 2013. The Committee considered this overwhelmingly favorable outcome and believes it conveys our shareholders’ support of the Committee’s decisions and the existing executive compensation programs. As a result, the Committee made no material changes in the structure of our compensation programs or pay for performance philosophy. At the 2014 Annual Meeting of Shareholders, in keeping with our shareholders’ request for an annual advisory vote, we will again hold a vote to approve executive compensation (see page 55). The Committee will continue to consider the results from this year’s and future advisory votes on executive compensation.

Role of Compensation Committee

    The Compensation Committee of the Board has the primary responsibility for establishing the compensation of Kroger’s executive officers, including the named executive officers, with the exception of the Chief Executive Officer. The Committee’s role regarding the CEO’s compensation is to make recommendations to the independent members of the Board; those independent Board members establish the CEO’s compensation.

21

Establishing Executive Compensation

    The independent members of the Board have the exclusive authority to determine the amount of the CEO’s salary; the bonus potential for the CEO; the nature and amount of any equity awards made to the CEO; and any other compensation questions related to the CEO. In setting the annual bonus potential for the CEO, the independent directors determine the dollar amount that will be multiplied by the percentage payout under the annual bonus plan generally applicable to all corporate management, including the named executive officers. The independent directors retain discretion to reduce the percentage payout the CEO would otherwise receive. The independent directors thus make a separate determination annually concerning both the CEO’s bonus potential and the percentage of bonus paid.

    The Committee performs the same function and exercises the same authority as to the other named executive officers. The Committee’s annual review of compensation for the named executive officers includes the following:

• Conducts an annual review of all components of compensation, quantifying total compensation for thenamed executive officers on tally sheets. The review includes a summary for each named executive officerof salary; annual performance-based cash bonus; long-term performance-based cash and performanceunit compensation; equity; accumulated realized and unrealized stock option gains and restricted stockand performance unit values; the value of any perquisites; retirement benefits; severance benefitsavailable under The Kroger Co. Employee Protection Plan; and earnings and payouts available underKroger’s nonqualified deferred compensation program.
  
• Considers internal pay equity at Kroger to ensure that the CEO is not compensated disproportionately.The Committee has assured itself that the compensation of Kroger’s CEO and that of the other namedexecutive officers bears a reasonable relationship to the compensation levels of other executive positionsat Kroger taking into consideration performance and differences in responsibilities.
  
• Reviews a report from the Committee’s compensation consultants (described below) comparing namedexecutive officer and other senior executive compensation with that of other companies, primarily ourcompetitors, to ensure that the Committee’s objectives of competitiveness are met.
  
• Takes into account a recommendation from the CEO (except in the case of his own compensation) forsalary, bonus potential, and equity awards for each of the senior officers including the other namedexecutive officers. The CEO’s recommendation takes into consideration the objectives established byand the reports received by the Committee as well as his assessment of individual job performance andcontribution to our management team.
  
• Looks at historical information regarding salary, bonus, and equity compensation for a 3-year period.

    In considering each of the factors above, the Committee does not make use of a formula, but rather subjectively reviews each in setting compensation.

The Committee’s Compensation Consultants and Benchmarking

    As referenced earlier in this compensation discussion and analysis, the Committee directly engages a compensation consultant from Mercer Human Resource Consulting to advise the Committee in the design of compensation for executive officers.

    The Mercer consultant conducts an annual competitive assessment of executive positions at Kroger for the Committee. The assessment is one of several bases, as described above, on which the Committee determines compensation. The consultant assesses:

• Base salary;
  
• Target annual performance-based bonus;
  
• Target annual cash compensation (the sum of salary and annual bonus);
  
• Annualized long-term incentive awards, such as stock options, restricted shares, and performance-basedlong-term cash bonuses and performance-based equity awards; and
  
• Total direct compensation (the sum of all these elements).

22

    The consultant compares these elements against those of other companies in a group of publicly-traded food and drug retailers. For 2013, the group consisted of:

    This peer group is the same group as was used in 2012. The make-up of the compensation peer group is reviewed annually and modified as circumstances warrant. Industry consolidation and other competitive forces will change the peer group used over time. The consultant also provides the Committee data from companies in “general industry,” a representation of major publicly-traded companies. These data are reference points, particularly for senior staff positions where competition for talent extends beyond the retail sector.

    In 2009, the Committee directly engaged an additional compensation consultant to conduct a review of Kroger’s executive compensation. This consultant, from Frederic W. Cook & Co., Inc., examined the compensation philosophy, peer group composition, annual cash bonus, and long-term incentive compensation including equity awards. The consultant concluded that Kroger’s executive compensation program met the Committee’s objectives, and that it provides a strong linkage between pay and performance. The Committee expects to engage an additional compensation consultant from time to time as it deems advisable.

    Considering the size of Kroger in relation to other peer group companies, the Committee believes that salaries paid to our executive officers should be at or above the median paid by competitors for comparable positions. The committee also aims to provide an annual bonus potential to our executive officers that, if the increasingly more challenging annual business plan objectives are achieved, would cause total cash compensation to be meaningfully above the median.

Components of Executive Compensation at Kroger

Compensation for our named executive officersNEOs is comprised of the following:

• Salary;
  

• ●Annual Compensation:
  ➢	Salary
  ➢	Performance-Based Annual Cash Bonus
  ●Long-Term Compensation:
  ➢	Performance-Based Long-Term Incentive Plan (consisting of a long-term cash bonus andperformance units)
  ➢	Non-qualified stock options
  ➢	Restricted stock
  ●Retirement and other benefits ●    Limited perquisites

  The annual and long-term performance-based compensation awards described herein were made pursuant to our 2011 Long-Term Incentive and Cash Bonus (annual, non-equity incentive pay);
  

• Performance-BasedPlan and our 2014 Long-Term Incentive and Cash Bonus Plan, each of which was approved by our shareholders in 2011 and 2014, respectively.

  Annual Compensation (long-term,– 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 performance unitincentive compensation);
  

• Other Equity (non-qualified stock optionsretain a high caliber leadership team, and restricted stock);
  
• Retirement and other benefits; and
  
• Perquisites.

Salary

    We provide our named executive officers and other employees a fixed amountto have an appropriate level of cash compensation – salary – for their work. that is not variable.

Salaries for named executive officersthe 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 the independent directors. Salaries for the named executive officers wereNEOs are reviewed annually in June 2013.June.

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

• An assessment of individual contribution in the judgment of the CEO and the Committee (or, in the caseof the CEO, of the Committee and the rest of the independent directors);
  
• Benchmarking with comparable positions at peer group companies;
  
• Tenure; and
  
• Relationship with the salaries of other executives at Kroger.

23

The assessment of individual contribution is a qualitative determination, based on a subjective determination, without the use of performance targets, in the following areas:factors:

18

• Leadership;

  ---

  
  
• Contribution to the officer group;
  
• Achievement of established objectives, to the extent applicable;
  
• Decision-making abilities;
  
• Performance of the areas or groups directly reporting to the officer;
  
• Increased responsibilities;
  
• Strategic thinking; and
  
• Furtherance of Kroger’s core values.

The amounts shown below reflect the salaries of the named executive officers in effect followingNEOs effective at the annual reviewend of their compensation in June.each fiscal year.

The amount of bonus that the named executive officers earn each year is determined by Kroger’s performance compared to targets2015 goals established by the Compensation Committee, the actual 2015 results and our independent directors based on the business plan adopted by the Board of Directors. In 2013, one-thirdbonus percentage earned for each of the bonus was based on a target for identical sales without fuel; one-third was based on a target for EBITDA without fuel; and one-third was based on implementation and results of a set of measures under our strategic plan. An additional 5% would be earned if Kroger achieved three goals with respect to its supermarket fuel operations: achievementperformance metrics of the targeted fuel EBITDA, increase of at least 3% in total gallons sold,and achievement of the planned number of fuel centers placed in service.annual cash bonus plan were as follows:

Following the close of the year, the Compensation Committee reviewed Kroger’s performance against each of the identical sales without fuel, EBITDA without fuel, and strategic plan objectivesmetrics outlined above and determined the extent to which Kroger achieved those objectives.Kroger’s EBITDA without fuel for 2013 was $4.245 billion and Kroger’s identical sales without fuel for 2013 were 3.5%. In 2013, Kroger’s supermarket fuel EBITDA was $232.990 million, which exceeded the goal of $184.875 million necessary to earn a bonus for the fuel component. Kroger’s fuel gallon sales The Compensation Committee believes our management produced outstanding results in supermarket fuel centers were 4.431 billion gallons, or 6.6% over the prior year. We operated 1,240 supermarket fuel centers as of the end of 2013, exceeding our goal of 1,235 centers. As a result, the payout percentage included the additional 5% fuel bonus.2015, measured against increasingly aggressive business plan objectives. Due to our performance when compared to the targetsgoals established by the Compensation Committee, and based on the business plan adopted by the Board, of Directors, the named executive officers earned 104.949% of their bonus potentials. This is the same bonus percentage payout received byNEOs and all other participants in the corporate annual corporatecash bonus plan.plan earned 126.7% of their bonus potentials.

25

     The 2013 targets established by the Committee for annual bonus amounts based on identical sales without fuel and EBITDA without fuel results, the actual 2013 results, and the bonus percentage earned in each of the components of named executive officer bonus, were as follows:

In 2013,2015, as in all years, the Compensation Committee retained discretion to reduce the annual cash bonus payout for all executive officers, including the named executive officers,NEOs, if the Compensation Committee determined for any reason that the bonus payouts were not appropriate.appropriate given their assessment of Company performance. The independent directors retained that discretion for the CEO’s bonus. Those bodiesThe Compensation Committee and the independent directors also retained discretion to adjust the targets goals for each metric

22

under the plan should unanticipated developments arise during the year. No adjustments were made to the targetsgoals in 2013.2015. The Compensation Committee, and the independent directors in the case of the CEO, determined that the annual cash bonus payouts forearned appropriately reflected the named executive officersCompany’s strong performance in 2015 and therefore should remain the same as other participants.not be adjusted.

The actual annual cash bonus percentage paidpayout for 20132015 represented excellent performance that exceeded our business plan objectives. objectives, with the exception of operating costs as a percentage of sales, without fuel. 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 2009, 2010 and 2012, when payouts were less than 100%. In those years, we did not achieve all of our business plan objectives.A comparison of actual annual cash bonus percentages for the named executive officerspercentage payouts in prior years demonstrates the variability of annual cash bonus incentive compensation:compensation and its strong link to our performance:

As described above, the annual cash bonus payout percentage is applied to each NEO’s bonus potential, which is determined by the Compensation Committee, and the independent directors in the case of the CEO. The actual amounts of performance-based annual performance-based cash bonuses paid to the named executive officersNEOs for 20132015 are reported in the Summary Compensation Table underin the heading “Non-Equity Incentive Plan Compensation” column and footnote 4. These amounts represent the bonus potentials for each named executive officer multiplied by the 104.949% payout percentage earned in 2013. In no event can any participant receive a performance-based annual cash bonus in excess of $5,000,000. The maximum amount4 to that a participant, including each named executive officer, can earn is further limited to 200% of the participant’s bonus potential amount.

     The performance-based annual cash bonus for 2014 will be determined based on Kroger’s performance against the identical sales without fuel, EBITDA without fuel, strategic plan, and operating costs as a percentage of sales objectives established by the Committee. The first three metrics will be weighted at 30% each and the final metric will be weighted at 10%. The underlying strategy metrics have been revised from prior years to focus on shorter-term measures, as the long-term bonus emphasizes long-term performance. The 2014 plan also provides for an additional 5% payout if our goals for supermarket fuel EBITDA, supermarket fuel gallons sold, and targeted number of fuel centers in operation at the fiscal year end are achieved.table.

26

Long-Term IncentivesCompensation

The Compensation Committee believes in the importance of providing an incentive to the named executive officersNEOs to achieve the long-term goals established by the BoardBoard. As such, a majority of Directors by conditioning a significant portion of compensation is conditioned on the achievement of those goals.

     In 2006, the Committee adopted the first in a series ofCompany’s long-term performance basedgoals and is delivered via four long-term compensation plans designed to reward participants for their contribution to the long-term performance of Kroger. These earlier plans provided for overlapping four year performance periods that allowed for the earning of a long-term cash bonus. In 2010, Kroger’s long-term incentive program was redesigned to combine the total value of ourvehicles: long-term cash bonus, performance units, stock options and equity programs into a cohesive, strategic reward for eligible executivesrestricted stock. Long-term compensation promotes long-term value creation and discourages the over-emphasis of attaining short-term goals at the Vice President level and above. Approximately fifty percentexpense of long-term growth.

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 planCEO, recommending to the independent directors the amount awarded. These factors include:

23

A majority of long-term compensation is time-based and delivered inequity-based (performance units, stock options, and restricted shares.stock) and is tied to the future value of our common shares, further aligning the interests of our NEOs with our shareholders. All four components of long-term compensation are intended to focus executive behaviors on our long-term strategy. Each component is described in more detail below.

Amounts of long-term compensation awards issued and outstanding for the NEOs are set forth in the tables that follow this discussion and analysis.

Performance Based Long-Term CompensationIncentive Plan Design

In contrast to the performance-based annual cash bonus plan, described above, which has approximately 13,000 participants, our performance-based Long-Term Incentive Plan has approximately 160 participants, including the NEOs. Each year we adopt a similar Long-Term Incentive Plan, which provides for overlapping three year performance periods. The Long-Term Incentive Plan consists of a performance-based long-term incentive plan adopted in 2010 (and earned in 2012) provides the model for our combined plan structure. Subsequent plans have been adopted each year thereafter. Each of these planscash bonus and performance units which has the following characteristics:

• Performance is measured over a three year period.

• Between 130 and 170 executives, including the named executive officers, participate in each plan.

• Awards include both cash and performance units.

• Compensation under the plans is●

  The actual long-term cash bonus and number of performance units earned are each determined based on our performance against the same metrics established by the Compensation Committee (the independent directors, for the CEO) at the beginning of the performance period.
  

  ●

  Performance at the end of the three-year period is measured against the baseline of each performance metric established at the beginning of the performance period.
  

  ●

  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.
  

  ●

  Actual payouts cannot exceed 100% of the long-term cash bonus potential or 100% of the number of performance units awarded.

  The Compensation Committee anticipates adopting a new Long-Term Incentive Plan each year, measuring improvement over successive three-year periods. Each year when establishing the performance period.

• The payoutmetric baselines and percentage based onpayouts per unit of improvement, the extent to whichCompensation Committee considers the performance metrics are achieved, is applied to both the bonus base and the numberdifficulty of achieving compounded improvement over time. During 2015, Kroger awarded 503,276 performance units awarded.

• Actual payouts cannot exceed 100% ofto approximately 160 employees, including the cash bonus base or 100% of the number of performance units awarded.NEOs.

• In no event can a cash bonus award exceed $5,000,000.

2724

Long-Term Incentive Plan Metrics and Connection to our Business Strategy

25

The following table summarizes each of the long-term performance based plansLong-Term Incentive Plans adopted for the years shown:

     At the time of adopting new long-term plans, theThe Compensation Committee has made adjustments to the percentage payouts for the components of the long-term plansLong-Term Incentive Plans over time to account for the increasing difficulty of achieving compounded improvement.

During 2015, Kroger awarded 503,276 performance units to approximately 160 employees, including the NEOs.

26

Results of 2013 Long-Term Incentive Plan

The Committee anticipates adopting a new plan each year, measuring improvement over successive three-year periods.

     The long-term performance based plan adopted in 2011,2013 Long-Term Incentive Plan, which measured improvements through fiscalover the three year period from 2013 to 2015, paid out in March 20142016 and was calculated as follows: