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The Kroger Co.

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A dominant position among the nation’s largest grocery retailers enables Kroger to sustain growth, expand store base, and boost market share. It also remains well positioned to deliver higher earnings, primarily through strong identical supermarket sales growth. This is well reflected from the company’s better-than-expected fourth-quarter fiscal 2014 results and an encouraging outlook. We believe there remain enormous opportunities to augment identical supermarket sales, alleviate gross margin pressure and improve operating margin. In our view, Kroger’s long term earnings per share growth rate target of 8% to 11% seem achievable. However, cautious consumer spending and higher debt-to-capitalization ratio remain causes of concern.

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