KROGER CO Stock Compensation Disclosure
11. | STOCK-BASED COMPENSATION |
The Company recognizes compensation expense for all share-based payments granted. The Company recognizes share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of the award based on the fair value at the date of the grant.
The Company grants stock options to employees under various plans at an option price equal to the fair market value of the underlying shares on the grant date of the award. The Company accounts for stock options under the fair value recognition provisions. Stock options typically expire 10 years from the date of grant. Stock options vest between and four years from the date of grant.
In addition to the stock options described above, the Company awards restricted stock to employees and incentive shares to nonemployee directors under various plans. The restrictions on the restricted share awards generally lapse between and four years from the date of the awards. The Company determines the fair value for restricted stock awards in an amount equal to the fair market value of the underlying shares on the grant date of the award.
At January 31, 2026, approximately 23 million common shares were available for future options or restricted stock grants under the 2019 Amended and Restated Long-Term Incentive Plan. Stock options granted reduce the shares available under the Plans at a ratio of one to one. Restricted stock grants reduce the shares available under the Plans at a ratio of 2.83 to one.
Equity awards granted are based on the aggregate value of the award on the grant date. This can affect the number of shares granted in a given year as equity awards. Excess tax benefits related to equity awards are recognized in the provision for income taxes. Equity awards may be approved at one of four meetings of its Board of Directors occurring shortly after the Company’s release of quarterly earnings. The 2025 primary grants were made in conjunction with the March and June meetings of the Company’s Board of Directors.
All awards become immediately exercisable upon certain changes of control of the Company.
Stock Options
Changes in stock options outstanding under the stock option plans are summarized below:
| Shares | | Weighted- |
| ||
subject | average |
| ||||
to option | exercise |
| ||||
| (in millions) | | price |
| ||
Outstanding, year-end 2022 |
| 16.6 | $ | 30.81 | ||
Granted |
| 1.3 | $ | 47.23 | ||
Exercised |
| (2.4) | $ | 24.04 | ||
Canceled or Forfeited |
| (0.1) | $ | 39.54 | ||
Outstanding, year-end 2023 |
| 15.4 | $ | 33.11 | ||
Granted |
| 1.2 | $ | 55.50 | ||
Exercised |
| (4.6) | $ | 29.75 | ||
Canceled or Forfeited |
| (0.4) | $ | 45.79 | ||
Outstanding, year-end 2024 |
| 11.6 | $ | 36.25 | ||
Granted |
| 0.8 | $ | 66.34 | ||
Exercised |
| (5.7) | $ | 31.69 | ||
Canceled or Forfeited |
| (0.7) | $ | 52.54 | ||
Outstanding, year-end 2025 |
| 6.0 | $ | 43.03 | ||
A summary of stock options outstanding, exercisable and expected to vest at January 31, 2026 follows:
Weighted-average | Aggregate |
| |||||||||
remaining | Weighted-average | intrinsic |
| ||||||||
| Number of shares | | contractual life | | exercise price | value |
| ||||
| (in millions) |
| (in years) | (in millions) | |||||||
Stock options Outstanding |
| 6.0 |
| 5.21 | $ | 43.03 | $ | 122 | |||
Stock options Exercisable |
| 4.0 |
| 3.83 | $ | 35.71 | $ | 110 | |||
Stock options Expected to Vest |
| 1.9 |
| 7.98 | $ | 57.73 | $ | 12 | |||
Restricted stock
Changes in restricted stock outstanding under the restricted stock plans are summarized below:
| Restricted | |
| |||
shares | Weighted-average |
| ||||
outstanding | grant-date |
| ||||
(in millions) | fair value |
| ||||
Outstanding, year-end 2022 |
| 5.8 | $ | 41.76 | ||
Granted |
| 3.5 | $ | 47.06 | ||
Lapsed |
| (3.1) | $ | 40.37 | ||
Canceled or Forfeited |
| (0.3) | $ | 45.32 | ||
Outstanding, year-end 2023 |
| 5.9 | $ | 45.49 | ||
Granted |
| 3.2 | $ | 53.29 | ||
Lapsed |
| (3.2) | $ | 44.22 | ||
Canceled or Forfeited |
| (0.5) | $ | 48.76 | ||
Outstanding, year-end 2024 |
| 5.4 | $ | 50.58 | ||
Granted |
| 2.4 | $ | 69.46 | ||
Lapsed |
| (2.9) | $ | 50.05 | ||
Canceled or Forfeited |
| (0.8) | $ | 55.39 | ||
Outstanding, year-end 2025 |
| 4.1 | $ | 61.36 | ||
The weighted-average grant date fair value of stock options granted during 2025, 2024 and 2023 was $20.28, $17.05 and $15.17, respectively. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model, based on the assumptions shown in the table below. The Black-Scholes model utilizes accounting judgment and financial estimates, including the term option holders are expected to retain their stock options before exercising them, the volatility of the Company’s share price over that expected term, the dividend yield over the term and the number of awards expected to be forfeited before they vest. Using alternative assumptions in the calculation of fair value would produce fair values for stock option grants that could be different than those used to record stock-based compensation expense in the Consolidated Statements of Operations. The increase in the fair value of the stock options granted during 2025, compared to 2024, resulted primarily from the increase in the Company’s share price and the decrease of the expected dividend yield. The increase in the fair value of the stock options granted during 2024, compared to 2023, resulted primarily from the increase in the Company’s share price, partially offset by the increase in the expected dividend yield.
The following table reflects the weighted-average assumptions used for grants awarded to option holders:
| 2025 | | 2024 | | 2023 |
| |
Weighted average expected volatility |
| 28.91 | % | 30.63 | % | 31.14 | % |
Weighted average risk-free interest rate |
| 4.21 | % | 4.20 | % | 4.09 | % |
Expected dividend yield |
| 2.09 | % | 2.31 | % | 2.11 | % |
Expected term (based on historical results) |
| 7.1 | years | 7.1 | years | 7.1 | years |
The weighted-average risk-free interest rate was based on the yield of a treasury note as of the grant date, continuously compounded, which matures at a date that approximates the expected term of the stock options. The dividend yield was based on the Company’s history and expectation of dividend payouts. Expected volatility was determined based upon historical stock volatilities; however, implied volatility was also considered. Expected term was determined based upon historical exercise and cancellation experience.
Total stock compensation recognized in 2025, 2024 and 2023 was $157, $175 and $172, respectively. Stock option compensation recognized in 2025, 2024 and 2023 was $8, $15 and $17, respectively. Restricted shares compensation recognized in 2025, 2024 and 2023 was $149, $160 and $155, respectively.
The total intrinsic value of stock options exercised was $207, $117 and $55 in 2025, 2024 and 2023, respectively. The total amount of cash received by the Company was $182, $127 and $50 in 2025, 2024 and 2023, respectively, from the exercise of stock options granted under share-based payment arrangements. As of January 31, 2026, there was $201 of total unrecognized compensation expense remaining related to non-vested share-based compensation arrangements granted under the Plans. This cost is expected to be recognized over a weighted-average period of approximately two years. The total fair value of stock options that vested was $14, $16 and $16 in 2025, 2024 and 2023, respectively.
Shares issued as a result of stock option exercises may be newly issued shares or reissued treasury shares. Proceeds received from the exercise of stock options, and the related tax benefit, may be utilized to repurchase the Company’s common shares under a stock repurchase program adopted by the Company’s Board of Directors. During 2025, the Company repurchased approximately three million common shares in such a manner.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 31, 2026 | Showing above |
| 2025 | Apr 1, 2025 | |
| 2024 | Apr 2, 2024 | |
| 2023 | Mar 28, 2023 | |
| 2022 | Mar 29, 2022 | |
| 2021 | Mar 30, 2021 | |
| 2020 | Apr 1, 2020 | |
| 2019 | Apr 2, 2019 | |
| 2018 | Apr 3, 2018 | |
| 2017 | Mar 28, 2017 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.