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KROGER CO (KR)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 2026 delivered mixed but solid results: adjusted EPS beat while revenue was slightly below consensus; identical sales ex-fuel rose 3.2% and eCommerce grew 15% . Versus S&P Global consensus, adjusted EPS of $1.49 beat the $1.46 estimate*, while revenue of $45.12B narrowly missed the $45.31B estimate*.
  • Guidance: Kroger raised FY 2025 identical sales ex-fuel to 2.25%–3.25% (from 2.0%–3.0%), and reaffirmed adjusted EPS, adjusted FIFO operating profit, FCF, capex, and tax rate .
  • Strategic actions: announced closure of ~60 underperforming stores over 18 months (modest financial benefit, reinvested in customer experience), accelerated store opening plans, and continued cost optimization .
  • Key call themes: strong pharmacy and fresh drove comps; fuel is expected to be a headwind for the remainder of the year; ongoing progress to improve e-commerce profitability (not yet profitable); shrink improving via AI-enabled processes .
  • Potential stock reaction catalysts: raised comp guidance, eCommerce acceleration with a profitability roadmap, dividend increase to $1.40/year announced June 26, 2025, and network optimization plan .

What Went Well and What Went Wrong

What Went Well

  • Identical sales without fuel increased 3.2% driven by pharmacy, eCommerce (+15%), and fresh; adjusted EPS was $1.49, up vs prior year . “Strong sales led by pharmacy, eCommerce and fresh… We are confident… to deliver value for customers” — CEO Ron Sargent .
  • Gross margin expanded to 23.0%, with FIFO gross margin rate up 79 bps YoY, aided by KSP sale, lower shrink, and lower supply chain costs . CFO: “Our FIFO gross margin rate… increased 79 basis points… primarily attributable to the sale of Kroger’s specialty pharmacy, lower shrink and lower supply chain costs” .
  • Raised FY identical sales ex-fuel guidance to 2.25%–3.25% on momentum, while reaffirming EPS and operating profit guidance . CFO: “We are raising our identical sales without fuel guidance… other elements… remain unchanged” .

What Went Wrong

  • Fuel was a headwind: lower average price per gallon and fewer gallons sold weighed on results; fuel expected to remain a headwind for the rest of the year .
  • OG&A rate increased 63 bps YoY (ex-fuel, adj.), driven by KSP sale and accelerated multi-employer pension contributions (+29 bps); underlying OG&A roughly flat after adjustments .
  • Reported revenue ($45.12B) slightly declined YoY due to prior-year KSP sales; ex-fuel and KSP, sales rose 3.7%, but headline revenue missed S&P consensus slightly* .

Financial Results

Quarterly comparison vs prior periods and S&P Global estimates

MetricQ3 2025Q4 2025Q1 2026
Total Sales ($USD Billions)$33.63 $34.31 $45.12
GAAP EPS ($)$0.84 $0.90 $1.29
Adjusted EPS ($)$0.98 $1.14 $1.49
Operating Profit ($USD Billions)$0.83 $0.91 $1.32
Adjusted FIFO Operating Profit ($USD Billions)$1.02 $1.17 $1.52
Gross Margin (%)22.9% 22.7% 23.0%
Identical Sales ex-Fuel (%)2.3% 2.4% 3.2%

Estimates comparison (S&P Global; asterisk indicates S&P Global values)

MetricQ3 2025Q4 2025Q1 2026
Revenue ($USD Billions)Actual: $33.63 ; Est*: $34.203Actual: $34.31 ; Est*: $34.762Actual: $45.12 ; Est*: $45.307
Primary EPS ($)Actual: $0.98 ; Est*: $0.978Actual: $1.14 ; Est*: $1.112Actual: $1.49 ; Est*: $1.457
EBITDA ($USD Billions)Actual: $1.775; Est*: $1.757Actual: $1.983; Est*: $1.889Actual: $2.509; Est*: $2.494

Values retrieved from S&P Global.*

KPIs and operational drivers

KPIQ3 2025Q4 2025Q1 2026
eCommerce Sales Growth (%)+11% +18% delivery (ex-53rd week) +15%
FIFO Gross Margin Rate Δ (bps, YoY)+51 +54 (incl. +41 from KSP sale) +79 (incl. +46 from KSP sale)
OG&A Rate Δ (bps, YoY)+22 +16 (ex-53rd week) +63 (incl. +29 from pension contribution)
LIFO Charge ($USD Millions)$4 $30 $40
Net Total Debt / Adjusted EBITDA (x)1.21 1.79 1.69

Notes:

  • Q1 2026 corresponds to Kroger’s fiscal Q1 2025 ended May 24, 2025 .
  • Reported revenue decline YoY reflects prior-year inclusion of KSP; ex-fuel and KSP, sales rose 3.7% YoY .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Identical Sales without Fuel (%)FY 20252.0% – 3.0% 2.25% – 3.25% Raised
Adjusted FIFO Operating Profit ($B)FY 2025$4.7 – $4.9 $4.7 – $4.9 Maintained
Adjusted EPS ($)FY 2025$4.60 – $4.80 $4.60 – $4.80 Maintained
Adjusted Free Cash Flow ($B)FY 2025$2.8 – $3.0 $2.8 – $3.0 Maintained
Capital Expenditures ($B)FY 2025$3.6 – $3.8 $3.6 – $3.8 Maintained
Adjusted Effective Tax Rate (%)FY 202523% 23% Maintained
Net Interest Expense ($M)FY 2025$650 – $675 Not updated in Q1 materialsN/A
Dividend (Annual, $)Ongoing$1.28 $1.40 (35¢ quarterly from Sep 1, 2025) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2025)Previous Mentions (Q4 2025)Current Period (Q1 2026)Trend
eCommerce growth & profitabilityDigital sales +11%; improved pickup productivity via batching/routing Delivery +18% YoY (ex-53rd week) from CFCs eCommerce +15%; profitability improving but not yet profitable; unified under new eCommerce unit Accelerating revenue, clearer profitability roadmap
Shrink & supply chainLower shrink supporting margin Lower shrink and KSP sale aided margins Continued shrink improvement via AI-enabled inventory/processes Ongoing improvement
Tariffs & macroN/AN/ATariffs minimal impact; flexible model; price investments on 2,000 items; consumer cautious Stable macro headwinds; guarded outlook
Our Brands performanceOutpaced total grocery; 226 new items New items and meal bundles; alternative profit contributions Outpaced national brands for 7th consecutive quarter; new Simple Truth protein line Strengthening mix/innovation
Pharmacy (GLP-1) & ESIN/AN/AScript growth incl. non-GLP-1; ESI minimal impact (<10 bps) and excluded from guide Tailwind; timing uncertainty
FuelN/AN/AFuel sales/profitability behind expectations; headwind expected for rest of year Deteriorating vs prior year
Store network & capital allocationN/AASR program; disciplined capex ~60 store closures over 18 months; accelerated new openings; focus on higher ROIC Portfolio optimization

Management Commentary

  • CEO priorities: “Retail always starts with the customer… position Kroger for long-term growth, accelerate top-line sales, and run great stores” .
  • Price investments and value perception: “We lowered prices on more than 2,000 additional products so far this year… pricing investments resulted in better sales, better gross margin, and happier customers” .
  • eCommerce profitability: “We are seeing improvements in profitability… to be clear… we’re not profitable at this point, and we must become profitable” .
  • Guidance update: “We are raising our identical sales without fuel guidance to a new range of 2.25–3.25%… other elements of our guidance remain unchanged” .
  • Fuel outlook: “Fuel results were behind expectations… We expect fuel will be a headwind to our results for the remainder of the year” .
  • Shrink improvement: “Investments in AI-enabled technology… better visibility… more sophisticated ordering… continue to see good shrink performance” .

Q&A Highlights

  • Pricing and margins: Management aims to improve value perception with simpler, more accessible pricing and maintain gross margin neutrality through Our Brands mix and sourcing savings .
  • eCommerce roadmap: Unified under Chief Digital Officer; reviewing market-by-market operations; density and retail media to improve economics; acknowledged current losses but improving trajectory .
  • Market share: Gains in markets with new stores; better in-store experience and eCommerce growth contributing; continued focus on new store openings .
  • Ocado: Drew down remaining $152M under letter of credit per contract; management reviewing all aspects of eCommerce operations .
  • Labor/ESI: ESI impact minimal (<10 bps) and excluded from guidance; progress on multiple labor agreements; multi-employer pension contributions increased OG&A by 29 bps .

Estimates Context

  • Q1 2026 outcomes vs S&P Global consensus: Adjusted EPS $1.49 vs $1.46* (beat); revenue $45.12B vs $45.31B* (slight miss); EBITDA $2.509B vs $2.494B* (beat). Values retrieved from S&P Global.*
  • Prior quarters: Q4 2025 adjusted EPS $1.14 vs $1.11* (beat), revenue $34.31B vs $34.76B* (miss); Q3 2025 adjusted EPS $0.98 vs $0.98* (inline), revenue $33.63B vs $34.20B* (miss). Values retrieved from S&P Global.*

Where estimates may adjust:

  • Potential upward revisions to comp assumptions given raised identical sales guidance; cautious stance on fuel profitability may temper margin estimates .
  • E-commerce profitability path and shrink improvements could support margin expectations despite continued price investments .

Key Takeaways for Investors

  • The quarter’s narrative is positive on core comps and margin execution; headline revenue optics are clouded by prior KSP base, but underlying ex-fuel/KSP growth is healthy .
  • The comp guide raise is the clearest near-term catalyst; watch for sequential volume improvement and durability of pharmacy tailwinds (including GLP-1 scripts) .
  • Margin drivers (lower shrink, supply chain costs, Our Brands mix) offset price investments; expect underlying gross margin and OG&A to be relatively flat through year per CFO .
  • Fuel is a known headwind; estimate models should reflect lower gallons and margin headwinds through FY 2025 .
  • E-commerce is scaling with improving profitability, but remains loss-making; unified structure and retail media density efforts are execution priorities into 2H .
  • Capital allocation remains disciplined: ASR completion by Q3 FY 2025, resumption of open-market buybacks thereafter; dividend raised to $1.40/year signaling confidence in FCF .
  • Store closures and accelerated openings suggest a sharper ROIC focus and potential share gains in growth geographies; near-term financial impact modest and reinvested in customer experience .