🔍 Deep Dive: KROGER CO

Period Ending 2026-08-15

• Sales Performance and Revised Outlook: Kroger reported Second Quarter 2026 total sales of $34.6 billion. Identical sales without fuel saw a modest 0.2% increase, which, along with persistent macroeconomic challenges and regulatory headwinds, led the company to lower its full-year 2026 identical sales guidance to a range of 0.2%-0.8% from the previous 1.0%-2.0%. This revised outlook includes an approximate 140 basis point drag from the Inflation Reduction Act affecting pharmacy revenues.
• Profitability Resilience: Despite the top-line pressures, Kroger demonstrated resilient profitability. Net earnings attributable to The Kroger Co. increased to $641 million, and operating profit rose to $971 million. Adjusted earnings per share (EPS) of $1.09 exceeded analyst estimates, driven by cost savings and improved operational efficiency.
• Digital Growth and Margin Expansion: Digital initiatives remain a key growth driver, with adjusted eCommerce sales growing 20% and Kroger Precision Marketing profit increasing by 24%. The FIFO gross margin rate, excluding fuel and other adjustment items, improved by 13 basis points, supported by enhanced eCommerce profitability and strategic sourcing initiatives.
• Strategic Acquisitions and Shareholder Returns: The company announced an agreement to acquire Giant Eagle for approximately $1.65 billion, a move expected to expand its retail footprint, pending regulatory approvals. Kroger also continued its commitment to shareholder returns, repurchasing $1.0 billion in shares during the quarter and increasing its quarterly dividend by 11%, marking its 20th consecutive year of dividend increases.
• Reaffirmed Full-Year Profit Guidance: Despite the reduced sales outlook, management reaffirmed its full-year adjusted FIFO operating profit guidance of $5.0 billion-$5.2 billion and adjusted EPS guidance of $5.10-$5.30. This reflects the company's confidence in its ability to manage costs and leverage profit drivers in a challenging environment, while maintaining a healthy balance sheet with a net debt to adjusted EBITDA ratio of 1.91, below its target range.