KROGER CO (KR): Results of Operations and Financial Condition
KROGER CO (KR) filed an SEC Form 8-K — Results of Operations and Financial Condition. Exhibit 99.1 Kroger Reports Second Quarter 2026 Results and Updates Guidance for 2026 Second Quarter Highlights · Identical Sales without fuel increased 0.2% · Operating Profit of $971 million; EPS of $1.05 · Adjusted FIFO Operating Profit of $1,076 million and Adjusted EPS of $1
How this was made
The 30-second read
Why it matters
The earnings beat and dividend increase reinforce the company's financial health, while the lowered sales guidance signals headwinds from fuel and regulatory impacts.
Market read
Kroger's results are a primary earnings event for a large-cap retailer, offering fresh data for traders to adjust positions.
What to watch
The impact of the Inflation Reduction Act on fuel margins and the recent Vitacost divestiture may provide longer‑term margin improvement.
Kroger Reports Second Quarter 2026 Results and Updates Guidance for 2026
Adjusted EPS grew 5 percent and Kroger reaffirmed adjusted FIFO operating profit, adjusted EPS, free cash flow, capital expenditure and tax-rate guidance, but identical sales without fuel increased 0.2% and the company lowered its full-year identical-sales outlook to 0.2% - 0.8% from 1.0% - 2.0%.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| SalesGAAP | $34,621 million | – | – |
| Identical Sales excluding fuelother | 0.2% | – | – |
| Sales excluding fuel, the sale of Vitacost and the exit of certain fulfillment centersother | 0.1% | – | 0.1% |
| Gross profitGAAP | $7,750 million | – | – |
| Gross marginGAAP | 22.4% | – | – |
| FIFO gross margin ratenon-GAAP | Increased 13 basis points | – | Increased 13 basis points |
| Merchandise costs, including advertising, warehousing and transportation, and LIFO chargeGAAP | $26,763 million | – | – |
| Operating, general and administrativeGAAP | $5,952 million | – | – |
| Operating, General and Administrative rate, excluding fuel and adjustment itemsnon-GAAP | Increased 33 basis points | – | Increased 33 basis points |
| Operating profitGAAP | $971 million | – | – |
| FIFO operating profitnon-GAAP | $1,010 million | – | – |
| Adjusted FIFO operating profit excluding adjustment itemsnon-GAAP | $1,076 million | – | – |
| Net earnings attributable to The Kroger Co.GAAP | $641 million | – | – |
| Net earnings attributable to The Kroger Co. excluding adjustment itemsnon-GAAP | $667 million | – | – |
| Net earnings attributable to The Kroger Co. per diluted common shareGAAP | $1.05 | – | – |
| Net earnings attributable to The Kroger Co. per diluted common share excluding adjustment itemsnon-GAAP | $1.09 | – | 5% |
| LIFO chargeGAAP | $39 million | – | – |
| Adjusted eCommerce salesnon-GAAP | +20% | – | +20% |
| Kroger Precision Marketing profitother | +24% | – | +24% |
| Year-to-date salesGAAP | $80,742 million | – | – |
| Year-to-date operating profitGAAP | $2,378 million | – | – |
| Year-to-date net earnings attributable to The Kroger Co.GAAP | $1,543 million | – | – |
| Year-to-date net earnings attributable to The Kroger Co. per diluted common shareGAAP | $2.51 | – | – |
| Year-to-date net earnings attributable to The Kroger Co. per diluted common share excluding adjustment itemsnon-GAAP | $2.67 | – | – |
| Year-to-date net cash provided by operating activitiesGAAP | $3,085 million | – | – |
| Year-to-date total capital investments, excluding lease buyoutsother | $(2,651) million | – | – |
| Net total debtother | $15,522 million | – | – |
| Net total debt to adjusted EBITDA rationon-GAAP | 1.91 | – | – |
Full-Year 2026 outlook
- Tax rate23%
- NoteIdentical Sales without fuel: 0.2% - 0.8%
- NoteFIFO Operating Profit: $5.0 - $5.2 billion
- NoteEPS: $5.10 - $5.30
- NoteFree Cash Flow: $2.7 - $2.9 billion
- NoteCap Ex: $3.8 - $4.0 billion
- NoteIdentical Sales without fuel guidance includes approximately 140 basis points unfavorable impact from the Inflation Reduction Act.
Capital returns
- Kroger increased its dividend by 11%, marking the 20th consecutive year of dividend increases.
- Dividends declared per common share were $0.39, compared to $0.35.
- During the quarter, Kroger repurchased $1.0 billion in shares.
- Year-to-date, Kroger repurchased $1.2 billion in shares under the $2 billion board authorization announced in December 2025.
- Approximately $800 million remains of the authorization, and Kroger expects to complete the remaining repurchases by the end of fiscal 2026.
- Year-to-date treasury stock purchases were $(1,271) million, compared to $(203) million.
What drove it
- Adjusted earnings per diluted share grew 5%, driven by cost savings, strong pharmacy and fuel performance, and improvement in eCommerce profitability.
- FIFO gross margin rate increased 13 basis points, primarily driven by eCommerce profitability and media, favorable pharmacy mix, sourcing initiatives and tariff refunds.
- Gross-margin pressures included the mix effect of higher fuel sales, higher shrink, higher transportation costs and greater value delivered for customers.
- The Operating, General and Administrative rate increased 33 basis points, primarily attributable to planned investments in associate wages, increased health care costs and sales deleverage.
- Adjusted eCommerce sales exclude the effect of fulfillment center exits in markets where Kroger does not operate stores, the sale of Vitacost, and the discontinuation of Ship Marketplace.
Concerns
- Identical sales without fuel increased 0.2%, compared to 3.4%.
- Kroger lowered full-year 2026 identical sales without fuel guidance to 0.2% - 0.8% from 1.0% - 2.0%.
- The identical-sales outlook includes an approximately 140 basis point headwind from the Inflation Reduction Act.
- GAAP gross margin was 22.4%, compared to 22.5%.
- Adjusted FIFO operating profit was $1,076 million, compared to $1,091 million.
- Higher shrink, transportation costs, associate wages, health care costs and sales deleverage weighed on profitability.
- Net total debt to adjusted EBITDA ratio was 1.91, compared to 1.63 a year ago.
What to watch
- Identical sales without fuel relative to the updated full-year range of 0.2% - 0.8%.
- The approximately 140 basis point unfavorable impact from the Inflation Reduction Act included in identical-sales guidance.
- Progress in eCommerce profitability, Kroger Precision Marketing profit, pharmacy mix, sourcing initiatives and tariff refunds.
- The persistence of higher shrink, transportation costs, associate wage investments, health care costs and sales deleverage.
- Completion of approximately $800 million of remaining repurchases by the end of fiscal 2026.
- Kroger's investor update meeting on October 20, 2026, when the company expects to share additional details on strategic initiatives and longer-term financial targets.
Balance sheet and cash flow
- Cash was $201 million as of August 15, 2026, compared to $215 million as of August 16, 2025.
- Temporary cash investments were $1,475 million, compared to $4,668 million.
- Cash and temporary cash investments at end of period were $1,676 million, compared to $4,883 million.
- Total debt was $16,997 million, compared to $17,959 million.
- Net total debt was $15,522 million, compared to $13,291 million.
- Year-to-date net cash provided by operating activities was $3,085 million, compared to $3,688 million.
- Year-to-date payments for property and equipment, including payments for lease buyouts, were $(2,437) million, compared to $(1,968) million.
- Year-to-date net cash used by financing activities was $(2,348) million, compared to $(657) million.
- Shareowners' equity was $5,846 million, compared to $9,277 million.
Analysis
Kroger reported second-quarter sales of $34,621 million, compared to $33,940 million, while identical sales excluding fuel were 0.2%, compared to 3.4%. Sales excluding fuel, the sale of Vitacost and the exit of certain fulfillment centers increased 0.1%. The company identified improving sales momentum as a top priority and reduced full-year identical-sales guidance to 0.2% - 0.8% from 1.0% - 2.0%. The revised outlook includes an approximately 140 basis point unfavorable impact from the Inflation Reduction Act.
GAAP operating profit was $971 million, compared to $863 million, and GAAP diluted EPS was $1.05, compared to $0.91. Adjusted EPS was $1.09, compared to $1.04, with the company citing cost savings, pharmacy and fuel performance, and improved eCommerce profitability. Adjusted FIFO operating profit, however, was $1,076 million, compared to $1,091 million. Second-quarter 2026 adjustment items included the gain on investments, merger-related litigation and settlement charges and transformation costs.
GAAP gross margin was 22.4%, compared to 22.5%. Higher fuel sales mix, higher shrink, higher transportation costs and greater value delivered for customers were the primary pressures. FIFO gross margin rate increased 13 basis points, supported by eCommerce profitability and media, favorable pharmacy mix, sourcing initiatives and tariff refunds. The OG&A rate excluding fuel and adjustment items increased 33 basis points, reflecting associate wage investments, health care costs and sales deleverage, partly offset by lower incentive plan costs and productivity initiatives.
Capital allocation remained active. Kroger repurchased $1.0 billion in shares during the quarter and $1.2 billion year-to-date, leaving approximately $800 million under its $2 billion authorization. The company increased its dividend by 11%, marking the 20th consecutive year of dividend increases. Cash and temporary cash investments were $1,676 million at period end, while net total debt was $15,522 million and the net total debt to adjusted EBITDA ratio was 1.91.
Kroger reaffirmed its full-year FIFO operating profit guidance of $5.0 - $5.2 billion, EPS guidance of $5.10 - $5.30, free cash flow guidance of $2.7 - $2.9 billion, capital expenditure guidance of $3.8 - $4.0 billion and tax-rate guidance of 23%. The retained profit and cash-flow outlook contrasts with the reduced sales outlook, placing emphasis on cost savings, pharmacy and fuel performance, eCommerce profitability, media, and continued margin discipline.
Management, verbatim
Kroger delivered a solid second quarter, with adjusted EPS growth of 5 percent. I am pleased with the progress we are making. Our teams kept driving value for customers, improving execution in our stores, growing eCommerce profitably and managing costs with discipline. Improving sales momentum remains a top priority. While there is more work to do, I am confident in our plan to become America's favorite grocer.
Greg Foran, CEO
Our second quarter results demonstrate the resiliency of Kroger's business model and the discipline with which our teams are executing. Adjusted earnings per diluted share grew 5%, driven by cost savings, strong pharmacy and fuel performance, and improvement in the profitability of our eCommerce business.
David Kennerley, CFO
Given our first half results and the macro environment, we are updating our identical sales without fuel guidance to a new range of 0.2% to 0.8%, which includes an approximately 140 basis point headwind from the Inflation Reduction Act. We are reaffirming our adjusted FIFO net operating profit and adjusted earnings per diluted share guidance, reflecting our confidence and visibility into the same factors that drove our profitability in the second quarter.
David Kennerley, CFO
Not in the filing
stated, not guessed- No reportable operating segments or segment revenue were provided.
- Prior-quarter comparisons were not provided for the reported quarterly metrics.
- Second-quarter operating cash flow, free cash flow and capital expenditures were not provided. Only year-to-date cash-flow and capital-investment figures were provided.
- Actual free cash flow was not provided.
- A GAAP revenue, gross-margin or operating-expense guidance figure was not provided.
- A separate previous-release outlook section was not provided; therefore, no actual-versus-prior-guidance comparisons are included.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.
Background
Kroger's 8‑K filing provides the first public disclosure of its Q2 2026 financial results and updated guidance.
Ticker impact
Kroger reported Q2 2026 results with adjusted EPS of $1.09 and lowered identical sales without fuel guidance to 0.2%-0.8% while reaffirming full-year adjusted EPS guidance.
modest upside potential if market digests lower sales guidance; downside risk if sales miss expectations.
Strong profit numbers and dividend increase support the stock, but the lowered sales outlook introduces uncertainty.
Market effects
Retail grocery sector may see pressure on sales growth forecasts as inflation reduction act impacts fuel margins.
U.S. consumer discretionary stocks could experience slight volatility following Kroger's guidance.
Limited; primarily affects U.S. grocery and consumer staples investors.
Counterpoint
Despite lower sales guidance, the strong cash flow and dividend track record could make the stock a defensive buy.
Key entities
- CEOGreg Foran
Provided comments on Q2 performance and strategic priorities.
- CFODavid Kennerley
Discussed earnings, guidance, and capital allocation.
