The Kroger Co. — Second Quarter 2026 Earnings Summary

Financial Performance

• Total company sales were $34.6 billion in Q2 2026, compared to $33.9 billion in Q2 2025.
• Identical sales without fuel increased 0.2% year-over-year in Q2 2026, down from 3.4% in Q2 2025.
• Earnings per diluted share (EPS) were $1.05 in Q2 2026, up from $0.91 in Q2 2025.
• Adjusted EPS was $1.09 in Q2 2026, up from $1.04 in Q2 2025, representing 5% growth.
• Operating profit was $971 million in Q2 2026, compared to $863 million in Q2 2025.
• Adjusted FIFO operating profit was $1,076 million in Q2 2026, compared to $1,091 million in Q2 2025.
• Gross margin was 22.4% in Q2 2026, compared to 22.5% in Q2 2025.
• FIFO gross margin rate increased 13 basis points year-over-year.
• Operating, General and Administrative (OG&A) rate increased 33 basis points year-over-year.
• LIFO charge was $39 million in Q2 2026, compared to $62 million in Q2 2025.
• Net total debt to adjusted EBITDA ratio was 1.91 as of August 15, 2026, compared to 1.63 a year ago.
• Net earnings attributable to The Kroger Co. were $641 million in Q2 2026, compared to $609 million in Q2 2025.

Guidance and Future Outlook

• Reaffirmed full-year 2026 adjusted net earnings per diluted share guidance of $5.10 to $5.30.
• Lowered full-year 2026 identical sales without fuel guidance to 0.2% to 0.8%, down from the previous range of 1.0% to 2.0%.
• Reaffirmed full-year 2026 adjusted FIFO operating profit guidance of $5.0 to $5.2 billion.
• Reaffirmed full-year 2026 free cash flow guidance of $2.7 to $2.9 billion.
• Reaffirmed full-year 2026 capital expenditures (CapEx) guidance of $3.8 to $4.0 billion.
• Reaffirmed full-year 2026 adjusted tax rate guidance of 23%.
• The updated sales guidance includes an approximately 140 basis point unfavorable impact from the Inflation Reduction Act.
• Management expects to continue paying its quarterly dividend and expects it to increase over time, subject to board approval.

Business Segments and Product Lines

• Adjusted eCommerce sales grew +20% in Q2 2026.
• Kroger Precision Marketing profit grew +24% in Q2 2026.
• eCommerce profitability and media contributed to improvements in gross margin and operating profit.
• Pharmacy mix was favorable, contributing to gross margin performance.
• Sourcing initiatives and tariff refunds contributed to margin improvements.
• The decrease in gross margin rate was partially driven by a mix effect of higher fuel sales.

Market and Competitive Landscape

• The company serves more than 11 million customers daily through digital shopping and retail food stores.
• Management identified improving sales momentum as a top priority.
• The company faces pressures from higher shrink, higher transportation costs, and greater value delivered to customers.
• The company maintains an investment grade debt rating.

Risks and Challenges

• Sales and earnings goals may be affected by labor negotiations, potential work stoppages, and pressures in the labor market.
• Competition includes pricing and promotional activities of existing and new competitors.
• Economic factors such as inflation, interest rates, and consumer spending caution pose risks.
• The outcome of litigation matters, including those relating to the terminated transaction with Albertsons, remains a risk.
• Risks include potential costs from opioid litigation settlements and data security breaches.
• The Inflation Reduction Act creates an unfavorable impact on identical sales growth.

Management Commentary and Tone

• CEO Greg Foran described the quarter as "solid" and expressed confidence in the plan to become "America's favorite grocer."
• CFO David Kennerley highlighted the "resiliency of Kroger's business model" and the "discipline with which our teams are executing."
• Management cited cost savings, strong pharmacy and fuel performance, and improved eCommerce profitability as drivers for adjusted earnings growth.
• Management emphasized continued investment in the business for growth while managing margins with discipline.

Other Key Points

• Kroger increased its dividend by 11%, marking the 20th consecutive year of dividend increases.
• During the quarter, Kroger repurchased $1.0 billion in shares; year-to-date repurchases totaled $1.2 billion.
• Approximately $800 million remains of the $2 billion share repurchase authorization announced in December 2025, with completion expected by the end of fiscal 2026.
• Kroger will host an investor update meeting on October 20, 2026, to share details on strategic initiatives and longer-term financial targets.
• The company recorded a $39 million LIFO charge in Q2 2026, down from $62 million in Q2 2025.
• OG&A rate increases were driven by planned investments in associate wages and increased health care costs, partially offset by lower incentive plan costs.