The Kroger Co. reported second quarter fiscal 2026 results on Friday, September 11, and the headline is a split decision. Adjusted earnings per share rose 5% to $1.09, beating the roughly $1.06 that analysts had expected, but identical sales without fuel grew just 0.2% against 3.4% a year earlier. The company cut its full-year identical sales guidance to a range of 0.2% to 0.8%, down from 1.0% to 2.0%, while holding every profit line unchanged.
Shares fell about 3% in pre-market trading, according to Investing.com.
The print is the first full quarter in which chief executive Greg Foran has owned both the operating plan and the outlook attached to it. It confirms what the June quarter hinted at: Kroger is defending margin and earnings through cost control, e-commerce profitability and retail media while the core store business barely grows. The company will lay out longer-term targets at an investor update on October 20.
In short
- Sales of $34.6 billion, up from $33.9 billion a year ago, essentially in line with the $34.6 billion consensus, for the quarter ended August 15, 2026.
- Identical sales without fuel up 0.2%, down from 3.4% in the prior-year quarter and below the roughly 1% bar management had guided to.
- Adjusted EPS of $1.09, up 5% from $1.04 and ahead of the $1.05 to $1.06 analyst range; GAAP EPS of $1.05 versus $0.91.
- Full-year identical sales guidance cut to 0.2% to 0.8% from 1.0% to 2.0%, including an approximately 140 basis point headwind from the Inflation Reduction Act; profit, EPS, free cash flow and capex guidance all reaffirmed.
- $1.0 billion of buybacks in the quarter and an 11% dividend increase, the 20th consecutive annual raise, with e-commerce sales up 20% and Kroger Precision Marketing profit up 24%.
What did Kroger report for the second quarter?
Kroger posted total sales of $34.6 billion for the 12 weeks ended August 15, 2026, compared with $33.9 billion in the same period of 2025, according to the company statement published on PR Newswire at 6:46 a.m. Eastern Time. Operating profit rose to $971 million from $863 million. Net earnings attributable to the company came in at $641 million, or $1.05 per diluted share, against $609 million, or $0.91, a year earlier.
On an adjusted basis, which strips out one-time items and the LIFO charge, earnings per diluted share were $1.09, up 5% from $1.04. Adjusted FIFO operating profit was $1,076 million, slightly below the $1,091 million reported in the second quarter of 2025. The LIFO charge for the quarter was $39 million, down from $62 million, which helped GAAP operating profit more than the underlying business did.
Analysts polled by Zacks had expected adjusted earnings of about $1.05 per share, while the consensus cited by Investing.com was $1.06 on revenue of $34.65 billion. The beat on earnings was therefore modest, and revenue landed effectively on the number. The quarter matched the framing set out in our Kroger Q2 earnings preview: a print in which the commentary on execution would move the stock more than the reported figures.
| Metric | Q2 fiscal 2026 | Q2 fiscal 2025 | Change |
|---|---|---|---|
| Total sales | $34.6bn | $33.9bn | +2.1% |
| Identical sales without fuel | +0.2% | +3.4% | Slowed by 3.2 points |
| Operating profit | $971m | $863m | +12.5% |
| Adjusted FIFO operating profit | $1,076m | $1,091m | (1.4%) |
| Net earnings | $641m | $609m | +5.3% |
| EPS (GAAP, diluted) | $1.05 | $0.91 | +15% |
| Adjusted EPS (diluted) | $1.09 | $1.04 | +5% |
| Gross margin | 22.4% | 22.5% | (10 bps) |
| LIFO charge | $39m | $62m | (37%) |
Year to date, sales stand at $80.7 billion versus $79.1 billion, identical sales without fuel are up 0.6% against 3.3%, and adjusted EPS is $2.67 compared with $2.53. The company’s quarterly results, presentation and webcast replay are available on the Kroger investor relations site.
Why did identical sales slow to 0.2%?
The single most important number in the release is the 0.2% identical sales figure, and the company gave three interlocking reasons for it. The first is a regulatory effect that reduces reported pharmacy revenue without reducing profit. The second is the value Kroger is deliberately handing back to shoppers through lower prices. The third, which the company did not quantify, is softer traffic and smaller baskets in a cautious consumer environment.
The Inflation Reduction Act headwind
Kroger has flagged since March that the Inflation Reduction Act, the 2022 US law that created Medicare drug price negotiation, would cut roughly 130 basis points from identical sales in fiscal 2026. Chief financial officer David Kennerley explained at the time that lower reimbursement rates on key medications flow through reported pharmacy sales but have no impact on gross profit dollars. In the second quarter that effect was approximately 138 basis points, per Investing.com, and the company now embeds about 140 basis points in its full-year guidance.
Stripping that out, underlying identical sales would have grown somewhere around 1.6% in the quarter, which is closer to the pace management had signalled but still well short of the 3.4% recorded a year ago. The distinction matters for how investors read the number. A pharmacy pricing reset is a one-time change to the base that will lap in 2027; a broad slowdown in grocery volumes is not.
Price investment and deflation in fresh categories
The second driver is intentional. Kroger has been cutting shelf prices since Foran took over in February, and the release explicitly lists “greater value delivered to customers” among the items that pressured gross margin. When the price of eggs, produce or other fresh items falls, the dollar value of identical sales declines even if the number of units sold holds steady. Our coverage of the June quarter noted the same mechanism when the company held its 2026 outlook while price cuts squeezed margins.
Traffic, basket and a cautious consumer
The third factor is the one the market cares about most, and the one the release says least about. The company did not disclose transaction counts or average basket size in the statement, but 24/7 Wall St. summarised the arithmetic bluntly: “fewer shoppers, or smaller baskets, are showing up in the numbers.” Kroger’s identical sales base excludes fuel and includes pharmacy, so a flat print on a $34.6 billion sales base implies that in-store food volume is at best treading water.
What changed in the full-year guidance?
Kroger cut one line and left everything else alone. Identical sales without fuel are now expected to grow 0.2% to 0.8% for fiscal 2026, down from the 1.0% to 2.0% range the company had maintained since March and reiterated in June. Adjusted FIFO operating profit of $5.0 billion to $5.2 billion, adjusted EPS of $5.10 to $5.30, free cash flow of $2.7 billion to $2.9 billion, capital expenditure of $3.8 billion to $4.0 billion and a 23% tax rate were all reaffirmed.
| Fiscal 2026 guidance line | Prior (June 18, 2026) | Updated (September 11, 2026) | Status |
|---|---|---|---|
| Identical sales without fuel | 1.0% to 2.0% | 0.2% to 0.8% | Cut |
| Adjusted FIFO operating profit | $5.0bn to $5.2bn | $5.0bn to $5.2bn | Reaffirmed |
| Adjusted EPS (diluted) | $5.10 to $5.30 | $5.10 to $5.30 | Reaffirmed |
| Free cash flow | $2.7bn to $2.9bn | $2.7bn to $2.9bn | Reaffirmed |
| Capital expenditure | $3.8bn to $4.0bn | $3.8bn to $4.0bn | Reaffirmed |
| Effective tax rate | ~23% | ~23% | Reaffirmed |
| IRA headwind to identical sales | ~130 bps | ~140 bps | Widened |
The mathematics of the new range deserve a closer look. With first-half identical sales at 0.6% and the second quarter at 0.2%, the 0.2% to 0.8% full-year band implies a second half somewhere between roughly flat and 1%. That is not a recovery; it is a stabilisation at the current run rate with a slightly easier comparison in the fourth quarter. The midpoint of the EPS range, $5.20, matched analyst consensus before the release, which is why the stock reaction was a sell-off rather than a rout.
Kennerley’s statement leaned on the earnings side of the ledger: adjusted EPS grew 5%, “driven by cost savings,” and the company is “reaffirming our adjusted FIFO net operating profit and adjusted earnings per diluted share guidance.” The message to the market is that Kroger can hit its profit numbers on a flat top line, at least for this year.
How did margins hold while sales stalled?
Reported gross margin slipped 10 basis points to 22.4% of sales, but the more useful measure, the FIFO gross margin rate excluding rent, depreciation, amortisation and fuel, improved by 13 basis points. The release attributes the improvement to e-commerce and retail media profitability, a favourable pharmacy mix, sourcing gains and tariff refunds. Offsetting those gains were a higher fuel sales mix, higher shrink, higher transportation costs and the value investments described above.
Tariff refunds reach the grocery aisle
The tariff refund reference is notable because Kroger, as a domestic grocer, is far less exposed to import duties than a general merchandiser. The company did not quantify the figure, and the mention sits in a list of margin contributors rather than as a headline item. The contrast with Walmart is instructive: in August the retailer disclosed that it had poured a $2.9 billion tariff refund into price cuts and still saw its shares drop 9% because underlying US demand slowed. Kroger’s refund is presumably a small fraction of that, tied to general merchandise and imported private-label goods, but it points in the same direction: refunded duties are now a line item across US retail.
Wages, healthcare and deleverage on the cost line
The operating, general and administrative rate, excluding fuel and adjustment items, rose 33 basis points. Kroger cites investments in associate wages, higher healthcare costs and sales deleverage, which is the mechanical effect of fixed store costs spread over a flat sales base. That 33 basis point increase in costs against a 13 basis point improvement in FIFO gross margin is the reason adjusted FIFO operating profit fell 1.4% year over year even as GAAP operating profit rose 12.5%. The GAAP improvement owes mainly to a smaller LIFO charge and lower adjustment items, not to a stronger core.
Put simply, Kroger is running harder to stand still on operating profit. Gross margin levers (e-commerce, media, pharmacy mix, sourcing) are working; cost levers (wages, healthcare, shrink, transport) are pushing the other way; and the sales line is not growing fast enough to absorb the difference.
Where is the growth coming from?
Two businesses are growing at double-digit rates inside an otherwise flat company. Adjusted e-commerce sales rose 20% in the quarter, a figure that excludes the fulfilment centre exits, the sale of Vitacost and the discontinuation of the Ship marketplace. That is an acceleration from the 19% digital growth reported in the first quarter, and it comes after the e-commerce operation reached profitability ahead of schedule earlier this year.
Kroger Precision Marketing, the company’s retail media arm, grew profit by 24%. The release names e-commerce and media profitability first among the FIFO gross margin contributors, which suggests the two businesses are now large enough to move the consolidated margin rate rather than merely to feature in the strategy deck. Foran’s statement referred to “growing eCommerce profitably” as one of the quarter’s achievements.
The strategic tension is obvious. Digital and media are compounding, but they sit on top of a physical store network that generates the traffic they depend on. A 20% growth rate in e-commerce on a base that is a small fraction of $34.6 billion adds perhaps a percentage point or so to total sales; it cannot offset a slowdown in the stores by itself. That arithmetic is why the company’s next reset is more likely to come from store standards than from further digital investment, an argument we set out in our analysis of why Kroger’s next reset likely comes from stores.
How does Kroger compare with Walmart and Albertsons?
Kroger’s 0.2% print sits between its two most relevant comparators. Walmart US grew comparable sales, excluding fuel, by 2.6% in its quarter ended July 31, 2026, its slowest rate in roughly six years but still more than ten times Kroger’s pace. Albertsons, Kroger’s closest pure-play grocery peer, reported identical sales of negative 0.8% in its first quarter of fiscal 2026 and cut its full-year outlook to a range of negative 1.5% to negative 0.5% in July.
| Company | Most recent quarter | Comparable or identical sales | Full-year comp guidance | Digital growth |
|---|---|---|---|---|
| Kroger | Q2 FY2026 (to Aug 15) | +0.2% ex fuel | 0.2% to 0.8% (cut from 1.0% to 2.0%) | +20% adjusted e-commerce |
| Walmart US | Q2 FY2027 (to Jul 31) | +2.6% ex fuel | Full-year outlook raised | Not broken out here |
| Albertsons | Q1 FY2026 | (0.8)% | (1.5)% to (0.5)% (cut in July) | +13% |
The table tells a sector story more than a company story. Traditional supermarkets are losing share to Walmart, Costco and club formats on price, and to digital and discount channels on convenience, and both of the large listed grocers have now cut their sales outlooks within two months of each other. Albertsons responded by creating an executive chair role for Meg Whitman and launching a restructuring that collapses 11 divisions into four regions, as we reported when the company named Whitman executive chair. Kroger’s response is cost discipline plus a store program, with the detail promised for October 20.
Read against Albertsons, Kroger’s quarter is relative strength: positive identical sales, positive EPS growth and a reaffirmed profit outlook. Read against Walmart, it is relative weakness: a 2.4 point gap in comparable sales growth at a moment when Walmart is also complaining about the consumer. Kroger’s 140 basis point IRA adjustment narrows that gap but does not close it.
What do the buyback and dividend say about capital allocation?
Kroger repurchased $1.0 billion of stock in the second quarter, bringing year-to-date buybacks to $1.2 billion under the $2 billion authorisation announced in December 2025. About $800 million remains. The company also raised its quarterly dividend by 11%, which it describes as the 20th consecutive year of dividend increases.
Net total debt to adjusted EBITDA stood at 1.91 times, up from 1.63 times a year earlier but still below the company’s stated target range of 2.30 to 2.50 times. That gap gives Kroger room to keep buying back shares, to fund the roughly $1.65 billion Giant Eagle acquisition announced in July, and to absorb a capital expenditure budget of up to $4 billion. It also means the 5% EPS growth reported this quarter owes something to a lower share count rather than solely to operating improvement.
- Buybacks: $1.0 billion in Q2, $1.2 billion year to date, roughly $800 million of authorisation left.
- Dividend: raised 11%, the 20th straight annual increase.
- Leverage: 1.91 times net debt to adjusted EBITDA against a 2.30 to 2.50 times target, leaving headroom.
- Capex: $3.8 billion to $4.0 billion for the year, unchanged, funding store openings alongside about 60 closures.
- Free cash flow: $2.7 billion to $2.9 billion guided, unchanged.
The capital return story is the part of the release that investors will find least controversial. Kroger is generating cash, its balance sheet is under-levered relative to its own target, and it is returning money at a steady rate. The question is whether that cash would be better spent on price and store standards to re-accelerate the top line, which is precisely the debate the October investor update is meant to settle.
How did the market react, and what comes on October 20?
Kroger shares fell about 3.1% in pre-market trading after the release, according to Investing.com, a move that reflects the guidance cut rather than the quarter itself. An EPS beat of three cents paired with a top-line cut is a familiar pattern in 2026 retail, and the market has learned to price the outlook change over the historical number. The Friday timing gives investors a weekend to digest the commentary before Monday’s session.
The bigger event is now the investor update scheduled for October 20, 2026, at which the company says it will share strategic initiatives and longer-term targets. Foran, who ran Walmart US from 2014 to 2019 during a run of 20 consecutive quarters of comparable sales growth, has spent his first two quarters describing a plan rather than reporting against one. October is when the plan gets numbers attached: a multi-year comp target, a margin structure, a store investment envelope and, most likely, a view on how the roughly 60 store closures scheduled through the end of 2026 hand off to a new program.
What management said
Foran’s quote in the release was measured: “Kroger delivered a solid second quarter, with adjusted EPS growth of 5 percent,” followed by a reference to “confidence in our plan to become America’s favorite grocer.” Kennerley’s statement focused on cost savings and the reaffirmed profit guidance. Neither executive characterised the identical sales number as a disappointment in the written release; the conference call at 8 a.m. Eastern Time was where analysts pressed on traffic and the second-half trajectory.
What the sell side will model now
With a 0.2% to 0.8% comp range and a $5.10 to $5.30 EPS range, the implied second half requires flat to slightly positive identical sales and continued cost savings to deliver roughly $2.43 to $2.63 of adjusted EPS over the remaining two quarters. The third quarter of 2025 was the period in which last year’s identical sales growth began to decelerate, which makes the comparison marginally easier. Any upside from here is more likely to come from margin than from volume.
What should grocers and suppliers watch next?
For competitors and consumer packaged goods suppliers, the read-through from Kroger’s quarter is concrete. Kroger is the largest traditional supermarket operator in the US, and its identical sales rate is a reasonable proxy for the health of the format as a whole. A 0.2% print, even adjusted to roughly 1.6% for the pharmacy effect, says that volume growth in conventional grocery has stalled while Walmart continues to take share.
- Price investment will continue. Kroger has explicitly named customer value as a margin cost it is willing to bear. Suppliers should expect continued pressure on trade terms and promotional funding through the holiday period.
- Retail media is the growth budget. A 24% rise in Kroger Precision Marketing profit means the company will keep pushing brands toward its media platform, both as a revenue line and as a lever on the consolidated margin.
- Store closures will run alongside openings. The current program of about 60 closures is on track to complete this year, and October should reveal whether a successor program follows.
- Pharmacy will keep dragging reported comps through early 2027. The IRA headwind laps only once Medicare negotiated prices have been in the base for a full year, and further drugs enter negotiation in 2027 and 2028.
- Giant Eagle integration begins. The $1.65 billion acquisition adds stores in Pennsylvania and Ohio and will need to be folded into the same operating plan Foran presents in October.
For shoppers, the practical effect is more of the same: lower shelf prices on staple categories, more personalised offers driven by the loyalty and media platform, and a slowly shifting store map as underperforming locations close and new formats open.
FAQ: Kroger Q2 2026 results
What were Kroger’s Q2 2026 earnings?
Kroger reported adjusted earnings of $1.09 per diluted share for the quarter ended August 15, 2026, up 5% from $1.04 a year earlier and ahead of the $1.05 to $1.06 that analysts had expected. GAAP earnings were $1.05 per share, or $641 million, compared with $0.91, or $609 million, in the prior-year quarter. Total sales were $34.6 billion versus $33.9 billion.
Why did Kroger cut its sales guidance?
Identical sales without fuel grew only 0.2% in the second quarter, well below the roughly 1% the company had guided to and the 3.4% recorded a year earlier. Management lowered the full-year range to 0.2% to 0.8% from 1.0% to 2.0%, citing an approximately 140 basis point headwind from the Inflation Reduction Act, price investments for customers and a softer sales environment. Profit and EPS guidance were reaffirmed.
What is the Inflation Reduction Act headwind for Kroger?
The Inflation Reduction Act introduced Medicare drug price negotiation, which lowers reimbursement on certain medications sold through Kroger’s pharmacies. Lower reimbursement reduces the dollar value of reported pharmacy sales without changing gross profit dollars, according to chief financial officer David Kennerley. Kroger estimated the effect at about 130 basis points on identical sales in March and now puts it at approximately 140 basis points for fiscal 2026, with roughly 138 basis points in the second quarter.
Did Kroger beat analyst estimates?
On earnings, yes. Adjusted EPS of $1.09 compared with a Zacks consensus of $1.05 and an Investing.com consensus of $1.06. On revenue, the $34.6 billion reported was essentially in line with the $34.61 billion to $34.65 billion expected. On identical sales, the 0.2% figure was below the roughly 1% that management had signalled, which is why the guidance was cut and the shares fell about 3% in pre-market trading.
How is Kroger’s e-commerce business performing?
Adjusted e-commerce sales grew 20% in the second quarter, excluding fulfilment centre exits, the sale of Vitacost and the discontinued Ship marketplace. That follows 19% growth in the first quarter, when the digital business reached profitability ahead of schedule. Kroger Precision Marketing, the retail media unit, grew profit by 24%. Both businesses are now cited as contributors to the FIFO gross margin rate.
How much stock did Kroger buy back?
Kroger repurchased $1.0 billion of shares in the second quarter and $1.2 billion year to date under a $2 billion authorisation announced in December 2025, leaving roughly $800 million available. The company also raised its quarterly dividend by 11%, its 20th consecutive annual increase. Net total debt to adjusted EBITDA was 1.91 times, below the 2.30 to 2.50 times target range.
How does Kroger’s quarter compare with Walmart and Albertsons?
Walmart US reported comparable sales growth of 2.6% excluding fuel for its quarter ended July 31, 2026, its slowest in about six years but far ahead of Kroger’s 0.2%. Albertsons reported identical sales of negative 0.8% in its first quarter of fiscal 2026 and cut its full-year range to negative 1.5% to negative 0.5%. Kroger sits between the two: positive but barely, with a reaffirmed profit outlook.
When is Kroger’s investor day and what will it cover?
Kroger will hold an investor update on October 20, 2026, at which it says it will share strategic initiatives and longer-term targets. This is expected to be the first detailed statement of chief executive Greg Foran’s multi-year plan, including comparable sales ambitions, margin structure, store investment and the future of the store closure program that runs through the end of 2026.
When does Kroger report third quarter 2026 results?
Kroger has not yet announced the date for its third quarter fiscal 2026 results. The third quarter is a 12-week period that ends in early November, and the company typically reports in early December. Its fiscal year is 52 weeks, ending on the Saturday closest to January 31, 2027.
What this means for the grocery sector
Kroger’s second quarter confirms that the US grocery slowdown is broad rather than company-specific: the two largest listed supermarket chains have now cut their sales outlooks within eight weeks of each other while Walmart continues to grow. The company’s answer, for now, is margin discipline, a growing digital and media engine, and steady capital returns, with the store-level plan held back for October 20. Readers following the sector can revisit our preview of the Kroger Q2 comp bar for the expectations going into the print, and our coverage of how the June quarter’s price cuts first compressed grocery margins for the origin of the current strategy.