The Kroger Co. KR used its second-quarter fiscal 2026 earnings call to stress cost discipline and customer value as sales momentum softened. Management lowered its identical-sales outlook but kept profit targets intact.
Adjusted earnings per share of $1.09 topped the Zacks Consensus Estimate of $1.05, while revenues of $34.62 billion came in below the $34.69 billion estimate.
KR Cuts Sales View but Holds Profit Targets
CFO David Kennerley lowered fiscal 2026 identical sales without fuel guidance to 0.2%-0.8% from 1.0%-2.0%, reflecting first-half results and continued pressure on the consumer.
Kennerley kept adjusted FIFO operating profit guidance at $5.0-$5.2 billion and adjusted earnings guidance at $5.10-$5.30 per share, citing cost savings, pharmacy margins, e-commerce profitability and media growth.
The CFO also said third-quarter identical sales without fuel should be slightly better than the fourth quarter, when pharmacy, delivery-comparison and weather-related headwinds become more pronounced.
Kroger Leans on Savings to Fund Value
CEO Greg Foran said Kroger is deliberately using sourcing, procurement, productivity and simplification savings to improve shelf value rather than sacrificing profit discipline.
Foran described pricing changes as a multiyear effort that will be rolled out by geography. He said the company is also simplifying promotions so customers can more easily recognize value.
Kennerley said the 13-basis-point increase in FIFO gross margin, excluding rent, depreciation, amortization and fuel, demonstrated Kroger's ability to reinvest savings while protecting margins.
KR Sees Digital and Media Momentum
Foran highlighted adjusted e-commerce sales growth of 20% and said Kroger delivered a second consecutive quarter of profitable e-commerce growth.
Foran said new e-commerce customers increased 20% year over year, while demand continued shifting toward faster fulfillment, including delivery orders completed in less than an hour.
The CEO also said retail media grew 24%, its best performance since 2021, while Our Brands gained roughly 50 basis points of penetration and Private Selection sales rose more than 14%.
Kroger Faces a More Pressured Consumer
Kennerley said the Inflation Reduction Act reduced identical sales without fuel by about 140 basis points, while generic drug shifts, egg deflation and Cyclospora created additional pressure.
Together, those items represented a 265-basis-point drag on identical sales without fuel. CEO Greg Foran also cited higher fuel prices, lower SNAP benefits and softer confidence as constraints on household spending.
Foran said traffic still increased slightly, but ticket declined as shoppers bought fewer items. He emphasized that natural, organic, prepared meals and other health-oriented categories remained areas of strength.
KR Q&A Sharpens the Pricing Road Map
A UBS analyst pressed management on the size and effectiveness of price investments. Foran declined to quantify the spending but said basic shelf pricing improved relative to competitors.
A Wells Fargo analyst asked how pricing simplification would alter promotions. Foran said Kroger will gradually rebalance shelf prices and promotional activity while tracking unit growth, e-commerce engagement and competitor responses.
A JPMorgan analyst questioned gross-margin drivers. Kennerley said e-commerce, media, pharmacy mix and sourcing all contributed meaningfully, while tariff refunds were modest and fully reinvested in customer value.
Kroger Keeps Focus on Execution
Foran said the operating agenda remains centered on better in-stocks, merchandising, store standards and shrink control, with the company preparing to detail its longer-term framework at its October investor update.
Kennerley reinforced that management expects savings to build through the second half while maintaining investment in value and e-commerce. The call remained focused on execution despite a softer sales backdrop.
Zacks Signals for KR Stay Mixed
KR carries a Zacks Rank #3 (Hold), along with a Value Score of A, Growth Score of B, Momentum Score of F and VGM Score of B. The favorable Value, Growth and VGM scores indicate stronger characteristics in those styles, while the Momentum score is weak. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Style Scores are designed to complement the Zacks Rank, with A and B grades preferred to lower grades. The current Rank is neutral rather than top-rated, and it can change as earnings estimates are revised following the newly reported results.
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The Kroger Co. (KR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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