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    KR
    Earnings call· Jan 2026(Q4 FY26)

    KROGER Q4 FY26 earnings call KR

    Mar 5, 2026 Source

    Executive summary

    The Kroger Co. Q4 FY26 – Strong Performance Capped by Positive Market Share Gains and Accelerated E-commerce Growth

    Kroger delivered a strong Q4 FY26, marked by positive market share gains and robust e-commerce growth, capping a year of solid financial performance. The company is focused on accelerating sales, improving customer value through price investments, and driving productivity to fund these initiatives, with a new CEO emphasizing speed and execution.

    Highlights

    5

    • Identical sales without fuel grew 2.4% in Q4 FY26, and 2.9% for the full year, in line with guidance.

    • Achieved positive market share growth in the final period of the year, strongest since 2021.

    • Adjusted e-commerce sales grew 20% this quarter, building into a $16 billion business.

    • Full-year adjusted EPS grew 9% to $4.85, at the high end of expectations.

    • Alternative profit businesses (Media, Kroger Personal Finance, Insights) delivered $1.5 billion in operating profit in 2025.

    Concerns

    4

    • Inflation Reduction Act created a nearly 40 basis point headwind to identical sales without fuel in Q4 FY26.

    • Pharmacy sales growth expected to moderate to low to mid-single digits in 2026 due to IRA and generic shift.

    • Fuel gallons and profits expected to be slightly down year-over-year in 2026.

    • Q1 FY26 identical sales without fuel expected near the low end of the full-year range due to continued egg deflation.

    Guidance & targets

    18
    CategoryTargetConfidence
    Identical sales without fuel growth
    1% to 2%
    high materiality
    High
    Identical sales without fuel growth (excluding IRA impact)
    2.3% to 3.3%
    high materiality
    High
    Q1 identical sales without fuel
    near the low end of our full year range
    medium materiality
    Medium
    Adjusted FIFO operating profit
    $5 billion to $5.2 billion
    high materiality
    High
    FIFO gross margin rate (excluding fuel and adjustment items)
    improve
    medium materiality
    Medium
    Media business growth
    double-digit growth
    medium materiality
    High
    Capital expenditures
    $3.8 billion to $4 billion
    high materiality
    High
    Adjusted free cash flow
    $2.7 billion to $2.9 billion
    high materiality
    High
    Adjusted net earnings per diluted share
    $5.10 to $5.30
    high materiality
    High
    LIFO charge
    similar to 2025
    low materiality
    Medium
    Share repurchase authorization
    $2 billion
    high materiality
    High
    E-commerce profitability
    profitable
    medium materiality
    High
    Convenience offerings sales (DoorDash, Uber Eats, Instacart)
    over $1.5 billion
    medium materiality
    High
    Total sales without fuel
    slightly lower than identical sales without fuel
    medium materiality
    Medium
    Cost savings
    exceed 2025 cost savings
    medium materiality
    High
    Kroger Global Capability Center benefits
    modest benefits
    low materiality
    Medium
    Pharmacy sales growth
    moderate to low to mid-single digits
    medium materiality
    Medium
    Fuel gallons and profits
    slightly down
    medium materiality
    Medium

    Operational metrics

    20
    LIFO charge
    $157 millionvs $95 million last year
    FY25

    Expected to be similar in 2026.

    Adjusted EPS
    $1.2812% growth
    Q4 FY26

    Reflects Q4 performance.

    Adjusted EPS
    $4.859% growth
    FY25

    At the top end of long-term growth expectations.

    Alternative profit businesses operating profit
    $1.5 billion
    FY25

    Includes Media, Kroger Personal Finance, and Insights.

    E-commerce sales
    $16 billion
    Current

    Business size, with 7 consecutive quarters of double-digit growth.

    Identical sales without fuel
    2.4%
    Q4 FY26

    Includes a headwind from the Inflation Reduction Act.

    Identical sales without fuel
    2.9%nearly doubled from 1.5%
    FY25

    In line with full year guidance.

    Identical sales without fuel (2-year stack)
    4.8%
    Q4 FY26

    Reflects combined growth over two years.

    Food inflation moderation
    down 90 bpscompared to Q3
    Q4 FY26

    Egg deflation was a significant headwind, partially offset by beef inflation.

    FIFO gross margin rate (excluding fuel and adjustment items)
    flatcompared to same period last year
    Q4 FY26

    Improved in the second half of the year, primarily driven by Q4 performance.

    FIFO gross margin rate improvement (excluding KSP, fuel, and adjustment items)
    14 bps
    FY25

    Achieved while investing more in price, reflecting balance between value and margin discipline.

    Operating, general and administrative rate (excluding fuel and adjustment items)
    increased 21 bpscompared to same period last year
    Q4 FY26

    Reflects investments in customer experience and labor.

    Share repurchase authorization completed
    $7.5 billion
    FY25

    Completed the remaining authorization in Q4.

    Major store projects completed
    29
    FY25

    Accelerated new store investments.

    New store openings increase
    30%
    FY26

    Expected increase, with plans to expand into Jacksonville and Kansas City.

    Headwind from Florida fulfillment center closure
    $350 million
    FY26

    Impacts total sales without fuel.

    Headwind from Vitacost sale
    $300 million
    FY26

    Impacts total sales without fuel.

    Pharmacy contribution to sales
    50 bps lessthan in Q3
    Q4 FY26

    Reflecting impact of Inflation Reduction Act and shift from brand to generic.

    Kroger business size
    $150 billion
    Current

    Contextual size of the business, mentioned in discussion about imports.

    Walmart hourly wage (historical)
    $7.63
    2014

    Mentioned by Greg Foran as historical context for prior experience.

    Industry KPIs

    9
    MetricValueDetails
    Sg a rateIncreased 21 bpsbps
    Gross margin driversFlat
    Fuel gas station economicsAhead of last year
    Warehouse store club count29projects
    Comparable same store sales2.4%%
    E commerce digital sales growth20%%
    Advertising retail media revenueDouble-digit growth%
    Private label own brand penetration1,100+products
    Category level comps and inflation deflationDown 90 bpsbps

    Product announcements

    2
    ProductTypeDetails
    Agentic AI shoppinglaunch
    Loyalty program enhancementsupdate

    Deals & partnerships

    4
    Vitacostdivestiture

    Announced the sale of Vitacost as part of simplifying the business and reviewing noncore assets.

    DoorDash and Uber Eatspartnership

    New relationships that have extended reach to customers and shopping occasions.

    Instacartpartnership

    Part of the refreshed hybrid fulfillment model and convenience offerings.

    Googlepartnership

    Announced partnership, providing context for AI initiatives.

    Capital programs

    1
    Kroger Global Capability Centerunderway

    Benefit: Streamline decision-making, improve productivity, increase speed of execution.

    Work has started and is progressing with speed. Expected to deliver modest benefits in 2026, with more significant benefits expected in 2027 and 2028.

    Risks & headwinds

    6
    Inflation Reduction Act (IRA) impact on salesQ4 FY26 and FY26

    nearly 40 basis point headwind to identical sales without fuel in Q4 FY26; approximately 130 basis point headwind to identical sales without fuel in FY26

    Mitigation: No impact on gross profit dollars, but affects reimbursement rates on key medications.

    Egg deflationQ4 FY26 and Q1 FY26

    significant headwind

    Mitigation: Expected to ease later in the year, leading to improved sales trends.

    Pharmacy shift from brand to generic mixFY26

    accelerating, greater than seen in the past

    Mitigation: Partially offset by continued GLP-1 adoption and script growth; company expects to regain ESI households gradually.

    Fuel gallons and profits declineFY26

    slightly down year-over-year

    Headwind from Florida fulfillment center closureFY26

    $350 million headwind to total sales without fuel

    Mitigation: Partially offset by new store openings.

    Headwind from Vitacost saleFY26

    $300 million headwind to total sales without fuel

    Mitigation: Partially offset by new store openings.

    Q&A highlights

    8

    What are the key initiatives for accelerating top-line growth beyond price, and how much runway is there for sourcing/procurement improvements to self-fund these investments?

    CEO Greg Foran, in his fourth week, acknowledged the solid foundation and ongoing price work. He sees significant opportunities in COGS, direct imports, and the Kroger Capability Center to generate savings. He expressed comfort with the self-funding model, noting that the team is working on the math and will share details later in the year.

    “Generally, any business I've been in, Simeon, there's opportunities around COGS and my sense is that's not a lot different in this business.”

    asked by Krisztina Katai · answered by Gregory Foran

    2 min read6 chapters

    Detailed Narrative

    01

    Leadership Transition and Strategic Focus

    Greg Foran was appointed CEO, bringing extensive food retail experience from Woolworths and Walmart. His initial focus areas include accelerating sales growth, improving customer value through price investments, and driving productivity. He emphasized operationalizing the existing strategy with greater speed and execution, building on the strong foundation laid by the previous leadership, and aims to make Kroger the best it can be.

    02

    Customer Value and Price Investments

    Kroger continued to invest in lowering everyday prices and increasing promotions in Q4, which improved customer value perception. The company plans to increase these investments in 2026, funded by productivity gains and cost savings, aiming to balance value delivery with margin discipline. Management noted that while not aiming for a price war, they are focused on ensuring customers perceive good value at Kroger.

    03

    E-commerce and Digital Acceleration

    Adjusted e-commerce sales grew 20% in Q4, reaching a $16 billion business. The company is enhancing its hybrid fulfillment model, leveraging stores and third-party delivery partners like DoorDash, Uber Eats, and Instacart, to accelerate growth and achieve profitability in the first half of 2026. This growth also fuels the media business, with convenience offerings expected to deliver over $1.5 billion in sales in 2026.

    04

    Cost Structure Optimization and AI

    Kroger is aggressively pursuing cost savings through sourcing improvements, procurement renegotiations (for COGS and goods not for resale), and modernizing operations. A newly created AI role, led by Milen Mahadevan, and significant investments in AI are expected to drive productivity (e.g., shrink reduction, labor management) and enhance customer experience (e.g., agentic shopping). The Kroger Global Capability Center is also being launched to streamline decision-making and improve productivity.

    05

    Store Footprint Expansion and Remodels

    The company completed 29 major store projects in 2025 and plans to increase new store openings by 30% in 2026, expanding into Jacksonville and Kansas City. These strategic investments are expected to drive long-term returns, volume growth, and customer base expansion. Capital investments will also support technology and AI, supply chain modernization, and ongoing remodels to ensure a consistently strong in-store experience.

    06

    Portfolio Optimization and Non-Core Asset Review

    Kroger announced the sale of Vitacost and plans to close nearly 50 underperforming Little Clinic locations, reflecting a commitment to efficiency and focusing on core priorities. The company continues to review all noncore assets to determine their ongoing contribution and role within the company, aiming for a more agile and focused organization.

    AI-generated summary of the company’s earnings call. Not investment advice.