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    KR
    Earnings call· Apr 2026(Q1 FY27)

    KROGER Q1 FY27 earnings call KR

    Jun 18, 2026 Source

    Executive summary

    The Kroger Co. Q1 FY27 — E-commerce Profitability and Cost Savings Drive Strong Start

    Kroger's Q1 FY27 performance reflects a solid start under new leadership, with a clear strategic direction focused on cost reduction and operational improvements. The company achieved e-commerce profitability ahead of schedule and is leveraging significant cost savings to fund strategic price investments, aiming to enhance customer value and market share. Management is balancing short-term results with long-term foundational changes, with further details expected at the upcoming investor update.

    Highlights

    5

    • Identical sales, excluding fuel, grew 1% in Q1 FY27.

    • E-commerce grew 19% and became profitable this quarter, including media.

    • Our Brands gained share and outpaced national brands by 175 basis points.

    • Adjusted EPS was $1.58, reflecting 6% growth compared to last year.

    • Cost of goods savings were 30% ahead of plan in Q1 FY27.

    Concerns

    4

    • Identical sales without fuel included a 130 basis point headwind from the Inflation Reduction Act and an additional 40 basis point headwind from the accelerating shift from brand to generic prescriptions.

    • FIFO gross margin rate decreased 9 basis points year-over-year, primarily due to higher transportation costs, egg deflation, and planned pricing investments.

    • Transportation was an unexpected headwind, resulting in 15 basis points of pressure on gross margin in the quarter.

    • Operating, general and administrative rate increased 16 basis points due to intentional investments in associates.

    Guidance & targets

    5
    CategoryTargetConfidence
    Full year guidance
    Reaffirmed
    high materiality
    High
    Identical sales without fuel
    Roughly in line with the first quarter
    medium materiality
    High
    Adjusted net earnings per diluted share
    In line with last year
    high materiality
    High
    E-commerce profitability
    Accelerate through the remainder of this year and continue improving beyond 2026
    high materiality
    High
    Long-term framework
    Share at investor update on October 20
    high materiality
    High

    Operational metrics

    11
    Adjusted FIFO operating profit
    $1.5 billion
    Q1 FY27

    Reported for the first quarter.

    Adjusted EPS
    $1.586% growth YoY
    Q1 FY27

    Reflecting 6% growth compared to last year.

    Net total debt to adjusted EBITDA
    1.75x
    Q1 FY27

    At the end of the first quarter, compared to the target ratio range of 2.3 to 2.5.

    Food at home growth
    100 bpsdecelerated QoQ
    Q1 FY27

    Decelerated compared to the last quarter.

    Traffic
    up
    Q1 FY27

    Customers are coming through doors more often.

    Perfect order rates (e-commerce)
    8%improved
    Q1 FY27

    Improved in e-commerce.

    Convenience orders delivered under an hour
    approximately 50%
    Q1 FY27

    Represented approximately 50% of digital growth.

    COGS savings
    30%ahead of plan
    Q1 FY27

    Delivered 30% ahead of plan in the first quarter.

    Fuel reward redemptions
    10%up YoY
    Q1 FY27

    Up 10% compared to last year.

    Fuel gallons
    down slightlyvs last year
    Q1 FY27

    Outpaced industry benchmarks by more than 400 basis points.

    Transactions tied to loyalty card
    95%
    Q1 FY27

    95% of all transactions are tied to a loyalty card, backed by over 20 years of history.

    Industry KPIs

    11
    MetricValueDetails
    Sg a rate+16 bpsbps
    Gross margin drivers-9 bpsbps
    Membership economics17 consecutive quartersquarters
    Delivery fulfillment speed8%%
    Fuel gas station economicsdown slightly
    Warehouse store club count—
    Comparable same store sales1%%
    E commerce digital sales growth19%%
    Advertising retail media revenueover 20%%
    Private label own brand penetration175 bpsbps
    Category level comps and inflation deflationlow end of expectations

    Deals & partnerships

    4
    DoorDashpartnership

    New third-party partnership to leverage store network for faster delivery and reach new customers.

    Uber Eatspartnership

    New third-party partnership to leverage store network for faster delivery and reach new customers.

    Google's Display and Video 360 platformpartnership

    Advertisers can now use Kroger Precision Marketing's retail signals to reach audiences across YouTube and YouTube TV with SKU level conversion reporting available for the first time.

    TikTokpartnership

    Kroger is the first retail media network set to launch a self-service collaboration with TikTok, giving brands direct access to KPM audiences.

    Risks & headwinds

    9
    Operating costs growing faster than sales

    Not sustainable or acceptable

    Mitigation: Taking costs out of the business, moving faster, making decisions more quickly, improving asset and talent utilization, fewer organizational layers, smarter ways of working, standing up Kroger capability center, applying AI.

    Inconsistent execution in stores and onlineNear-term

    Gap between best stores and rest of fleet needs improvement

    Mitigation: Getting out into the business, spending time with division presidents and managers, walking stores, using data, encouraging teams.

    Lack of new store openings and market share growth

    Competitors continued to grow their footprint while Kroger stepped back

    Mitigation: Ramping pipeline thoughtfully focused on markets and formats that can generate the strongest returns.

    Price position needs strengthening and simplification

    Getting too many promotional trips and not enough full baskets; price gaps widened over several years

    Mitigation: Moving towards simpler, more consistent everyday value; sharper and easier to understand promotions; pressing harder on supplier negotiations; leaning further into direct sourcing; removing complexity and waste in goods not for resale.

    Customer pressure from economic factors

    Higher gas prices and reduced SNAP benefits squeezing budgets; customers managing spend carefully and shopping with real intent

    Mitigation: Work on affordability is starting to resonate, value message landing, driving traffic.

    Inflation Reduction Act impact on pharmacy salesFull year FY27

    130 basis point headwind to total company identical sales without fuel

    Mitigation: Neutral from a profit perspective due to rebate structures; winning share in core scripts and GLP-1s.

    Shift from brand to generic prescriptionsFull year FY27

    40 basis point headwind to total company identical sales without fuel

    Mitigation: Profit positive, helps improve margin profile of the business; winning share in core scripts and GLP-1s.

    Egg deflationQ1 FY27

    64 basis points of pressure on identical sales without fuel

    Mitigation: Expected to improve as the year progresses.

    Higher transportation costsQ1 FY27, expected to persist while oil markets remain elevated

    15 basis points of pressure on FIFO gross margin rate

    Mitigation: Managing closely; confident in ability to work through it; sensible assumption in guidance for balance of year.

    Q&A highlights

    8

    How will Kroger close the execution gap between its best and worst stores, and what is an acceptable food volume performance target for the business?

    CEO Greg Foran stated that 2 out of 5 stores are in very good condition, 2 out of 5 are moderate, and 1 out of 5 needs improvement. Closing the gap involves being present in the business, working with division leaders, and using data. He noted that improving store performance can quickly impact sales. Regarding volumes, Kroger is seeing a meaningful break from traditional grocery competitors and aims to achieve positive unit growth, currently showing the best unit market share performance in 2-3 years.

    “It's amazing how quickly you can get it turned around and the impact it has on sales.”

    asked by John Heinbockel · answered by Gregory Foran

    2 min read6 chapters

    Detailed Narrative

    01

    New Leadership Vision & Priorities

    CEO Greg Foran, in his first 100 days, has identified key areas for improvement, including operating costs growing faster than sales, inefficient back-of-store operations, and inconsistent execution. He introduced 'The 5 Fs' (Fresh, Fast, For You, Friendly, Affordable) as core priorities. The goal is to be America's best grocer by leading with food focus and superior execution, emphasizing that cost savings will fund investments in customer value.

    02

    Customer & Market Dynamics

    The customer is under pressure from higher gas prices and reduced SNAP benefits, leading to more deliberate spending. Despite this, Kroger's affordability initiatives are resonating, with traffic up and loyal households growing for 17 consecutive quarters. The company is starting to pull away from traditional grocery competitors, achieving its best performance against Secarna's rest of market in over three years, indicating a meaningful shift in market position.

    03

    E-commerce & Media Momentum

    E-commerce sales grew 19%, primarily driven by delivery, and the business, including media, achieved profitability this quarter ahead of schedule. This success is attributed to improved perfect order rates, a shift to more store-based fulfillment, and new third-party partnerships with DoorDash and Uber Eats. Kroger Precision Marketing, a high-margin business built on first-party data, grew over 20% and is expanding AI-powered capabilities and partnerships with platforms like Google and TikTok.

    04

    Cost Savings & Margin Management

    Kroger is moving with urgency on cost reduction, delivering COGS savings 30% ahead of plan in Q1. These savings are expected to build throughout the year and accelerate beyond, funding price investments and driving margin expansion. While the FIFO gross margin rate decreased 9 basis points due to transportation costs, egg deflation, and planned pricing, the company expects a positive full-year gross margin rate, supported by ongoing cost-saving initiatives.

    05

    Pharmacy Performance & Headwinds

    The pharmacy business faced headwinds from the Inflation Reduction Act (130 basis points impact on identical sales) and a shift from brand to generic prescriptions (40 basis points impact). Despite these top-line pressures, pharmacy profit grew ahead of expectations, driven by continued growth in GLP-1s and core scripts. The company is gaining share and views its ecosystem as well-positioned to serve customers with changing needs, such as those using GLP-1s.

    06

    Capital Allocation & Financial Strength

    Kroger generated strong adjusted free cash flow, providing liquidity and supporting a robust balance sheet. The net total debt to adjusted EBITDA ratio stood at 1.75x, below the target range of 2.3x to 2.5x, offering strategic flexibility. The company's capital allocation framework is focused on improving ROIC, guiding investment decisions to generate strong long-term returns for shareholders.

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