Kroger Cuts Sales Forecast, Holds Profit Targets
Kroger lowered its full-year identical-sales outlook to 0.2%–0.8% due to pharmacy headwinds and a produce outbreak, while maintaining adjusted EPS guidance of $5.10–$5.30 supported by margin gains.
The Kroger Co. reduced its full-year identical-sales-without-fuel outlook to a range of 0.2% to 0.8%, down from the previous 1% to 2% target. This revision reflects specific operational headwinds, including a 35-basis-point drag from the Cyclospora produce outbreak and broader cautious consumer spending. Despite the top-line pressure, the retailer maintained its adjusted earnings per share guidance of $5.10 to $5.30, citing improved gross margins and cost-saving initiatives.
In the second quarter, identical sales excluding fuel rose by just 0.2%, yet adjusted earnings per diluted share increased 5% to $1.09. Adjusted FIFO operating profit reached $1.1 billion. Chief Financial Officer David Kennerley attributed the sales drag to a combination of factors, including a 140-basis-point impact from the Inflation Reduction Act and a 60-basis-point shift toward generic prescriptions. The company also noted a 30-basis-point effect from egg deflation, contributing to a total 265-basis-point reduction in comparable sales.
Regulatory And Supply Chain Pressures
The Inflation Reduction Act remains a primary driver of the lowered outlook, with the company expecting the pharmacy-related sales impact to rise to approximately 150 basis points in the fourth quarter. This increase is driven by the addition of high-cost drugs, including GLP-1 medications, to formularies in January. Additionally, the Cyclospora outbreak continued to weigh on produce categories, with CEO Greg Foran noting the incident reduced identical sales by roughly 35 basis points during the final reporting period. The company expects these effects to linger into the third quarter.
Digital And Private Label Growth
Growth in digital and private-label segments provided a buffer against the broader sales slowdown. Adjusted e-commerce sales rose by 20%, while retail media revenue increased by 24%. Private Selection sales grew by more than 14%, indicating strong customer adoption of the company's own-brand products. These performance metrics are central to Kroger's strategy for maintaining profitability despite flat overall traffic, as the company focuses on higher-margin digital channels and proprietary inventory.
Capital Allocation And Strategic Moves
Kroger repurchased approximately $1.2 billion of its own shares in the first half of the fiscal year, signaling confidence in its long-term value. The company also expects to close its acquisition of Giant Eagle in 2027, pending regulatory review. This expansion aims to broaden Kroger's geographic footprint and consolidate its position in the northeastern United States. According to GN markets/earnings (en-US), these strategic actions are intended to support the company's maintained profit guidance of $5.0 billion to $5.2 billion in adjusted FIFO operating profit.
