Kroger Posts Modest Sales Growth, Trims 2026 Outlook

Kroger reported a 2% year-over-year increase in total sales to $34.62 billion for the latest quarter, a figure slightly below analyst consensus of $34.65 billion. The supermarket giant’s adjusted net income declined to $667 million from $695 million in the prior year period, yet earnings per share rose to $1.09 from $1.04 due to a reduced share count. This performance reflects a quarter where operational gains were largely offset by cost pressures and strategic divestitures.

Management attributes the modest growth to a complex mix of factors, noting that sales would have increased by only 0.1% if fuel, the divested Vitacost unit, and closed fulfillment centers were excluded. Gross margin remained flat at 22.4%, as higher fuel sales were counterbalanced by increased transportation costs and inventory shrink. Positive contributions came from a 20% jump in adjusted e-commerce sales and favorable pharmacy volume mix, according to the earnings release reported by GN markets/earnings (en-US).

Pharmacy drag lowers sales forecast

Kroger narrowed its full-year 2026 identical sales growth guidance to a range of 0.2% to 0.8%, down from a previous estimate of 1% to 2%. The company cites a roughly 140-basis point headwind on pharmacy sales resulting from adjustments under the Inflation Reduction Act. This regulatory impact has forced management to recalibrate expectations for core retail growth in the coming year.

EPS target holds steady

Despite the softer top-line outlook, Kroger maintained its adjusted earnings per share forecast for 2026 at $5.10 to $5.30. This guidance implies year-over-year growth of at least 5%, matching the rate achieved in the trailing second quarter. In a low-margin retail sector, this level of profit expansion remains significant and signals management’s confidence in cost management and volume stabilization.

Dividend growth continues

Kroger confirmed its intent to continue increasing its quarterly dividend, marking the 20th consecutive year of annual payouts since reinstating the distribution in 2006. The most recent increase was 11%, raising the quarterly payout to $0.39 per share. This move supports a yield of 2.5%, which is more than double the average yield of the S&P 500 index.