TLDR
- Kroger stock drops 3.56% pre-market after the grocer cuts its sales outlook.
- Adjusted EPS rises 5% to $1.09 as quarterly operating profit reaches $971 million.
- Kroger lowers identical sales growth guidance to a new range of 0.2% to 0.8%.
- Quarterly sales climb to $34.6 billion while gross margin slips slightly to 22.4%.
- Kroger keeps EPS guidance intact and plans to finish its remaining buybacks.
Kroger (KR) stock fell in pre-market trading Friday after the grocer reported mixed second-quarter results and lowered its annual sales outlook. KR shares dropped 3.56% to $54.93 after closing Thursday at $56.95, up 0.90%. However, Kroger delivered higher quarterly profit and maintained its full-year earnings guidance.
Kroger Stock Falls as Sales Outlook Weakens
Kroger reported second-quarter sales of $34.6 billion, compared with $33.9 billion during the same period last year. However, sales increased only 0.1% after excluding fuel, Vitacost, and exited fulfillment centers. Identical sales without fuel increased 0.2%, down sharply from 3.4% one year earlier.
Meanwhile, Kroger lowered its full-year identical sales guidance as slower momentum weighed on the outlook. The company now expects identical sales without fuel to grow between 0.2% and 0.8%. Previously, management expected growth between 1.0% and 2.0% for fiscal 2026.
The updated range includes an estimated 140-basis-point headwind linked to the Inflation Reduction Act. Kroger also identified sales improvement as an important priority following weaker first-half growth. The reduced sales forecast appeared to overshadow stronger earnings and profit figures before Friday’s opening bell.
Kroger Q2 Profit and EPS Increase
Kroger reported earnings per share of $1.05 during the quarter, compared with $0.91 one year earlier. Adjusted earnings per share increased 5% to $1.09 from $1.04 during the comparable quarter. Operating profit also climbed to $971 million from $863 million last year.
However, adjusted FIFO operating profit declined slightly to $1.076 billion from $1.091 billion. Gross margin slipped to 22.4% from 22.5% as several operating pressures affected profitability. Higher shrink, transportation costs, fuel sales, and customer value investments contributed to the margin decline.
Still, Kroger improved profitability across its eCommerce operations and benefited from pharmacy performance. Sourcing initiatives, tariff refunds, and lower LIFO charges also supported the company’s quarterly results. The LIFO charge declined to $39 million from $62 million during the prior-year period.
Kroger Maintains Earnings Guidance and Shareholder Returns
Kroger maintained its full-year adjusted earnings guidance despite reducing its identical sales forecast. The company still expects adjusted earnings per share between $5.10 and $5.30. It also maintained adjusted FIFO operating profit guidance between $5.0 billion and $5.2 billion.
Kroger expects free cash flow between $2.7 billion and $2.9 billion this year. Capital spending remains projected between $3.8 billion and $4.0 billion. The company also maintained its expected full-year tax rate at approximately 23%.
Kroger increased its dividend by 11% earlier this quarter, marking its twentieth consecutive annual increase. The company also repurchased $1.0 billion of shares during the quarter and $1.2 billion year-to-date. Kroger plans to complete its remaining $800 million repurchase authorization before fiscal 2026 ends.
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