Kroger Cuts FY2026 Identical-Sales Outlook to 0.2%-0.8% After Q2 EPS Rises to $1.05, Holds Adjusted EPS Guidance

Kroger reported second-quarter fiscal 2026 earnings per share of $1.05, up from $0.91 a year earlier, and adjusted EPS of $1.09, up from $1.04, while lowering its full-year identical-sales guidance to a range of 0.2% to 0.8% without fuel. The company reaffirmed its adjusted FIFO operating profit and adjusted EPS guidance for the year, according to Kroger's own second-quarter release distributed via PR Newswire and corroborated by Stock Titan.

Second-quarter results

Total company sales were $34.6 billion in the quarter, up from $33.9 billion a year earlier. Excluding fuel, the sale of Vitacost and the exit of certain fulfillment centers, sales rose 0.1% year over year, Kroger said. Operating profit climbed to $971 million from $863 million, though adjusted FIFO operating profit slipped to $1,076 million from $1,091 million. The quarterly LIFO charge fell to $39 million from $62 million a year earlier.

Kroger's reported figures show identical sales without fuel of 0.2% for the quarter, down from 3.4% in the same period last year — a decline of 3.2 percentage points (0.2 minus 3.4), by our calculation from the company's reported figures. Gross margin came in at 22.4% of sales versus 22.5% a year earlier, a decrease of 0.1 percentage point (22.4 minus 22.5), also by our calculation from those reported figures.

Guidance cut and management's stated reasons

Chief Financial Officer David Kennerley tied the lowered identical-sales range directly to the first half of the year and the broader operating backdrop. "Given our first half results and the macro environment, we are updating our identical sales without fuel guidance to a new range of 0.2% to 0.8%," Kennerley said, according to the company's release as carried by Stock Titan and Kroger's own PR Newswire statement. A footnote to the guidance table attributes roughly 140 basis points of unfavorable impact within that range to the Inflation Reduction Act, per the company's disclosure.

Even with softer top-line expectations, Kennerley said the company is "reaffirming our adjusted FIFO net operating profit and adjusted earnings per diluted share guidance, reflecting our confidence and visibility into the same factors that drove our profitability in the second quarter." CEO Greg Foran characterized the quarter as "solid, with adjusted EPS growth of 5 percent," adding that "improving sales momentum remains a top priority" and that "while there is more work to do, I am confident in our plan to become America's favorite grocer."

Margin pressure, pharmacy mix and shrink

Kroger attributed the year-over-year GAAP gross margin decline to "the mix effect of higher fuel sales, higher shrink, higher transportation costs and greater value delivered for customers," partially offset by improved eCommerce profitability and media revenue, favorable pharmacy mix, sourcing initiatives, tariff refunds, a lower LIFO charge and depreciation and amortization, according to the company's release.

Stripped of rent, depreciation, amortization and fuel, the FIFO gross margin rate actually rose 13 basis points year over year, which Kroger said was driven primarily by eCommerce profitability and media, favorable pharmacy mix, sourcing initiatives and tariff refunds, partly offset by higher shrink, higher transportation costs and value investments for customers. Operating, general and administrative expense, excluding fuel and adjustment items, rose 33 basis points, which the company attributed to planned wage investments, higher health care costs and sales deleverage, partially offset by lower incentive costs and productivity initiatives.

Capital returns and balance sheet

Kroger repurchased $1.0 billion of shares during the quarter and $1.2 billion year to date under the $2 billion board authorization announced in December 2025. Roughly $800 million of that authorization remained at quarter-end, and the company said it expects to complete the remaining repurchases by the end of fiscal 2026. Total common shares outstanding fell to 596 million from 662 million a year earlier.

Earlier in the quarter Kroger raised its dividend by 11%, marking a 20th consecutive year of increases; dividends declared per common share were $0.39 versus $0.35 a year earlier. Net total debt to adjusted EBITDA stood at 1.91, up from 1.63 a year ago but still below the company's stated target range of 2.30 to 2.50.

Digital growth and forward outlook

Adjusted eCommerce sales grew 20% in the quarter, and Kroger Precision Marketing profit grew 24%, according to the company. Those adjusted eCommerce figures exclude the effect of fulfillment center exits in markets where Kroger does not operate stores, the sale of Vitacost, and the discontinuation of Ship Marketplace, Kroger said.

Kroger said it will host an investor update meeting on October 20, 2026, where it plans to share additional detail on strategic initiatives and longer-term financial targets, according to the company's release.

Seeking Alpha's earnings snapshot page framed the print with two linked headlines, "Kroger beats top-line and bottom-line estimates; updates FY2026 outlook" and "Kroger falls despite showing improved profitability in Q2," and cited Bloomberg as its consensus data source, though the underlying figures behind that consensus comparison were not included in the material reviewed for this report.

Bottom line

Kroger's second quarter showed higher reported and adjusted earnings per share even as identical-sales growth without fuel cooled to 0.2% from 3.4% a year earlier, a slowdown now reflected in the lowered 0.2%-0.8% full-year range in the company's guidance table. Gross margin was slightly lower year over year at 22.4% of sales versus 22.5%, while the FIFO gross margin rate excluding rent, depreciation and amortization, and fuel rose 13 basis points, according to the company's release. Management's decision to reaffirm adjusted FIFO operating profit and adjusted EPS guidance alongside the sales cut is, by our interpretation of those disclosures, a signal that Kroger expects the same factors it credited for second-quarter profitability — cost savings, eCommerce profitability and media, favorable pharmacy mix and sourcing initiatives — to carry earnings even with flat-to-modest sales growth. How durable that combination proves to be is likely to be a central question at the October 20, 2026 investor update, where Kroger said it will share additional detail on strategic initiatives and longer-term financial targets.