stockrowWhat it does
The Kroger Co. is a U.S. food retailer built around supermarkets, with pharmacies, fuel centers and online shopping attached to its grocery network. It sells food, household goods, health and wellness products, prescriptions and fuel to households through stores, pickup, delivery and third-party delivery platforms. Its strategy centers on Fresh, Our Brands, personalization and eCommerce.
As of January 31, 2026, Kroger operated 2,697 supermarkets under local banner names in 35 states and the District of Columbia. Of these stores, 2,250 had pharmacies and 1,731 had fuel centers. It offers pickup services at 2,408 supermarkets and delivery to substantially all customers through stores, customer fulfillment centers and third-party platforms.
Kroger also uses transaction and loyalty data to personalize offers and operate alternative-profit businesses. These include Kroger Precision Marketing, which sells targeted advertising and measurement services to consumer-packaged-goods companies and other partners, and data analytic services. The company serves approximately 63 million households annually. It employed 403,000 people as of January 31, 2026.
The business is a single reportable retail-operations segment, combining its store, pharmacy, fuel, digital and related activities.
How it makes money
Kroger earns most of its revenue when customers buy products in stores, at fuel centers or through online platforms. It aims to sell products at prices above the costs of buying, distributing and making them available. Its retail operations account for 100.0% of FY2026 revenue.
The merchandise mix is led by non-perishable products, which generated $77.6 billion in FY2026 and represented 52.5% of revenue. Fresh products generated $37.2 billion, while pharmacy generated $18.2 billion and grew 15.8% in FY2026. Supermarket fuel remains part of the customer-loyalty offering and an important contributor to revenue and earnings, although its sales depend on fuel prices and volumes.
Our Brands is another part of the merchandising model. These private-label products represented over $39 billion of sales in 2025. Kroger produces about 20% of Our Brands units sold in its supermarkets itself, while outside manufacturers make the remainder to its specifications.
The company also generates alternative-profit revenue from assets created by its retail business. Kroger Precision Marketing uses loyalty and shopping data to sell advertising across search, display, social media, connected TV and in-store placements. The company links media impressions to household purchases across digital and store transactions. In Q2 FY2026, retail media grew 24%, while adjusted e-commerce sales grew 20%; the company reported its second consecutive quarter of profitable e-commerce growth.
FY2026 retail-operations revenue was $147.6 billion; Q2 FY2026 adjusted FIFO operating profit was $1.1 billion and adjusted earnings per diluted share were $1.09.
| Product or service | Revenue, FY2025 | Share | Change on the year |
|---|---|---|---|
| Non perishable | $77.1 billion | — | — |
| Fresh | $36.3 billion | — | — |
| Pharmacy | $15.7 billion | — | — |
| Supermarket fuel | $15.0 billion | — | — |
| Other | $3.1 billion | — | — |
Customers and how it sells
Kroger serves approximately 63 million households annually through supermarkets and digital channels. Its rewards program links over 95% of customer transactions to a loyalty card, giving the company purchase data it uses for personalized experiences, value offers, data analytics and retail media.
Its stores operate under local banners in 35 states and the District of Columbia, serving different geographies, consumer demographics and shopping occasions. Customers can shop in store, order online for pickup, receive delivery from stores or fulfillment centers, or use third-party platforms. The company offers pickup at 2,408 supermarkets and delivery to substantially all customers.
Pharmacies and fuel centers extend the customer relationship beyond grocery shopping. The company rebranded FuelPoints as SimplyPoints in Q2 FY2026, allowing customers to apply loyalty points to fuel or grocery purchases. It also launched grocery-and-prescription delivery with Instacart across nearly all banners in August 2026.
Kroger reported that new e-commerce customers increased 20% year over year in Q2 FY2026. Its digital model is intended to make the same assortment available through store, pickup and delivery channels.
| Segment | Revenue, FY2025 | Share | Change on the year |
|---|---|---|---|
| Retail operations segment | $147.1 billion | — | — |
Suppliers and costs
Kroger’s principal costs are procurement and distribution, facility occupancy, store operations and overhead. Merchandise costs also include advertising, warehousing and transportation expenses. Associate wages, benefits, healthcare and training are significant operating costs: more than two-thirds of associates are covered by collective-bargaining agreements.
The company owned 33 food production plants as of January 31, 2026, including dairies, deli and bakery plants, grocery-product plants, beverage plants, a meat plant and cheese plants. These facilities produce approximately 20% of Our Brands units sold in supermarkets. Outside manufacturers make the remaining private-label items to Kroger specifications, with make-or-buy decisions based on market-based transfer prices versus open-market purchases.
The company reported higher transportation costs and higher shrink in Q2 FY2026. Higher diesel costs affected freight costs, while the company expects cost savings from sourcing, procurement, simplification and productivity to support investments in customer value.
- Revenue$147.6B
- Cost of revenue−$113.2B
- Selling, general and administrative−$28.3B
- Other operating costs−$4.2B
- Operating income$1.9B
Competitive position
Kroger operates in a food-retailing market with local, regional and national retailers across stores and digital formats. Its competitive set includes online retailers, mass merchants, club stores, regional chains, deep discounters, dollar stores, and ethnic, specialty and natural-food stores. Competition concerns price, product range, fresh-food execution, pharmacy, convenience, digital fulfillment and customer loyalty.
Albertsons is the only named peer supported by the supplied material. Albertsons terminated its proposed merger with Kroger and sued Kroger, alleging that Kroger mishandled the merger-review process. The company also says its customer-value plan is designed to improve its value proposition, while it does not aim to be the lowest-cost retailer.
Our reading: Kroger’s store network, pharmacies and fuel centers are a moderate source of differentiation because they support multiple shopping needs in the same local markets. [item1]
Our reading: Its loyalty-data position is a meaningful moat source because over 95% of transactions are linked to a loyalty card, supporting personalization and retail-media measurement; this advantage depends on continued customer participation and effective data use. [item1]
Our reading: Our Brands and its owned production capacity provide a moderate merchandising advantage, but outside manufacturers still produce most private-label units and competitors can also offer private labels. [item1]
Our reading: E-commerce and retail media broaden the model, but competition remains broad and intense across both physical and digital formats. [item1] [item1a]
| Competitor | Where they compete | Threat (our reading) |
|---|---|---|
| Albertsons | Proposed merger and subsequent litigation | Medium |
Growth opportunities
Kroger’s growth plan combines store expansion, digital shopping, private-label merchandising, pharmacy, loyalty and retail media. The company expects new stores to increase penetration in existing markets, enter new geographies and reach new customers. In Q2 FY2026, it completed 12 major-store projects intended to build market density and expand customer reach.
E-commerce is a central growth channel. The company is shifting more fulfillment toward stores, with pickup, delivery, customer fulfillment centers and third-party platforms all part of the network. It reported adjusted e-commerce sales growth of 20% in Q2 FY2026 and said this was its second consecutive quarter of profitable e-commerce growth. It is also emphasizing delivery in less than an hour and using stores for fulfillment.
Retail media is another growth vector because it monetizes shopper traffic and loyalty data. Retail-media revenue grew 24% in Q2 FY2026. The company continues to invest in technology, talent and collaborations for Kroger Precision Marketing.
Our Brands expansion supports both value and product differentiation. Private Selection sales increased more than 14% in Q2 FY2026, and own-brand penetration increased approximately 50 basis points. The company plans to expand SmartWay from about 130 products to 1,000 products over the next year and a bit. It also expects its planned Giant Eagle acquisition to close in 2027, subject to regulatory review.
- $137.9BFY2022
- $148.3BFY2023
- $150.0BFY2024
- $147.1BFY2025
- $147.6BFY2026
Structural risks
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Food retailing faces intense and increasing competition from retailers across physical and digital formats, including mass merchants, club stores, regional chains, deep discounters, dollar stores and specialty formats.
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More than two-thirds of associates are covered by collective-bargaining agreements. A work stoppage affecting a substantial number of locations could materially affect financial condition, operating results or cash flows.
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The business depends increasingly on complex information-technology systems. It also handles loyalty and transaction data, while privacy, data-protection and payment-system requirements affect operations.
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Supply-chain disruption could negatively affect the business. Procurement, transportation and fuel costs can rise, and fuel sales face regulation, demand changes and retail-price volatility.
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Weather, natural disasters and climate effects can disrupt stores, distribution facilities, fulfillment centers and supply chains. The company identifies exposure to hurricanes, tornadoes, floods, droughts, wildfires, ice and snow storms, and earthquakes.
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In Q2 FY2026, the company identified pressure on household budgets from reduced SNAP benefits, higher fuel prices and softer consumer confidence. It also expects pharmacy sales headwinds from the Inflation Reduction Act, although it expects no related profit impact in Q4 FY2026 or 2027.
Bottom line
Our reading
Our reading: Kroger is a large U.S. grocery retailer whose core economics come from frequent household purchases, supported by pharmacies, fuel and digital ordering. Its loyalty-linked transactions, private-label range, store network and retail-media business give it several ways to deepen customer relationships and monetize traffic. [item1] [call_prepared]
Our reading: The company is investing in value, store execution and store-based fulfillment while operating in a low-margin, intensely competitive market exposed to labor, supply-chain, pharmacy and consumer-budget pressures. Its ability to fund these investments through sourcing, productivity and alternative-profit growth is central to the model. [item1a] [call_prepared]