Latest quarter
Kroger reported Q2 FY2027 revenue of $34.6 billion, a 2.01% increase from $33.9 billion a year earlier. Revenue was below the consensus of $34.7 billion, while adjusted EPS of $1.09 exceeded the consensus of $1.05.
The filing shows diluted EPS of $1.05, up 15.4% from $0.91 a year earlier. Kroger said total sales growth reflected higher supermarket fuel sales and identical sales excluding fuel, while the sale of Vitacost.com, closed stores and fulfillment-center exits partly offset the increase. The company reported that eCommerce sales increased 14%, led by delivery demand, and that its eCommerce business, including third-party media revenue, was profitable.
Kroger reported gross margin of 22.7%, compared with 23.0% a year earlier, while operating margin was 2.80%, compared with 2.54%. The filing attributed higher operating profit to lower OG&A and depreciation and amortization expenses as a percentage of sales and a lower LIFO charge, partly offset by a lower FIFO gross margin rate. Kroger reported free cash flow of $167.0 million, compared with $615.0 million a year earlier.
| Q2 FY2027 | Q2 FY2026 | Change | |
|---|---|---|---|
| Revenue | $34.6 billion | $33.9 billion | 2.01% |
| Diluted EPS | $1.05 | $0.91 | 15.4% |
| Gross margin | 22.7% | 23.0% | −0.3 percentage points |
| Operating margin | 2.80% | 2.54% | 0.3 percentage points |
| Free cash flow | $167.0 million | $615.0 million | −72.8% |
| Against the consensus | Reported | Consensus | Result |
|---|---|---|---|
| Adjusted EPS | $1.09 | $1.05 | Beat by 3.81% |
| Revenue | $34.6 billion | $34.7 billion | In line |
Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.
What management said on the call
Gregory Foran said customers continued to shop in stores and online and that traffic increased, but he described household budgets as under pressure from reduced SNAP benefits, higher fuel prices and softer consumer confidence. He said sales tracked well until the final period, when the Cyclospora outbreak affected produce categories and reduced total-company identical sales without fuel by roughly 35 basis points.
Foran said Kroger’s value plan focuses on strengthening its value position, simplifying promotions and making value easier for customers to recognize. He told analysts the program would be implemented by geography and funded over time through savings in cost of goods, goods not for resale and business efficiency; he said Kroger would not provide exact figures for the investment. Foran also said the company is not seeking to be the cheapest retailer, while positioning itself as a value option.
David Kennerley said gross-margin improvement in the quarter reflected e-commerce profitability, retail media, pharmacy mix, tariff refunds and sourcing initiatives. He said higher shrink, transportation costs and customer-value investments partly offset those benefits. Kennerley said tariff refunds were modest and fully reinvested in value, and that Kroger would spend further refunds if received rather than quantify them.
On investment, Foran said Kroger is pursuing better in-stocks, merchandising, store standards and shrink management, while Kennerley said the company completed 12 major store projects during the quarter. Foran said e-commerce is expected to account for much of the industry’s growth and that Kroger intends to grow it faster and more profitably; he reported adjusted e-commerce sales growth of 20% and retail-media growth of 24%.
Analysts pressed management on pricing, inflation, market-share comparisons, fuel and gross-margin performance. Kennerley said Kroger expects inflation of 1% to 2.5% for the rest of the year and expects positive FIFO gross-margin growth for the full year. He said the outlook assumes softer fuel margins in the second half than in the first half. Foran said the company was still seeing some lingering Cyclospora effects early in the third quarter, with the impact easing each week.
Guidance
Kroger lowered its FY2026 guidance for identical sales without fuel to 0.2% to 0.8% from its initial range of 1% to 2%. David Kennerley said the revision reflects first-half results and expected pressures through the rest of the year, including lingering Cyclospora effects in Q3 and fourth-quarter comparison headwinds. Kroger said it maintained adjusted FIFO operating-profit guidance of $5.0 billion to $5.2 billion and adjusted EPS guidance of $5.10 to $5.30.