Dive Brief:
- Kroger’s identical sales excluding fuel increased 1% during the first quarter of fiscal 2026, led by strong digital, fresh and private label sales, CEO Greg Foran said during an earnings call on Thursday morning. Overall sales were up about 2% compared with the same period a year ago, to $46.1 billion, while operating profit was up more than 6%.
- The grocer’s e-commerce operations turned a profit for the first time during Q1, Foran said.
- Kroger expects e-commerce profitability to continue expanding and is depending on that trend “to become a larger contributor to margin expansion over time,” CFO David Kennerley said during the call.
Dive Insight:
Kroger executives cast the company’s online operations as a particular source of strength. Digital sales grew 19% year over year during the quarter, led by delivery, and the company drew a “record number” of new households to its e-commerce business, Foran said during the call
In addition, orders delivered in less than an hour represented about half of the company’s e-commerce growth during the quarter, according to Kennerley.
Digital sales growth helped propel Kroger’s retail media business, which grew more than 20% in Q1. Kroger includes sales from its retail media operations when computing e-commerce performance.
While Kroger’s digital business soared in Q1, the company’s identical-store sales performance was down markedly from the same period in fiscal 2025, when the company recorded sales growth of 3.2%. Kennerley noted that Kroger absorbed a 130-basis-point hit to its identical sales during its most recent quarter because of changes in how the federal government pays for certain prescription drugs — a factor that has also impacted other grocers. The accelerating shift from brand name to generic medications took a bite out of Kroger’s performance in Q1 as well, Kennerley said.
Foran emphasized during the call that improving store operations must be a key priority for Kroger, observing that the company needs “to move faster, make decisions more quickly, and get more out of the assets and the talent we already have.”
Asked during the call about store performance, Foran said he thinks that approximately 60% of the company’s locations need to improve their results. “The gap between our best stores and the rest of the fleet needs to improve, and closing it is one of our biggest near-term opportunities,” he said.
Foran suggested, however, that stores can make meaningful changes to their operations relatively quickly.
“I was in a store the other weekend. It wasn’t in great shape, it had been running negative comp sales, and in the space of basically some hard work over the day by the team, they turned it into some reasonably healthy positive comps,” he said. “So it makes a difference when you run a good store.”
Foran also said Kroger has not expanded its store fleet quickly enough, putting it at a disadvantage compared with other grocery chains. “Competitors have continued to grow their footprint while we stepped back,” he said. “Our existing footprint is one of our strongest assets, but standing still in store growth means standing still in market share.”
Foran noted Kroger’s value proposition is too hard for shoppers to grasp and made clear that the company will take steps to change that.
“We need to be more competitive, more consistent, and easier for customers to understand,” said Foran.
Kroger reaffirmed its guidance for fiscal 2026, which calls for identical sales to come in between 1% and 2%.
Foran, a former Walmart U.S. executive who arrived at Kroger in February, has brought much-needed urgency to the company as it seeks to improve its performance, GlobalData Retail managing director Neil Saunders said in comments sent by email.
“New management under Greg Foran has clearly identified some of the problems and is using more urgent language to suggest Kroger needs to get back to being a best-in-class grocer across multiple dimensions,” Saunders wrote. “We believe this is a critical shift. For too long, Kroger has felt complacent and process-driven rather than customer-led and commercially aggressive.”
Catherine Douglas Moran contributed reporting.
