Dive Brief:
- Kroger’s identical sales without fuel edged up 0.2% during the second quarter of fiscal 2026 as headwinds, including reduced spending on produce stemming from the cyclospora crisis, held back the company’s performance, CFO David Kennerley said during an earnings call Friday morning.
- The supermarket chain’s total sales moved up 2% year over year in Q2, to $34.6 billion, while its operating profit rose by more than 12%, to $971 million.
- Kroger lowered its full-year identical sales guidance because it believes that consumers will remain cautious about buying produce, Kennerley said. The grocer now expects its identical sales to rise between 0.2% and 0.8% during the year, down from its previous projection of 1% to 2%.
Dive Insight:
Kroger’s sales growth was moving in the right direction until late in the quarter, when shoppers reacted to the cyclospora outbreak by shying away from fresh fruits and vegetables, CEO Greg Foran said during the earnings call. That dynamic alone shaved about a third of a percentage point off the company’s identical sales, he said.
While the public health crisis didn’t take hold until the quarter was well underway, shoppers responded by avoiding types of produce that were not contaminated by cyclospora, according to Foran.
Kroger also lost about 30 basis points in identical sales during Q2 because of declining egg prices, Kennerley noted. On the other hand, sales of natural foods, meat, seafood and baked goods all came in strong, he said.
Kroger’s sales growth also took a hit from the Inflation Reduction Act, which requires the Department of Health and Human Services to negotiate what Medicare pays for drugs. The law drove down Kroger’s pharmacy sales growth by 140 basis points during Q2, according to Kennerley.
The Inflation Reduction Act’s impact on Kroger’s sales was larger in Q2 than in the first quarter, and Kroger anticipates that will worsen during the second half as the law covers more drugs, Kennerley said. Kroger also lost more than half a percentage point in identical sales as people shift toward generic medications, he added.
Kroger's comps are running out of steam again
Foran said he is pleased with how Kroger weathered the obstacles it encountered during the quarter, which ended Aug. 15.
“Despite these industry-wide challenges, our teams are executing our plan: keep the customer at the center, move with more speed, be great item merchants,” he said during the earnings call. “We are resolute and committed to executing our plan. We’re chasing every dollar we can save, and you can see that in our profit result.”
Kroger’s digital operations were a bright spot during Q2, as adjusted digital sales rose 20% and retail media was up 24%. With retail media taken into account, the retailer’s e-commerce business turned a profit for the second quarter in a row, Foran said.
Kroger’s stock price rose by around 2% Friday morning as investors reacted to the company’s performance. Still, the grocer’s shares are down by about 7% since the start of the year and have lost a fifth of their value over the past six months.
