Kroger (KR) Q3 2026 earnings summary

Executive summary

• Identical sales excluding fuel grew 2.6% year-over-year, led by pharmacy and eCommerce, with eCommerce sales up 17% and six consecutive quarters of double-digit growth.

• Adjusted EPS was $1.05, up 7% year-over-year, while reported EPS was $(2.02) due to a $2.6 billion impairment charge for the automated fulfillment network, resulting in a net loss of $1.32 billion.

• Total company sales reached $33.9 billion, up from $33.6 billion in the prior year quarter, with strong performance in core grocery, pharmacy, and alternative profit streams.

• Strategic review of eCommerce led to a hybrid fulfillment model, closure of three automated centers, and is expected to drive profitability in 2026.

• Focused on cost structure optimization, store operations, and investments to maximize return on capital and shareholder value.

Financial highlights

• Adjusted FIFO operating profit was $1.1 billion, up 7% year-over-year, and gross margin improved to 22.8% from 22.4% last year.

• Operating loss was $(1,541) million, compared to $828 million operating profit last year, driven by impairment and related charges.

• Net total debt to adjusted EBITDA ratio was 1.73x, up from 1.21x a year ago, but below the target range of 2.3x–2.5x.

• Media and alternative profit streams delivered double-digit growth and contributed meaningfully to profitability.

• Cash flow from operations was $4.7 billion for the first three quarters, up 6% year-over-year.

Outlook and guidance

• FY25 identical sales without fuel guidance narrowed to 2.8%–3.0%, and adjusted EPS guidance raised to $4.75–$4.80.

• Operating profit expected at $4.8–$4.9 billion; free cash flow at $2.8–$3.0 billion.

• eCommerce business expected to be profitable in 2026, with $400 million in incremental operating profit from fulfillment center closures.

• CapEx guidance set at $3.6–$3.8 billion; adjusted tax rate at 22%.

• Q4 identical sales without fuel expected to be reduced by 30–40 basis points due to Medicare drug price changes, with no earnings impact.