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Can Kroger's Digital Growth Offset Its Softer Fiscal 2026 Sales View?
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Key Takeaways
Kroger's Q2 adjusted EPS rose 4.8%, while identical sales excluding fuel increased just 0.2%.
Kroger cut fiscal 2026 identical-sales guidance to 0.2%-0.8% but kept EPS guidance at $5.10-$5.30.
Kroger's e-commerce sales rose 20%, while Precision Marketing profit increased 24%.
The Kroger Co. (KR - Free Report) exited the second quarter with a widening gap between digital momentum and core sales growth. Adjusted e-commerce sales rose 20%, but identical sales excluding fuel increased only 0.2%.
That contrast now defines the fiscal 2026 setup. Kroger’s digital, retail-media and private-label businesses are improving the profit mix, while a lower comparable-sales outlook and persistent cost pressure keep the top-line picture restrained.
Second-quarter fiscal 2026 adjusted earnings rose 4.8% year over year to $1.09 per share, beating the Zacks Consensus Estimate of $1.05. Cost savings, stronger pharmacy and fuel performance, and better e-commerce profitability supported earnings.
Total sales increased 2% to $34.62 billion but missed the consensus mark of $34.69 billion. Identical sales excluding fuel rose 0.2%, and Kroger cut its fiscal 2026 identical-sales outlook to 0.2%-0.8% from 1%-2%. Adjusted earnings guidance remained $5.10-$5.30 per share.
Image Source: Zacks Investment Research
KR’s Digital Business Keeps Scaling
Adjusted e-commerce sales advanced 20% in the quarter, following 19% growth in the first quarter. New digital customers also increased 20%, while pickup perfect-order performance reached a record level and delivery orders completed in less than an hour continued to grow.
Kroger also delivered a second consecutive quarter of profitable e-commerce growth when combined with retail media. The company is emphasizing faster, store-based fulfillment as it works to reduce the cost to serve and improve reliability across digital grocery.
Kroger’s Media and Brands Support Profit Mix
Kroger Precision Marketing profit increased 24%, its best growth rate since 2021, while media monetization improved 88 basis points. First-party customer data covering 63 million households gives the business scale to support personalization and advertising activity.
Our Brands added another source of support. Sales outpaced national brands, penetration increased about 50 basis points and Private Selection sales rose more than 14%. Walmart Inc. (WMT - Free Report) , meanwhile, reported 24% Walmart U.S. e-commerce growth in its fiscal 2027 second quarter, showing how digital convenience remains a major competitive battleground in grocery retail.
KR Still Faces Pharmacy and Logistics Headwinds
Kroger’s 0.2% identical-sales growth excluding fuel absorbed about 265 basis points of combined pressure. The Inflation Reduction Act accounted for roughly 140 basis points, the shift from branded to generic prescriptions about 60 basis points, Cyclospora about 35 basis points and egg deflation about 30 basis points.
Higher shrink, transportation expenses, healthcare costs and customer-value investments also pressured results. Costco Wholesale Corporation (COST - Free Report) reported 7.2% adjusted U.S. comparable-sales growth and 19.8% adjusted digitally enabled growth in its fiscal fourth quarter, highlighting the competitive standard Kroger faces as rivals combine store traffic with digital expansion.
Kroger’s Signals Frame the Post-Earnings Setup
Digital growth is improving Kroger’s business mix, but the softer fiscal 2026 sales view means those gains still need to translate into broader sales productivity. Continued e-commerce profitability, media expansion and private-label momentum provide offsets, while pharmacy and logistics pressures remain important constraints.
KR currently carries a Zacks Rank #3 (Hold). It also has a VGM Score of A, Value Score of A, Growth Score of B and Momentum Score of D. The Style Scores point to favorable value and growth characteristics but weaker momentum, while the Zacks Rank indicates a more neutral near-term earnings-revision backdrop. That combination keeps the focus on execution rather than digital growth alone. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
View the Zacks #1 Rank List
Image: Bigstock
Can Kroger's Digital Growth Offset Its Softer Fiscal 2026 Sales View?
Key Takeaways
The Kroger Co. (KR - Free Report) exited the second quarter with a widening gap between digital momentum and core sales growth. Adjusted e-commerce sales rose 20%, but identical sales excluding fuel increased only 0.2%.
That contrast now defines the fiscal 2026 setup. Kroger’s digital, retail-media and private-label businesses are improving the profit mix, while a lower comparable-sales outlook and persistent cost pressure keep the top-line picture restrained.
The Kroger Co. Price, Consensus and EPS Surprise
The Kroger Co. price-consensus-eps-surprise-chart | The Kroger Co. Quote
Kroger’s Q2 Beat Came With a Sales Warning
Second-quarter fiscal 2026 adjusted earnings rose 4.8% year over year to $1.09 per share, beating the Zacks Consensus Estimate of $1.05. Cost savings, stronger pharmacy and fuel performance, and better e-commerce profitability supported earnings.
Total sales increased 2% to $34.62 billion but missed the consensus mark of $34.69 billion. Identical sales excluding fuel rose 0.2%, and Kroger cut its fiscal 2026 identical-sales outlook to 0.2%-0.8% from 1%-2%. Adjusted earnings guidance remained $5.10-$5.30 per share.
Image Source: Zacks Investment Research
KR’s Digital Business Keeps Scaling
Adjusted e-commerce sales advanced 20% in the quarter, following 19% growth in the first quarter. New digital customers also increased 20%, while pickup perfect-order performance reached a record level and delivery orders completed in less than an hour continued to grow.
Kroger also delivered a second consecutive quarter of profitable e-commerce growth when combined with retail media. The company is emphasizing faster, store-based fulfillment as it works to reduce the cost to serve and improve reliability across digital grocery.
Kroger’s Media and Brands Support Profit Mix
Kroger Precision Marketing profit increased 24%, its best growth rate since 2021, while media monetization improved 88 basis points. First-party customer data covering 63 million households gives the business scale to support personalization and advertising activity.
Our Brands added another source of support. Sales outpaced national brands, penetration increased about 50 basis points and Private Selection sales rose more than 14%. Walmart Inc. (WMT - Free Report) , meanwhile, reported 24% Walmart U.S. e-commerce growth in its fiscal 2027 second quarter, showing how digital convenience remains a major competitive battleground in grocery retail.
KR Still Faces Pharmacy and Logistics Headwinds
Kroger’s 0.2% identical-sales growth excluding fuel absorbed about 265 basis points of combined pressure. The Inflation Reduction Act accounted for roughly 140 basis points, the shift from branded to generic prescriptions about 60 basis points, Cyclospora about 35 basis points and egg deflation about 30 basis points.
Higher shrink, transportation expenses, healthcare costs and customer-value investments also pressured results. Costco Wholesale Corporation (COST - Free Report) reported 7.2% adjusted U.S. comparable-sales growth and 19.8% adjusted digitally enabled growth in its fiscal fourth quarter, highlighting the competitive standard Kroger faces as rivals combine store traffic with digital expansion.
Kroger’s Signals Frame the Post-Earnings Setup
Digital growth is improving Kroger’s business mix, but the softer fiscal 2026 sales view means those gains still need to translate into broader sales productivity. Continued e-commerce profitability, media expansion and private-label momentum provide offsets, while pharmacy and logistics pressures remain important constraints.
KR currently carries a Zacks Rank #3 (Hold). It also has a VGM Score of A, Value Score of A, Growth Score of B and Momentum Score of D. The Style Scores point to favorable value and growth characteristics but weaker momentum, while the Zacks Rank indicates a more neutral near-term earnings-revision backdrop. That combination keeps the focus on execution rather than digital growth alone. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.