Published 2h ago2026-09-11 09:41:22

Kroger Lowers Full-Year Identical Sales Growth Outlook Following Fiscal Second-Quarter Revenue Miss

Kroger (KR) lowered its full-year identical sales growth outlook on Friday as the metric decelerated year over year in the fiscal second quarter and missed market estimates, while the supermarket chain's revenue fell short of expectations.

The company now anticipates identical sales, excluding fuel, to increase by 0.2% to 0.8% for fiscal 2026, including a headwind of about 140 basis points from the Inflation Reduction Act. Kroger previously projected the metric to grow 1% to 2%, while the current consensus on FactSet is for a gain of 1.3%.

The Inflation Reduction Act is a US law passed in 2022 that included measures to lower prescription drug costs for Medicare patients.

"The update reflects our first half results, together with pressures that remain in the balance of year in the opening weeks of the third quarter," Chief Financial Officer David Kennerley said during a conference call, according to a FactSet transcript.

Identical sales without fuel rose 0.2% in the quarter ended Aug. 15, down from 3.4% the year before and below the Street's view of 0.8%. Overall revenue advanced to $34.62 billion from $33.94 billion, but missed the average analyst estimate of $34.64 billion.

"The top line was soft across the industry this quarter," Chief Executive Greg Foran said on the call. "We know that fuel over $4 has an impact on consumer spend."

US retail gasoline prices averaged $4.2950 per gallon on Friday, compared with $4.1474 a week ago and $4.0116 a month prior, according to AAA motor club data that tracks fuel prices in the US.

In a client note emailed last week, Oppenheimer said it expected Kroger's second-quarter identical sales to underperform amid a challenging grocery business environment, likely prompting a full-year outlook revision.

The supermarket chain continues to expect adjusted earnings to be in a range of $5.10 to $5.30 per share for the ongoing fiscal year, while the Street is looking for $5.20. In the second quarter, adjusted EPS climbed to $1.09 from $1.04, surpassing the market's view for $1.06, buoyed by cost savings, robust pharmacy and fuel performance and improving e-commerce profitability, Kennerley said in the earnings release.

Kroger expects identical sales without fuel to be "slightly better" in the third quarter than in the subsequent three-month period, "despite a lower sales outlook," Kennerley said on the call. The company sees additional sales headwinds in the fourth quarter, with the impact from the Inflation Reduction Act projected to rise to about 150 basis points as new high-cost drugs are added to the formulary, the CFO noted.

Last month, retail giant Walmart (WMT) reported fiscal second-quarter US comparable sales growth that decelerated more than Wall Street expected amid a pharmacy-related headwind. In July, grocery chain Albertsons (ACI) lowered its fiscal 2026 earnings and identical sales outlook.

Warehouse chain Costco (COST) is scheduled to release its latest financial results on Sept. 24.

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