Kroger beats sales estimates as shoppers hunt for deals

CINCINNATI — Kroger topped Wall Street’s sales expectations in the first quarter and kept its full-year outlook unchanged Thursday, but executives warned that consumers remain cautious and increasingly focused on promotions as inflationary pressures are expected to intensify later this year.

The grocery retailer reported first-quarter sales of $46.1 billion, beating analysts’ estimates of $45.5 billion and up from $45.1 billion a year ago. Identical sales excluding fuel increased 1%, adjusted e-commerce sales rose 19%, and profit from Kroger Precision Marketing grew more than 20%.

Net earnings totaled $903 million, or $1.46 per diluted share, compared with $866 million, or $1.29 per diluted share, in the year-ago quarter. Adjusted earnings per share came in at $1.58, narrowly missing analysts’ expectations by a penny.

“Customers are being more deliberate with their spending and at times, shopping us selectively. We’re getting too many promotional trips and not enough of the full basket,” CEO Greg Foran said.

The comments underscore the ongoing pressure on grocers as shoppers seek value and stretch household budgets. Kroger said food-at-home growth slowed by about 100 basis points from the previous quarter, reflecting a more cautious consumer environment.

To drive traffic and defend market share against rivals such as Walmart and Costco, Kroger is expanding price investments across thousands of items. The company said those efforts will be supported by direct-sourcing initiatives, productivity improvements and technology investments.

“We are pleased with our first quarter results, but we know there is more work to do,” Foran said. “That is why we are building a culture that is never satisfied, with a constant focus on serving our customers better.”

Gross margin declined to 22.7% from 23.0% a year earlier, reflecting the impact of higher transportation costs, a greater mix of lower-margin fuel sales, egg deflation and planned price investments. Those pressures were partially offset by a favorable pharmacy mix, improved e-commerce profitability and sourcing benefits.

Operating profit rose to $1.41 billion, up from $1.32 billion a year ago, despite higher spending on associate wages and labor hours to improve the customer experience.

Looking ahead, Kroger reaffirmed its fiscal 2026 guidance, including identical sales growth excluding fuel of 1% to 2%, FIFO operating profit of $5.0 billion to $5.2 billion, and adjusted earnings per share of $5.10 to $5.30. The company also expects free cash flow of $2.7 billion to $2.9 billion.

The outlook comes as Kroger anticipates inflationary pressures will intensify in the second half of the year, adding another challenge for retailers competing for increasingly value-conscious shoppers. Shares fell in early trading after the earnings report as investors weighed the company’s inflation warning and ongoing margin pressures.