CINCINNATI — Kroger reported higher second-quarter sales and earnings growth Friday, while trimming its full-year identical sales outlook amid what executives described as a challenging macroeconomic environment.
The grocery giant said total sales for the quarter ended Aug. 15 rose to $34.6 billion from $33.9 billion a year earlier. Excluding fuel, the sale of Vitacost and the closure of certain fulfillment centers, sales increased 0.1% year over year.
Adjusted earnings per diluted share increased 5% during the quarter, prompting Kroger to reaffirm its full-year earnings guidance. However, the company lowered its forecast for identical sales excluding fuel to a range of 0.2% to 0.8%.
"Kroger delivered a solid second quarter, with adjusted EPS growth of 5 percent," chairman and CEO Greg Foran said. "Our teams kept driving value for customers, improving execution in our stores, growing eCommerce profitably and managing costs with discipline."
Foran said improving sales momentum remains a top priority, adding that he remains confident in the company's strategy to become "America's favorite grocer."
Gross margin declined slightly to 22.4% of sales from 22.5% in the year-ago period. Kroger attributed the decrease to higher fuel sales, increased shrink, rising transportation costs and greater value investments for customers. Those pressures were partially offset by stronger e-commerce profitability, growth in its retail media business, favorable pharmacy performance, sourcing initiatives, tariff refunds and a lower LIFO inventory charge.
On a FIFO basis, excluding rent, depreciation, amortization and fuel, gross margin improved 13 basis points from a year earlier. The gain was driven by improvements in e-commerce profitability and media, pharmacy mix, sourcing efforts and tariff-related benefits.
The company recorded a LIFO charge of $39 million in the quarter, compared with $62 million a year ago.
Meanwhile, Kroger's operating, general and administrative expense rate, excluding fuel and adjustment items, increased 33 basis points year over year. The company said the increase reflected investments in associate wages, higher healthcare costs and sales deleverage, partially offset by lower incentive compensation expenses and productivity initiatives.
Chief financial officer David Kennerley said Kroger's profitability was supported by cost savings, strong pharmacy and fuel performance, and improving e-commerce economics.
"Given our first half results and the macro environment, we are updating our identical sales without fuel guidance to a new range of 0.2% to 0.8%, which includes an approximately 140 basis point headwind from the Inflation Reduction Act," Kennerley said.
Despite the lower sales forecast, Kroger reaffirmed its adjusted FIFO net operating profit and adjusted earnings per share guidance for the fiscal year.
The retailer also highlighted its capital return efforts. Earlier this quarter, Kroger increased its dividend by 11%, marking its 20th consecutive year of dividend increases. During the second quarter, the company repurchased $1 billion in shares and has bought back $1.2 billion year to date under a $2 billion authorization approved in December 2025. Approximately $800 million remains available for repurchases, which Kroger expects to complete by the end of fiscal 2026.
Kroger's net total debt-to-adjusted EBITDA ratio stood at 1.91 at the end of the quarter, compared with 1.63 a year ago. The company said the figure remains below its target range of 2.30 to 2.50, providing flexibility to invest in growth initiatives while returning capital to shareholders.
Looking ahead, Kroger plans to provide additional details on its strategic priorities and long-term financial targets during an investor update meeting scheduled for Oct. 20, 2026.
