Shares of Kroger surged nearly 9% on Friday following the supermarket chain’s announcement of an upgraded full-year sales forecast, highlighting an influx of customers choosing its budget-friendly store brands and affordable dining alternatives.
The Cincinnati-based retailer now anticipates identical sales, excluding fuel, to rise between 2.25% and 3.25% year-on-year, surpassing its earlier projections of 2% to 3%. The term “identical sales” refers to a retail industry metric that discards one-time factors like store openings, closures, and renovations. Sales figures include stores and delivery operations that have been open for a minimum of five full quarters.
This year, Kroger’s shares have appreciated nearly 16%, significantly outperforming the S&P 500’s modest 1% gain over the same period.
In its fiscal first quarter results, Kroger’s performance compared to analyst expectations as per a survey by LSEG reveals:
- Earnings per share: $1.49 (adjusted) vs. $1.46 expected
- Revenue: $45.12 billion vs. $45.19 billion
Kroger recorded net sales of $866 million, or $1.29 per share, for the three months ending May 24. Identical sales, excluding fuel, increased by 3.2% compared to the same quarter last year, with growth driven by its pharmacy, e-commerce, and fresh grocery lines. The company witnessed a remarkable 15% year-on-year increase in e-commerce sales.
The retailer has encountered significant shifts over the past year, including a judge’s disapproval of its $25 million merger with competitor Albertsons in December. Additionally, CEO Rodney McMullen stepped down in March following a personal conduct investigation, and Kroger is currently engaged in legal disputes regarding the halted merger.
Recently, Kroger appointed David Kennerley, formerly of PepsiCo Europe, as its new CFO after ex-CFO Gary Millerchip transitioned to Costco.
Kroger faces increased competition from rivals such as Walmart and Costco, particularly as consumers become more cautious with their spending amid rising tariff uncertainties.
During an earnings call with analysts on Friday, interim CEO Ron Sargent indicated that Kroger is adapting to the shift towards value-seeking customers. The company has simplified its promotions, reduced prices on over 2,000 items this year, and is emphasizing its private label products, which are typically less expensive.
“Many customers want more value, and as a result, they are purchasing more promotional products and our own brand items,” Sargent noted. “They are also opting to prepare more meals at home.”
Kroger has observed a trend in customers purchasing larger pack sizes, using coupons more frequently, and cutting back on discretionary purchases like snacks and alcoholic beverages.
The company’s private label offerings have emerged as a significant growth factor, with Kroger’s own brands outpacing national brands for seven straight quarters. The leading brands include Simple Truth, known for its organic range, and Private Selection, which features gourmet items like brioche dinner rolls and lobster mac and cheese.
Sargent mentioned plans to build on this momentum as well as health trends by introducing 80 new protein items to the Simple Truth line, including protein bars and shakes.
While Kroger primarily sources food from U.S. suppliers, Sargent noted that it has been relatively insulated from the impact of higher tariffs on foreign imports. Nonetheless, for products that are imported, like fruits and vegetables, the company is actively seeking ways to maintain price stability for customers, treating cost increases as a last resort.
“Tariffs have not materially affected our business thus far. Based on current knowledge, we do not foresee any future impact,” he stated.
Kroger is also diligently reviewing its costs to modernize operations and make its e-commerce platform closer to achieving profitability, as this segment, which includes curbside pickup and home deliveries, is currently unprofitable.
As part of its strategy, the company plans to close approximately 60 stores over the next 18 months, resulting in a $100 million impairment charge for the first quarter.
Sargent explained that the company had halted its annual store review during the merger discussions, and not all locations were yielding the desired sustainable results. Therefore, Kroger is now catching up on closing unprofitable stores while also planning to launch new locations in regions with higher growth potential, with an acceleration of openings expected in 2026.
The search for Kroger’s next CEO is ongoing, with Sargent confirming that the company board is collaborating with a search firm, though no updates are available at this time.
