Kroger Co.

Core results & momentum (good): Kroger delivered identical sales ex-fuel of +1% in Q1 2026, led by eCommerce, fresh, and Our Brands. Grocery mix increased as a share, reinforcing improving underlying core grocery trends. eCommerce grew +19%, aided by improved delivery performance (notably better “perfect order” rates +8%) and a record number of new households.

Profitability/financial performance (mixed but improving): Adjusted EPS was $1.58 (+6% YoY) and adjusted FIFO operating profit was ~$1.5B. FIFO gross margin rate (ex-rent/depr/amort, fuel, and adjustments) declined 9 bps YoY, mainly driven by unexpected transportation costs, egg deflation, and planned pricing investments, partially offset by pharmacy mix, improved eCommerce profitability, and sourcing benefits. Company expects FIFO gross margin to remain positive full-year, with cost savings ramping through the year.

Key challenges & headwinds (bad/risks): - Customer pressure: higher gas prices and reduced SNAP benefits squeezed budgets; traffic improved (value message landing) but food-at-home growth decelerated ~100 bps vs last quarter. - Pharmacy headwinds: brand-to-generic shift created an additional ~40 bps headwind (total company) plus ~130 bps headwind from the Inflation Reduction Act; management notes pharmacy profit still grew ahead of expectations, but the headwinds persist. - Transportation/oil risk: diesel/oil impacts created ~15 bps pressure in the quarter; expect some pressure to persist while oil markets remain elevated.