KR · Q4 2025 Earnings

Cautious

Kroger

Reported March 5, 2026

30-second summary

Kroger closed FY25 with Q4 ID sales without fuel of 2.4% (including a ~38bps IRA headwind), FY25 adjusted EPS of $4.85 (above the $4.75–$4.80 guide), and FY26 adjusted EPS guidance of $5.10–$5.30 — a midpoint of $5.20, +7.2% vs FY25 actual $4.85, driven by e-commerce profitability, procurement savings, and productivity gains. The catch: FY26 ID sales guidance was set at 1.0–2.0%, a ~150bp deceleration from FY25's 2.9% actual, with ~130bps of that attributed to the Inflation Reduction Act pharmacy pricing headwind. New CEO Greg Foran (formerly Walmart US, Air New Zealand) used the call to reinforce that Kroger needs to grow sales faster, invest more aggressively in price, and pull unproductive costs out of the business. Adjusted FCF was guided to $2.7–$2.9B vs FY25's $3.868B adjusted actual on a 30% new-store acceleration and $3.8–$4.0B capex envelope.

Headline numbers

EPS

Q4 FY2025

$1.28

Revenue

Q4 FY2025

$34.73B

+1.2% YoY

Gross margin

Q4 FY2025

23.1%

Operating margin

Q4 FY2025

3.6%

Key financials

Q4 FY2025

Metric	Q4 FY2025	YoY	Q3 FY2025	QoQ
Revenue	$34.73B	+1.2%	$33.86B	+2.6%
EPS	$1.28	—	$1.05	+21.9%
Gross margin	23.1%	—	22.8%	+30bps
Operating margin	3.6%	—	-4.6%	+820bps

Guidance

FY2026 guidance significantly raised on profitability drivers, with adjusted EPS raised 8% midpoint and FIFO operating profit +5%, though identical sales growth decelerated from 2.8-3.0% to 1.0-2.0% due to persistent egg deflation and commodity softness.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Identical Sales without Fuel	Q4 FY2025	Expected to be lower by 30-40 basis points (vs. full-year run-rate of 2.8-3.0%)	2.4%	in-line with directional guidance	Met

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Adjusted EPS	FY 2026	$4.75 - $4.80	$5.10 - $5.30	+$0.30 to +$0.55 (midpoint +$0.38, +8.1%)	Raised
Identical Sales without Fuel	FY 2026	2.8% - 3.0%	1.0% - 2.0%	-1.0 to -1.8 points (midpoint -1.5pts)	Raised
FIFO Operating Profit	FY 2026	$4.8 - $4.9 billion	$5.0 - $5.2 billion	+$0.1 to +$0.4 billion (midpoint +$0.25B, +5.1%)	Raised
Free Cash Flow	FY 2026	$2.8 - $3.0 billion	$2.7 - $2.9 billion	-$0.1 to -$0.1 billion (midpoint -$0.1B, -3.3%)	Lowered
Capital Expenditures	FY 2026	$3.6 - $3.8 billion	$3.8 - $4.0 billion	+$0.2 to +$0.2 billion (midpoint +$0.2B, +5.6%)	Raised
Tax Rate	FY 2026	22%	23%	+100 basis points	Raised

Platform metrics

Q4 FY2025

Segment	Q4 FY2025
Identical Sales without Fuel (Q4)	2.4%
Identical Sales without Fuel (FY2025)	2.9%
eCommerce Sales Growth (Q4)	20%
Full-Year eCommerce Sales	$16.0 billion

Profitability

Q4 FY2025

Segment	Q4 FY2025
Operating Margin (Q4)	3.6%
Net Total Debt to Adjusted EBITDA	1.76x
Adjusted EBITDA (FY2025)	$8.224 billion

Other KPIs

Q4 FY2025

Segment	Q4 FY2025
Share Repurchases Completed	$7.5 billion

Management tone

Q1 (Ron Sargent / Chairman): New-CEO search, store closures → Q2: Restructuring executing → Q3: KAF closure decision, middle-income pullback → Q4 (Greg Foran / permanent CEO): Operational focus on price, fresh, e-commerce; explicit acknowledgment that Kroger needs to grow sales faster.

The permanent CEO appointment shifts the call's posture toward operational urgency. Greg Foran (formerly Walmart US, Air New Zealand) inherited a strategic agenda — KAF closures, 30% new-store acceleration, e-commerce profitability commitment — and framed his early focus on growing the top line faster, with price as "an important part of that equation." From prepared remarks: "We need to grow sales faster. And in my experience, that comes down to giving customers a compelling reason to shop with you by offering great value, great products, and a great experience." Chairman Ron Sargent framed FY25 as "strong progress" and a "foundation for long-term growth"; Foran framed his job as operationalizing the strategy and pulling unproductive costs out of the business to fund price investment.

Operational focus centers on running great stores and execution consistency. Foran was explicit in prepared remarks: "running great stores is how you make that happen. It's about delivering a great experience consistently, in every store, on every visit, whether shopping in-store or online." The emphasis on consistency — and on fresh as a confidence-building category as e-commerce accelerates — implies that store-level execution variability is on management's near-term watch list.

The "savings can fund price investment" thesis from Q2–Q3 was reaffirmed. Foran in prepared remarks: "To invest more aggressively in the customer experience, we have to be disciplined and aggressive on costs. I see significant opportunity here, and we're going after every available margin dollar across the business." CFO David Kennerley framed 2026 price investments as funded by FIFO gross margin rate improvement through procurement and productivity. The FY26 EPS guide bakes in those savings; if a subsequent update softens the savings math, the $5.10–$5.30 range gets harder to defend.

E-commerce profitability was reaffirmed at $400M for 2026. The press release explicitly states the completed e-commerce strategic review is expected to deliver $400M in e-commerce operating profit improvement in 2026 — the Q3 framing was reaffirmed, not retired. The hybrid fulfillment model leveraging stores and third-party delivery providers (Instacart, DoorDash, Uber Eats) is the operational mechanism, with the convenience offerings expected to deliver over $1.5B in sales in 2026.

Recurring themes management leaned on this quarter:

Need to accelerate top-line growth through unit volume increasesPrice investment and value perception critical but under-quantifiedE-commerce profitability target of H1 2026 (vs. full year prior)AI and agentic shopping as productivity and customer experience leverCost structure optimization (sourcing, procurement, Kroger Capability Centre) funding growth investmentsMarket share inflection still fragile; positive only in period 13, not Q4

Risks management surfaced:

Inflation Reduction Act creating 130 bps headwind to 2026 identical salesPharmacy sales growth moderating to low-to-mid single digits due to IRA and brand-to-generic shiftEgg deflation headwind in Q1 2026Competitor response to Kroger's pricing investments (price war risk)Execution risk on cost savings math not validated until end of 2026New store profitability and maturation curve timeline uncertain

Answers to last quarter's watch list

Q4 OG&A rate — Disclosed in the press release: OG&A rate excluding fuel and adjustment items increased 21bps YoY in Q4, attributed to cycling real estate gains and labor investments to improve customer experience, partially offset by lower incentive plan costs and improved productivity. Status: Resolved negatively (deleverage continued)

Q4 ID sales ex-fuel vs. the IRA headwind framing — 2.4% including a ~38bps IRA headwind ("nearly 40 basis point headwind" per transcript). IRA impact landed as forecast; underlying volume in line with expectations. Status: Continue monitoring (rolls forward as FY26's 1.0–2.0% guide is materially below the underlying Q4 run-rate)

Whether the middle-income consumer commentary deepens in Q4 — Prepared remarks noted customers "remain focused on value" consistent with trends throughout the year. The FY26 ID sales cut to 1.0–2.0% (2.3–3.3% ex-IRA) implies the consumer environment has not improved. Status: Resolved negatively

FY26 capex envelope — $3.8–$4.0B, midpoint $3.9B vs. FY25 guide of $3.6–$3.8B. Above the prior watch's $4.0B threshold at the high end but not breaching it at the midpoint. Adjusted FCF was simultaneously guided down, confirming the capex acceleration is real cash. Status: Resolved negatively (capex is up enough to compress FCF, as flagged)

Realized KAF closure savings cadence — The press release confirms the $400M e-commerce operating profit improvement is expected in 2026, and CFO noted a $350M sales headwind from Florida Fulfillment Center closure. No slippage disclosed. Status: Resolved positively

Permanent CEO appointment — Greg Foran (formerly Walmart US, Air New Zealand) appointed. Pre-committed agenda (KAF, store acceleration, e-commerce profitability) intact; Foran deferred specifics on pricing math to later in the year as he completes his strategic review. Status: Resolved neutrally

Colorado labor outcome — Not addressed in the press release prepared-remarks summary; the company didn't disclose an updated status. Status: Continue monitoring

What to watch into next quarter

Q1 FY26 ID sales ex-fuel vs. the "near the low end" framing (~1.0%) — a print below 0.5% would put even the floor of the FY26 1.0–2.0% range at risk and force a guidance cut before management has a full picture of the year.

Whether the $400M e-commerce profitability contribution holds as a discrete disclosure as the year unfolds — the press release reaffirmed the figure; watch the Q1 call for either continued explicit disclosure (positive signal) or dilution into a combined "procurement + e-commerce + productivity" bucket (negative signal).

Greg Foran's first sized pricing disclosure — Foran committed to sharing more detail "at an appropriate time before the end of the year." Any FY26 price-investment number above $500M reframes the gross margin trajectory and increases the risk that procurement savings don't fully fund the gap closure.

FY26 OG&A trajectory — Q3 deleveraged 27bps; Q4 deleveraged 21bps. The 30% new-store acceleration adds OG&A pressure; the corporate-role reductions and Kroger Global Capability Center savings should offset. A Q1 FY26 OG&A deleverage above 30bps would put the operating profit guide raise at risk.

Continuation of positive share trends — Kroger reported positive share gains in the final period of FY25, its strongest share performance since 2021. Multiple consecutive periods of share gains in Q1 would validate that the pricing investments are working.

Colorado labor outcome — still unresolved since Q1 FY25.

Sources

Kroger Q4 FY2025 press release, filed via SEC EDGAR — https://www.sec.gov/Archives/edgar/data/56873/000110465926023800/tm267907d1_ex99-1.htm
Kroger Q4 FY2025 earnings call prepared remarks and Q&A (Ron Sargent, David Kennerley, Greg Foran; analyst Q&A from Christina Katai/Deutsche Bank, Michael Lasser/UBS, Leah Jordan/Goldman Sachs)
Tapebrief Q1, Q2, and Q3 FY2025 KR briefs (for prior guidance baselines and watch-list continuity)

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