The Kroger Co.

Kroger reported first-quarter identical sales excluding fuel of 1%. Adjusted FIFO operating profit was $1.5 billion, and adjusted EPS was $1.58, up 6% versus last year. FIFO gross margin rate, excluding rent, depreciation and amortization, fuel, and adjustment items, declined 9 basis points year over year; OG&A rate excluding fuel and adjustment items increased 16 basis points. The company said eCommerce, including media, became profitable in the quarter, eCommerce grew 19%, and media grew over 20%. For the second quarter, Kroger expects identical sales excluding fuel to be roughly in line with Q1 and adjusted net earnings per diluted share to be in line with last year. Kroger reaffirmed full-year guidance, citing continued cost savings, improving eCommerce profitability, media growth, and disciplined value investment.

Greg Foran positioned the quarter as evidence that Kroger has strong assets but needs sharper execution, lower costs, and simpler value messaging. He emphasized a five-part operating focus — fresh, fast, for you, friendly, and affordable — and said the company does not need to be the lowest-price retailer, only more competitive and easier for customers to understand. His tone was candid and reform-minded, repeatedly stressing that cost growth ahead of sales is unacceptable and that the business must move faster.

David Kennerley said the quarter supported the strategy financially, with 1% identical sales ex fuel, $1.5 billion of adjusted FIFO operating profit, and $1.58 adjusted EPS, up 6%. He pointed to a 9 basis point decline in FIFO gross margin rate, driven mainly by 15 basis points of transportation pressure, egg deflation, and planned pricing investments, partly offset by pharmacy mix, eCommerce profitability, and sourcing benefits. OG&A increased 16 basis points from deliberate investments in associates, hours, training, and uniforms. He also noted net total debt to adjusted EBITDA of 1.75x versus a 2.3x-2.5x target range, said COGS savings were 30% ahead of plan, and reiterated that savings are sufficient to fund price investments.

Analysts pressed management on how quickly Kroger can close the execution gap between best and worst stores, how much pricing investment is needed, and whether the company can sustain volume improvement in a weak food market. Foran said the opportunity is being tackled store by store through more time in the field, simpler operations, and tighter standards, while Kennerley said Kroger is seeing its best unit market share performance in two to three years. On pricing, management said the strategy is surgical and funded by cost savings, with more detail due at the October 20 investor update; they declined to quantify the size of the opportunity. Questions also focused on pharmacy headwinds and freight costs, with management saying the IRA and brand-to-generic shift are top-line headwinds but neutral or positive to profit, while transportation cost pressure was about 15 basis points in the quarter and is expected to remain a manageable headwind.