One of the largest U.S. grocery chains, Kroger runs thousands of supermarkets, pharmacies, and fuel centers, along with pickup and delivery service, and sells its own store brands like Private Selection, Smart Way, and organic Simple Truth. It began in 1883 when a 23-year-old Cincinnati grocer, Bernard Kroger, opened a shop called the Great Western Tea Company; the store kept that tea-company name for years before adopting its founder's surname. A fun detail: "Kroger" is a German surname meaning innkeeper.
Kroger's identical sales growth slowed to 1.0% in Q1 FY2026 as fuel prices drove the top line.
Underlying sales growth decelerated sharply. Total rose 34.4% to $46.1 billion, driven by a 21.3% increase in supermarket fuel sales, but excluding fuel and a labor dispute grew just 1.0%, down from 3.2% a year ago, while adjusted rose 6% to $1.58 on a lower share count. The core grocery business is losing momentum even as fuel prices inflate the reported results.
Key takeaways
excluding fuel and a labor dispute rose 1.0%, a clear deceleration from 3.2% in the prior-year quarter, as a 130-basis-point from the Inflation Reduction Act and 64 from egg deflation weighed on growth.
Total rose 34.4% to $46.1 billion, but the increase was driven by a 21.3% rise in supermarket fuel sales from higher retail fuel prices, not by volume in the core grocery business.
The rate excluding fuel and adjusted items fell 9 , pressured by higher transportation costs, egg deflation, and price investments, partly offset by stronger pharmacy margins and improved eCommerce profitability.
Section summaries
Management's Discussion and Analysis
Kroger Q1 FY2026 sales rose 2.2% to $46.1B, driven by fuel prices; adjusted EPS grew 6% to $1.58 on lower share count.
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Total sales increased 2.2% to $46.1 billion, primarily due to a 21.3% jump in supermarket fuel sales from higher retail fuel prices, while excluding fuel and a labor dispute rose 1.0%.
Adjusted rose 6% to $1.58, helped by a lower share count from the $3.4 billion in buybacks executed in FY2025, while EPS rose 65.8% to $1.46 as the prior-year quarter included $100 million in store closure costs.
was $1.8 billion, down from $2.1 billion a year ago, reflecting less favorable cash flows; capital investments rose to $1.5 billion on timing of store projects.
The company repaid $500 million of 3.5% senior notes, reducing total debt by $571 million from year-end, while returning $428 million to shareholders through buybacks and dividends.
What changed
excluding fuel growth of 1.0% fell well short of the 2.9% rate reported for FY2025 and the 3.2% rate in Q1 FY2025, confirming that the pharmacy sale benefit is now fully lapped and that the underlying growth rate has stepped down.
The rate excluding fuel contracted 9 , reversing the 44-basis-point expansion reported for FY2025, as transportation costs and price investments replaced the prior year's tailwinds from lower shrink and supply chain savings.
The $100 million in store closure costs recorded in Q1 FY2025 did not repeat, removing a earnings and contributing to the 65.8% increase in reported .
The restructuring program flagged in prior quarters—including $100 million in store closure costs in Q1 FY2025 and $47 million in severance in Q2 FY2025—did not see new charges this quarter, suggesting the major actions may be complete.
What to watch
excluding fuel growth in Q2 FY2026, to see whether the 1.0% rate represents a new baseline or if growth recovers as the Inflation Reduction Act and egg deflation headwinds ease.
The trajectory of the rate excluding fuel, to determine if the 9-basis-point contraction is the start of a trend driven by sustained transportation cost pressure and price investments.
The pace of share repurchases, given the $213 million in buybacks this quarter versus the $3.4 billion executed in FY2025, to see if management sustains the elevated pace or prioritizes further debt reduction.
Whether the labor dispute that reduced growth this quarter is resolved, and if any associated costs or sales recovery appear in Q2.
growth was led by eCommerce (up 13%), pharmacy, Fresh, and Our Brands, partially offset by a 130-basis-point from the Inflation Reduction Act and 64 from egg deflation.
excluding fuel and adjusted items fell 9 , pressured by higher transportation costs, egg deflation, and price investments, partly offset by stronger pharmacy margins and improved eCommerce profitability.
rate excluding fuel and adjusted items rose 16 due to planned associate investments and higher maintenance costs, partially mitigated by cost-saving initiatives and lower pension contributions.
was $1.8 billion, down from $2.1 billion a year ago, largely reflecting less favorable cash flows; capital investments rose to $1.5 billion on timing of store projects.
The company repurchased $213 million in shares and paid $215 million in dividends; total debt decreased $571 million from year-end after repaying $500 million of 3.5% senior notes.
Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in our exposure to market risk from the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026. As of May 23, 2026, we had no…
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There have been no material changes in our exposure to market risk from the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026.
As of May 23, 2026, we had no forward-starting interest rate swap agreements or treasury lock agreements outstanding.
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Incorporated by reference herein is information regarding certain legal proceedings in which we are involved as set forth under “Litigation” contained in Note 5 – “Commitments and Contingencies” in the Notes to the Consolidated Financial Statements in Item 1 of Part I of this…
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Incorporated by reference herein is information regarding certain legal proceedings in which we are involved as set forth under “Litigation” contained in Note 5 – “Commitments and Contingencies” in the Notes to the Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q.
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