Kroger Reports Second Quarter 2026 Results
· Adjusted eCommerce sales grew +20%1; Kroger Precision Marketing profit grew +24%
CINCINNATI, September 11, 2026 – The Kroger Co. (NYSE: KR) today reported results for its second quarter ended August 15, 2026. Kroger reaffirmed its full-year adjusted net earnings per diluted share guidance, lowered its full-year 2026 identical sales without fuel guidance, and shared progress on key priorities.
“Kroger delivered a solid second quarter, with adjusted EPS growth of 5 percent. I am pleased with the progress we are making. Our teams kept driving value for customers, improving execution in our stores, growing eCommerce profitably and managing costs with discipline. Improving sales momentum remains a top priority. While there is more work to do, I am confident in our plan to become America's favorite grocer."
Adjusted eCommerce sales exclude the effect of fulfillment center exits in markets where Kroger does not operate stores, the sale of Vitacost, and the discontinuation of Ship Marketplace. 1 Second Quarter Financial Results
2Q26 2Q25 ($ in millions; except ($ in millions; except EPS) EPS) ID Sales(1) (Table 4) 0.2% 3.4% Earnings Per Share $1.05 $0.91 Adjusted EPS (Table 6) $1.09 $1.04 Operating Profit $971 $863 Adjusted FIFO Operating $1,076 $1,091 Profit (Table 7) Gross Margin (Table 8) 22.4% 22.5% FIFO Gross Margin Increased 13 basis points Rate(2) OG&A Rate(3) Increased 33 basis points
Without fuel and includes an unfavorable 138 basis point impact from the Inflation Reduction Act.
Without rent, depreciation and amortization, fuel and adjustment items, if applicable.
Total company sales were $34.6 billion in the second quarter compared to $33.9 billion for the same period last year. Excluding fuel, the sale of Vitacost and the exit of certain fulfillment centers, sales increased 0.1% compared to the same period last year.
Gross margin was 22.4% of sales for the second quarter compared to 22.5% for the same period last year. The decrease in rate was primarily driven by the mix effect of higher fuel sales, higher shrink, higher transportation costs and greater value delivered for customers. These pressures were partially offset by improvement in eCommerce profitability and media, favorable pharmacy mix, sourcing initiatives, tariff refunds, the decreased LIFO charge and depreciation and amortization.
The FIFO gross margin rate, excluding rent, depreciation and amortization, and fuel increased 13 basis points compared to the same period last year. The improvement was primarily driven by improvement in eCommerce profitability and media, favorable pharmacy mix, sourcing initiatives and tariff refunds. These benefits were partially offset by higher shrink, higher transportation costs and greater value delivered for customers.
The LIFO charge for the quarter was $39 million, compared to a LIFO charge of $62 million for the same period last year.
The Operating, General and Administrative rate, excluding fuel and adjustment items, increased 33 basis points compared to the same period last year. The increase was primarily attributable to planned investments in associate wages, increased health care costs, and sales deleverage, partially offset by lower incentive plan costs and ongoing productivity initiatives.
Kroger expects to continue to generate strong free cash flow and remains committed to investing in the business to drive long- term sustainable net earnings growth, as well as maintaining its current investment grade debt rating. The Company expects to continue to pay its quarterly dividend and expects this to increase over time, subject to board approval.
Earlier this quarter, Kroger increased its dividend by 11%, marking the 20th consecutive year of dividend increases. Additionally, during the quarter, Kroger repurchased $1.0 billion in shares and year-to-date has repurchased $1.2 billion in shares under the $2 billion board authorization announced in December 2025. As of the end of the second quarter, approximately $800 million remains of the authorization, and Kroger expects to complete the remaining repurchases by the end of fiscal 2026. 2 Kroger’s net total debt to adjusted EBITDA ratio is 1.91, compared to 1.63 a year ago (Table 5). The company’s net total debt to adjusted EBITDA ratio target range is 2.30 to 2.50. Kroger’s strong balance sheet provides ample opportunities for the Company to invest in the business and enhance shareholder value.
* Without adjusted items, if applicable. Kroger is unable to provide a full reconciliation of the GAAP and non-GAAP measures used in 2026 guidance without unreasonable effort because it is not possible to predict certain of our adjustment items with a reasonable degree of certainty. This information is dependent upon future events and may be outside of our control and its unavailability could have a significant impact on 2026 GAAP financial results.
** Includes approximately 140 basis points unfavorable impact from the Inflation Reduction Act.
*** The adjusted tax rate reflects typical tax adjustments and does not reflect changes to the rate from the completion of income tax audit examinations and changes in tax laws and policies, which cannot be predicted.
“Our second quarter results demonstrate the resiliency of Kroger's business model and the discipline with which our teams are executing. Adjusted earnings per diluted share grew 5%, driven by cost savings, strong pharmacy and fuel performance, and improvement in the profitability of our eCommerce business.
Given our first half results and the macro environment, we are updating our identical sales without fuel guidance to a new range of 0.2% to 0.8%, which includes an approximately 140 basis point headwind from the Inflation Reduction Act. We are reaffirming our adjusted FIFO net operating profit and adjusted earnings per diluted share guidance, reflecting our confidence and visibility into the same factors that drove our profitability in the second quarter. We will continue to invest in the business for growth, manage our margins with discipline and create long-term shareholder value.” 3 Kroger will host an investor update meeting on October 20, 2026. Additional details regarding the Company’s strategic initiatives and longer-term financial targets will be shared at that event.
The Kroger Co. (NYSE: KR) is one of America’s largest retailers, serving more than 11 million customers daily through a digital shopping experience and retail food stores under a variety of banner names. With more than 400,000 associates across our family of companies, Kroger is committed to providing America with affordable, great-tasting food and creating #ZeroHungerZeroWaste communities. To learn more about us, visit our newsroom and investor relations site.
Note: Fuel sales have historically had a low gross margin rate and operating expense rate as compared to corresponding rates on non-fuel sales. As a result, Kroger discusses the changes in these rates excluding the effect of fuel.
Please refer to the supplemental information presented in the tables for reconciliations of the non-GAAP financial measures used in this press release to the most comparable GAAP financial measure and related disclosure. As noted above, Kroger is unable to provide a full reconciliation of the GAAP and non-GAAP measures used in its guidance without unreasonable effort because it is not possible to predict certain of our adjustment items with a reasonable degree of certainty. This information is dependent upon future events and may be outside of our control and its unavailability could have a significant impact on GAAP financial results.
This press release contains certain statements that constitute “forward-looking statements” about Kroger’s financial position and the future performance of the company. These statements are based on management’s assumptions and beliefs in light of the information currently available to it. Such statements are indicated by words or phrases such as “achieve,” “committed,” “confidence,” “continue,” “drive,” “expect,” “focused,” “future,” “guidance,” “may,” “model,” “opportunities,” “outlook,” “remain,” “strategy,” “target,” “trends,” “visibility,” “will,” and variations of such words and similar phrases. Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. These include the specific risk factors identified in “Risk Factors” in our annual report on Form 10-K for our last fiscal year and any subsequent filings, as well as the following: 4 Kroger's ability to achieve sales, earnings, incremental FIFO operating profit, and adjusted free cash flow goals may be affected by: labor negotiations; potential work stoppages; changes in the unemployment rate; pressures in the labor market; changes in government-funded benefit programs; changes in the types and numbers of businesses that compete with Kroger; pricing and promotional activities of existing and new competitors, and the aggressiveness of that competition; Kroger's response to these actions; the state of the economy, including interest rates, the inflationary, disinflationary and/or deflationary trends and such trends in certain commodities, products and/or operating costs; the geopolitical environment including wars and conflicts; unstable political situations and social unrest; changes in tariffs; the effect that fuel costs have on consumer spending; volatility of fuel margins; manufacturing commodity costs; supply constraints; diesel fuel costs related to Kroger’s logistics operations; trends in consumer spending; the extent to which Kroger’s customers exercise caution in their purchasing in response to economic conditions; the uncertainty of economic growth or recession; stock repurchases; changes in the regulatory environment in which Kroger operates, along with changes in federal policy and at state and federal regulatory agencies; Kroger’s ability to retain pharmacy sales from third party payors; consolidation in the healthcare industry, including pharmacy benefit managers; Kroger’s ability to negotiate modifications to multi-employer pension plans; natural disasters or adverse weather conditions; the effect of public health crises or other significant catastrophic events; the potential costs and risks associated with potential cyber-attacks or data security breaches; the success of Kroger's future growth plans; the ability to execute our growth strategy and value creation model, including continued cost savings, growth of our media business, and our ability to better serve our customers and to generate customer loyalty and sustainable growth through our strategic pillars of fresh, our brands, personalization, and eCommerce; the outcome of litigation matters, including those relating to the terminated transaction with Albertsons; and the risks relating to or arising from our opioid litigation settlements, including the risk of litigation relating to persons, entities, or jurisdictions that do not participate in those settlements. Our ability to achieve these goals may also be affected by our ability to manage the factors identified above. Our ability to execute our financial strategy may be affected by our ability to generate cash flow.
Kroger’s adjusted effective tax rate may differ from the expected rate due to changes in tax laws and policies, the status of pending items with various taxing authorities, and the deductibility of certain expenses.
Kroger assumes no obligation to update the information contained herein unless required by applicable law. Please refer to Kroger's reports and filings with the Securities and Exchange Commission for a further discussion of these risks and uncertainties.
Note: Kroger's quarterly conference call with investors will broadcast live at 8 a.m. (ET) on September 11, 2026 at . An on-demand replay of the webcast will be available at approximately 1 p.m. (ET) on Friday, September 11, 2026.
Reconciliation 5. of Net Total Debt and Net Earnings Attributable to The Kroger Co. to Adjusted EBITDA
The Company defines First-In First-Out (FIFO) gross profit as sales minus Note: merchandise costs, including advertising, warehousing and transportation, but excluding the Last-In First-Out (LIFO) charge, rent and depreciation and amortization.
The Company defines FIFO operating profit as operating profit excluding the LIFO charge.
The Company defines FIFO operating margin as FIFO operating profit divided by sales.
The above FIFO financial metrics are important measures used by management to evaluate operational effectiveness. Management believes these FIFO financial metrics are useful to investors and analysts because they measure our day-to-day operational effectiveness.
Merchandise costs ("COGS") and operating, general and administrative expenses (a) ("OG&A") exclude depreciation and amortization expense and rent expense which are included in separate expense lines.
LIFO charges of $39 and $62 were recorded in the second quarters of 2026 and (b) 2025, respectively. For the year-to-date period, LIFO charges of $91 and $102 were recorded for 2026 and 2025, respectively.
ASSETS August 15, August 16, Current Assets 2026 2025 ────────────────────────────────────────────────────────────────────────────── Cash $ 201 $ 215 Temporary cash investments 1,475 4,668 Store deposits in-transit 1,060 1,133 Receivables 2,187 2,211 Inventories 7,282 6,843 Prepaid and other current assets 721 735 Total current assets 12,926 15,805 Property, plant and equipment, 25,265 25,947 net Operating lease assets 6,753 6,812 Intangibles, net 848 866 Goodwill 2,624 2,674 Other assets 1,075 1,486 Total Assets $ 49,491 $ 53,590 LIABILITIES AND SHAREOWNERS' EQUITY Current Liabilities Current portion of long-term debt including $ 1,838 $ 827 obligations under finance leases Current portion of operating lease 664 673 liabilities Accounts payable 10,775 10,183 Accrued salaries and wages 1,206 1,315 Other current liabilities 3,935 3,701 Total current liabilities 18,418 16,699 Long-term debt including obligations 15,159 17,132 under finance leases Noncurrent operating lease 6,497 6,546 liabilities Deferred income taxes 1,184 1,387 Pension and postretirement benefit 409 376 obligations Other long-term liabilities 1,978 2,173 Total Liabilities 43,645 44,313 Shareowners' equity 5,846 9,277 Total Liabilities and Shareowners' $ 49,491 $ 53,590 Equity Total common shares outstanding at end 596 662 of period Total diluted shares 612 664 year-to-date
CASH FLOWS FROM OPERATING YEAR-TO-DATE ACTIVITIES: 2026 2025 ────────────────────────────────────────────────────────────────────────────── Net earnings including $ 1,546 $ 1,478 noncontrolling interests Adjustments to reconcile net earnings including noncontrolling interests to net cash provided by operating activities: Depreciation 1,726 1,829 and amortization Asset impairment and store closure 66 114 charges Operating 314 318 lease asset amortization LIFO 91 102 charge Share-based 101 83 employee compensation Deferred 94 (31 ) income taxes Gain (26 ) (6 ) on the sale of assets Gain (20 ) (37 ) on investments Other 15 (29 ) Changes in operating assets and liabilities: Store 185 179 deposits in-transit Receivables (162 ) (12 ) Inventories (460 ) 92 Prepaid (85 ) (91 ) and other current assets Accounts (4 ) (14 ) payable Accrued 38 181 expenses Income 219 6 taxes receivable and payable Operating (367 ) (291 ) lease liabilities Other (186 ) (183 ) Net cash provided by operating 3,085 3,688 activities CASH FLOWS FROM INVESTING ACTIVITIES: Payments for property and equipment, (2,437 ) (1,968 ) including payments for lease buyouts Other 42 (139 ) Net cash used by investing (2,395 ) (2,107 ) activities CASH FLOWS FROM FINANCING ACTIVITIES: Payments on long-term debt including (604 ) (122 ) obligations under finance leases Dividends (431 ) (422 ) paid Proceeds 36 163 from issuance of capital stock Treasury (1,271 ) (203 ) stock purchases Other (78 ) (73 ) Net cash used by financing (2,348 ) (657 ) activities NET (DECREASE) INCREASE IN CASH (1,658 ) 924 AND TEMPORARY CASH INVESTMENTS CASH AND TEMPORARY CASH INVESTMENTS: BEGINNING 3,334 3,959 OF YEAR END $ 1,676 $ 4,883 OF PERIOD Reconciliation of capital investments: Payments for property and equipment, $ (2,437 ) $ (1,968 ) including payments for lease buyouts Payments 37 11 for lease buyouts Changes in construction-in-progress (251 ) (73 ) payables Total capital investments, excluding $ (2,651 ) $ (2,030 ) lease buyouts Disclosure of cash flow information: Cash paid during the year for net $ 372 $ 370 interest Cash paid during the year for $ 159 $ 415 income taxes
(in millions, except percentages) (unaudited) Items identified below should not be considered as alternatives to sales or any other GAAP measure of performance. Identical sales is an industry-specific measure, and it is important to review it in conjunction with Kroger's financial results reported in accordance with GAAP. Other companies in our industry may calculate identical sales differently than Kroger does, limiting the comparability of the measure.
Kroger defines identical sales, excluding fuel, as sales to retail customers, including sales from all departments at identical supermarket locations, jewelry and ship-to-home solutions. Kroger defines a supermarket as identical when it has been in operation without expansion or relocation for five full quarters. We include Kroger Delivery sales as identical if the delivery occurs in an existing Kroger Supermarket geography or when the location has been in operation for five full quarters. IDENTICAL SALES
Identical sales, excluding fuel, were adjusted to exclude stores involved in the (a) labor disputes in Colorado in the first quarter of 2025. Identical sales, excluding fuel, were excluded for the first four weeks of the first quarters of 2026 and 2025 for stores involved in this labor dispute.
(in millions, except for ratio) (unaudited) The items identified below should not be considered an alternative to any GAAP measure of performance or access to liquidity. Net total debt to adjusted EBITDA is an important measure used by management to evaluate the Company's access to liquidity. The items below should be reviewed in conjunction with Kroger's financial results reported in accordance with GAAP. The following table provides a reconciliation of net total debt.
The following table provides a reconciliation from net earnings attributable to The Kroger Co. to adjusted EBITDA, as defined in the Company's credit agreement, on a rolling four quarter basis.
ROLLING FOUR QUARTERS ENDED 2026 August 15, 2025 August 16, ────────────────────────────────────────────────────────────────────────────── Net earnings $ 1,085 $ 2,727 attributable to The Kroger Co. LIFO 146 135 charge Depreciation 3,230 3,347 and amortization Net 661 586 interest expense Income 251 685 tax expense Adjustment for loss on 57 6 investments Adjustment for severance - 79 charge and related benefits Adjustment for impairment 50 30 of intangible assets Adjustment for labor - 44 dispute charges Adjustment for store - 100 closures Adjustment for executive stock - (21 ) compensation for a former executive Adjustment for - 361 merger-related costs (a) Adjustment for merger-related 63 136 litigation and settlement charges Adjustment for property - 25 losses Adjustment for opioid settlement (28 ) (5 ) charges and vendor reserves Adjustment for gain on sale of Kroger - (79 ) Specialty Pharmacy Adjustment for fulfillment network 2,497 - impairment and related charges Adjustment for 119 - transformation costs (b) Other (9 ) (14 ) Adjusted $ 8,122 $ 8,142 EBITDA Net total debt to 1.91 1.63 adjusted EBITDA ratio
Merger-related (a) costs primarily include third-party professional fees and credit facility fees associated with the terminated merger with Albertsons Companies, Inc.
Transformation (b) costs primarily include costs related to third-party professional consulting fees associated with business transformation and cost saving initiatives.
(in millions, except per share amounts) (unaudited) The purpose of this table is to better illustrate comparable operating results from our ongoing business, after removing the effects on net earnings per diluted common share for certain items described below. Adjusted net earnings and adjusted net earnings per diluted share are useful metrics to investors and analysts because they present more accurately year-over-year comparisons for net earnings and net earnings per diluted share because adjusted items are not the result of normal operations. Items identified in this table should not be considered alternatives to net earnings attributable to The Kroger Co. or any other GAAP measure of performance. These items should not be reviewed in isolation or considered substitutes for the Company's financial results as reported in accordance with GAAP. Due to the nature of these items, as further described below, it is important to identify these items and to review them in conjunction with the Company's financial results reported in accordance with GAAP.
The following table summarizes items that affected the Company's financial results during the periods presented.
Table 6. Net Earnings Per Diluted Share Excluding the Adjustment Items (continued)
The pre-tax adjustments for gain on investments were $(34) and $(56) in the second quarters of (b) 2026 and 2025, respectively. The year-to-date pre-tax adjustments for gain on investments were $(20) and $(37) on the first two quarters of 2026 and 2025, respectively.
The (c) pre-tax adjustments to Sales, COGS and OG&A expenses for labor dispute charges were $44.
The (e) pre-tax adjustment to OG&A expenses for executive stock compensation for a former executive was $(21).
The pre-tax adjustments to OG&A expenses for merger-related litigation and settlement charges were $13 and $121 in the second quarters of 2026 and 2025, (f) respectively. The year-to-date pre-tax adjustments to OG&A expenses for merger-related litigation and settlement charges were $38 and $136 for the first two quarters of 2026 and 2025, respectively.
The (g) pre-tax adjustment to OG&A expenses for opioid settlement charges and vendor reserves was $22.
The (h) pre-tax adjustment to OG&A expenses for severance charge and related benefits was $47.
The pre-tax adjustment to OG&A expenses for transformation costs was $56 in the second quarter of 2026. The year-to-date pre-tax adjustment to OG&A expenses for (i) transformation costs was $119 for the first two quarters of 2026. Transformation costs primarily include costs related to third party professional consulting fees associated with business transformation and cost saving initiatives.
The (j) amounts presented represent the net earnings (loss) per diluted common share effect of each adjustment.
2026 Note: Second Quarter Adjustment Items include adjustments for the gain on investments, merger-related litigation and settlement charges and transformation costs.
2026 Adjustment Items include the Second Quarter Adjustment Items plus the adjustments that occurred in the first quarter of 2026 for loss on investments, merger-related litigation costs and transformation costs.
2025 Second Quarter Adjustment items include adjustments for the gain on investments, merger-related litigation and settlement charges and the severance charge and related benefits.
2025 Adjustment Items include the Second Quarter Adjustment Items plus the adjustments that occurred in the first quarter of 2025 for the loss on investments, labor dispute charges, store closures, executive stock compensation for a former executive, merger-related litigation costs, opioid settlement charges and vendor reserves and executive stock compensation for a former executive income tax.
(in millions) (unaudited) The purpose of this table is to better illustrate comparable operating results from our ongoing business, after removing the effects on operating profit for certain items described below. Adjusted FIFO operating profit is a useful metric to investors and analysts because it presents more accurately year-over-year comparisons for operating profit because adjusted items are not the result of normal operations. Items identified in this table should not be considered alternatives to operating profit or any other GAAP measure of performance. These items should not be reviewed in isolation or considered substitutes for the Company's financial results as reported in accordance with GAAP. Due to the nature of these items, as further described below, it is important to identify these items and to review them in conjunction with the Company's financial results reported in accordance with GAAP.
The following table summarizes items that affected the Company's financial results during the periods presented.
Transformation (a) costs primarily include costs related to third-party professional consulting fees associated with business transformation and cost saving initiatives.
(in millions, except percentages) (unaudited) In the Consolidated Statements of Operations within Table 1, the Company separately presents rent and depreciation and amortization to evaluate operational effectiveness. The table below calculates gross margin in accordance with Generally Accepted Accounting Principles ("GAAP") by including a portion of rent and depreciation and amortization related to the Company's manufacturing and warehousing and transportation activities.
The following table provides the calculation of gross profit and gross margin in accordance with GAAP.
Full text with the tables
Exhibit 99.1
Kroger Reports Second Quarter 2026 Results
and Updates Guidance for 2026
Second Quarter Highlights
· Identical Sales without fuel increased 0.2%
· Operating Profit of $971 million; EPS of $1.05
· Adjusted
FIFO Operating Profit of $1,076 million and Adjusted EPS of $1.09
· Adjusted
eCommerce sales grew +20%1; Kroger Precision Marketing profit grew +24%
CINCINNATI, September 11, 2026 – The Kroger Co. (NYSE: KR)
today reported results for its second quarter ended August 15, 2026. Kroger
reaffirmed its full-year adjusted net earnings per diluted
share guidance, lowered its full-year 2026 identical sales without fuel
guidance, and shared progress on key priorities.
Comments from CEO Greg Foran
“Kroger delivered a solid second quarter, with adjusted EPS growth
of 5 percent. I am pleased with the progress we are making. Our teams kept
driving value for customers, improving execution in our stores,
growing eCommerce profitably and managing costs with discipline. Improving sales
momentum remains a top priority. While there is more
work to do, I am confident in our plan to become America's favorite grocer."
Adjusted eCommerce sales exclude the effect of fulfillment
center exits in markets where Kroger does not operate stores, the sale of
Vitacost, and the discontinuation of Ship Marketplace.
1
Second Quarter Financial Results
2Q26 2Q25
($ in millions; except ($ in millions; except
EPS) EPS)
ID Sales(1) (Table 4) 0.2% 3.4%
Earnings Per Share $1.05 $0.91
Adjusted EPS (Table 6) $1.09 $1.04
Operating Profit $971 $863
Adjusted FIFO Operating $1,076 $1,091
Profit (Table 7)
Gross Margin (Table 8) 22.4% 22.5%
FIFO Gross Margin Increased 13 basis points
Rate(2)
OG&A Rate(3) Increased 33 basis points
Without fuel and includes an
unfavorable 138 basis point impact from the Inflation Reduction Act.
Without rent, depreciation
and amortization, fuel and adjustment items, if applicable.
Without fuel and adjustment
items, if applicable.
Total company sales were $34.6 billion in the second quarter compared
to $33.9 billion for the same period last year. Excluding fuel, the sale of
Vitacost and the exit of certain fulfillment centers, sales
increased 0.1% compared to the same period last year.
Gross margin was 22.4% of sales for the second quarter compared to
22.5% for the same period last year. The decrease in rate was primarily driven
by the mix effect of higher fuel sales, higher shrink,
higher transportation costs and greater value delivered for customers. These
pressures were partially offset by improvement in eCommerce
profitability and media, favorable pharmacy mix, sourcing initiatives, tariff
refunds, the decreased LIFO charge and depreciation and
amortization.
The FIFO gross margin rate, excluding rent, depreciation and amortization,
and fuel increased 13 basis points compared to the same period last year. The
improvement was primarily driven by improvement in eCommerce
profitability and media, favorable pharmacy mix, sourcing initiatives and tariff
refunds. These benefits were partially offset by higher
shrink, higher transportation costs and greater value delivered for customers.
The LIFO charge for the quarter was $39 million, compared to a LIFO
charge of $62 million for the same period last year.
The Operating, General and Administrative rate, excluding fuel
and adjustment items, increased 33 basis points compared to the same period last
year. The increase was primarily attributable to
planned investments in associate wages, increased health care costs, and sales
deleverage, partially offset by lower incentive plan
costs and ongoing productivity initiatives.
Capital Allocation
Kroger expects to continue to generate strong
free cash flow and remains committed to investing in the business to drive long-
term sustainable net earnings growth, as well as maintaining
its current investment grade debt rating. The Company expects to continue to pay
its quarterly dividend and expects this to increase over
time, subject to board approval.
Earlier this quarter, Kroger increased its
dividend by 11%, marking the 20th consecutive year of dividend increases.
Additionally, during the quarter, Kroger repurchased $1.0 billion
in shares and year-to-date has repurchased $1.2 billion in shares under the $2
billion board authorization announced in December 2025.
As of the end of the second quarter, approximately $800 million remains of the
authorization, and Kroger expects to complete the remaining
repurchases by the end of fiscal 2026.
2
Kroger’s net total debt to adjusted
EBITDA ratio is 1.91, compared to 1.63 a year ago (Table 5). The company’s net
total debt to adjusted EBITDA ratio target range
is 2.30 to 2.50. Kroger’s strong balance sheet provides ample opportunities for
the Company to invest in the business and enhance
shareholder value.
Full-Year 2026 Guidance*
FY26 FY26
Adjusted Guidance as of Guidance as of
Metric* June 18, 2026 September 11, 2026
──────────────────────────────────────────────────────────
Identical 1.0% 0.2%
Sales without fuel** - 2.0% - 0.8%
FIFO $5.0 $5.0
Operating Profit - $5.2 billion - $5.2 billion
EPS $5.10 $5.10
- $5.30 - $5.30
Free $2.7 $2.7
Cash Flow - $2.9 billion - $2.9 billion
Cap $3.8 $3.8
Ex - $4.0 billion - $4.0 billion
Tax 23% 23%
Rate***
* Without adjusted items, if applicable. Kroger is unable to provide
a full reconciliation of the GAAP and non-GAAP measures used in 2026 guidance
without unreasonable effort because it is not possible to
predict certain of our adjustment items with a reasonable degree of certainty.
This information is dependent upon future events and may
be outside of our control and its unavailability could have a significant impact
on 2026 GAAP financial results.
** Includes approximately 140 basis points unfavorable impact from
the Inflation Reduction Act.
*** The adjusted tax rate reflects typical tax adjustments and does
not reflect changes to the rate from the completion of income tax audit
examinations and changes in tax laws and policies, which cannot
be predicted.
Comments from CFO David Kennerley
“Our second quarter results demonstrate the resiliency of Kroger's
business model and the discipline with which our teams are executing. Adjusted
earnings per diluted share grew 5%, driven by cost savings,
strong pharmacy and fuel performance, and improvement in the profitability of
our eCommerce business.
Given our first half results and the macro environment, we are updating
our identical sales without fuel guidance to a new range of 0.2% to 0.8%, which
includes an approximately 140 basis point headwind from
the Inflation Reduction Act. We are reaffirming our adjusted FIFO net operating
profit and adjusted earnings per diluted share guidance,
reflecting our confidence and visibility into the same factors that drove our
profitability in the second quarter. We will continue to
invest in the business for growth, manage our margins with discipline and create
long-term shareholder value.”
3
Kroger will host an investor update meeting on October 20, 2026. Additional
details regarding the Company’s strategic initiatives and longer-term financial
targets will be shared at that event.
About Kroger
The Kroger Co. (NYSE: KR) is one of America’s largest retailers,
serving more than 11 million customers daily through a digital shopping
experience and retail food stores under a variety of banner names.
With more than 400,000 associates across our family of companies, Kroger is
committed to providing America with affordable, great-tasting
food and creating #ZeroHungerZeroWaste communities. To learn more about us,
visit our newsroom and investor relations site.
Kroger's second quarter 2026 ended on August 15, 2026.
Note: Fuel sales have historically had a low
gross margin rate and operating expense rate as compared to corresponding rates
on non-fuel sales. As a result, Kroger discusses the changes
in these rates excluding the effect of fuel.
Please refer to the supplemental information
presented in the tables for reconciliations of the non-GAAP financial measures
used in this press release to the most comparable GAAP
financial measure and related disclosure. As noted above, Kroger is unable to
provide a full reconciliation of the GAAP and non-GAAP measures
used in its guidance without unreasonable effort because it is not possible to
predict certain of our adjustment items with a reasonable
degree of certainty. This information is dependent upon future events and may be
outside of our control and its unavailability could have
a significant impact on GAAP financial results.
This press release contains certain statements
that constitute “forward-looking statements” about Kroger’s financial position
and the future performance of the company.
These statements are based on management’s assumptions and beliefs in light of
the information currently available to it. Such statements
are indicated by words or phrases such as “achieve,” “committed,” “confidence,”
“continue,”
“drive,” “expect,” “focused,” “future,” “guidance,” “may,” “model,”
“opportunities,” “outlook,” “remain,” “strategy,” “target,” “trends,”
“visibility,” “will,” and variations of such words and similar phrases. Various
uncertainties and other factors
could cause actual results to differ materially from those contained in the
forward-looking statements. These include the specific risk
factors identified in “Risk Factors” in our annual report on Form 10-K for our
last fiscal year and any subsequent filings,
as well as the following:
4
Kroger's ability to achieve sales, earnings,
incremental FIFO operating profit, and adjusted free cash flow goals may be
affected by: labor negotiations; potential work stoppages;
changes in the unemployment rate; pressures in the labor market; changes in
government-funded benefit programs; changes in the types and
numbers of businesses that compete with Kroger; pricing and promotional
activities of existing and new competitors, and the aggressiveness
of that competition; Kroger's response to these actions; the state of the
economy, including interest rates, the inflationary, disinflationary
and/or deflationary trends and such trends in certain commodities, products
and/or operating costs; the geopolitical environment including
wars and conflicts; unstable political situations and social unrest; changes in
tariffs; the effect that fuel costs have on consumer spending;
volatility of fuel margins; manufacturing commodity costs; supply constraints;
diesel fuel costs related to Kroger’s logistics operations;
trends in consumer spending; the extent to which Kroger’s customers exercise
caution in their purchasing in response to economic
conditions; the uncertainty of economic growth or recession; stock repurchases;
changes in the regulatory environment in which Kroger
operates, along with changes in federal policy and at state and federal
regulatory agencies; Kroger’s ability to retain pharmacy
sales from third party payors; consolidation in the healthcare industry,
including pharmacy benefit managers; Kroger’s ability to
negotiate modifications to multi-employer pension plans; natural disasters or
adverse weather conditions; the effect of public health
crises or other significant catastrophic events; the potential costs and risks
associated with potential cyber-attacks or data security
breaches; the success of Kroger's future growth plans; the ability to execute
our growth strategy and value creation model, including
continued cost savings, growth of our media business, and our ability to better
serve our customers and to generate customer loyalty and
sustainable growth through our strategic pillars of fresh, our brands,
personalization, and eCommerce; the outcome of litigation matters,
including those relating to the terminated transaction with Albertsons; and the
risks relating to or arising from our opioid litigation
settlements, including the risk of litigation relating to persons, entities, or
jurisdictions that do not participate in those settlements.
Our ability to achieve these goals may also be affected by our ability to manage
the factors identified above. Our ability to execute
our financial strategy may be affected by our ability to generate cash flow.
Kroger’s adjusted effective tax rate
may differ from the expected rate due to changes in tax laws and policies, the
status of pending items with various taxing authorities,
and the deductibility of certain expenses.
Kroger assumes no obligation to update the
information contained herein unless required by applicable law. Please refer to
Kroger's reports and filings with the Securities and Exchange
Commission for a further discussion of these risks and uncertainties.
Note: Kroger's quarterly conference call
with investors will broadcast live at 8 a.m. (ET) on September 11, 2026 at . An
on-demand replay of the webcast
will be available at approximately 1 p.m. (ET) on Friday, September 11, 2026.
2 ndQuarter 2026 Tables Include:
1. Consolidated
Statements of Operations
2. Consolidated
Balance Sheets
3. Consolidated
Statements of Cash Flows
4. Supplemental
Sales Information
Reconciliation
5. of Net Total Debt and Net Earnings Attributable to The Kroger Co. to
Adjusted EBITDA
6. Net
Earnings Per Diluted Share Excluding the Adjustment Items
7. Operating
Profit Excluding the Adjustment Items
8. Gross
Margin
--30--
Contacts: Media: Erin Rolfes (513) 762-1080; Investors: Rob Quast (513)
762-4969
5
Table 1.
THE KROGER CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)
…
… … … … … …
──────────────────────────────────────────────────────────────────────────────
$ … … % $ … … % $ … … % $ … … %
… … … … … … … …
… … … … … … … …
… … … … … … … …
… … … … … … … …
… … … … … … … …
… ) … ) … ) … ) … ) … ) … ) … )
… ) - … ) - … ) - … ) -
… - … - … - … …
… … … … … … … …
… … … … … … … …
… … … … … … … …
1 - 1 - 3 - 3 -
$ … … % $ … … % $ … … % $ … … %
$ … $ … $ … $ …
… … … …
$ … $ … $ … $ …
… … … …
$ … $ … $ … $ …
Note: Certain
percentages may not sum due to rounding.
The
Company defines First-In First-Out (FIFO) gross profit as sales minus
Note: merchandise costs,
including advertising, warehousing and transportation, but excluding
the Last-In First-Out
(LIFO) charge, rent and depreciation and amortization.
The
Company defines FIFO gross margin as FIFO gross profit divided by sales.
The
Company defines FIFO operating profit as operating profit excluding the LIFO
charge.
The
Company defines FIFO operating margin as FIFO operating profit divided by
sales.
The
above FIFO financial metrics are important measures used by management to
evaluate operational
effectiveness. Management believes these FIFO
financial metrics are useful to investors and analysts because they measure
our day-to-day
operational effectiveness.
Merchandise
costs ("COGS") and operating, general and administrative expenses
(a) ("OG&A")
exclude depreciation and amortization expense and rent expense which
are included in separate
expense lines.
LIFO
charges of $39 and $62 were recorded in the second quarters of 2026 and
(b) 2025, respectively.
For the year-to-date period, LIFO charges of $91 and $102 were recorded
for 2026 and 2025,
respectively.
Table 2.
THE KROGER CO.
CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)
ASSETS August 15, August 16,
Current Assets 2026 2025
──────────────────────────────────────────────────────────────────────────────
Cash $ 201 $ 215
Temporary cash investments 1,475 4,668
Store deposits in-transit 1,060 1,133
Receivables 2,187 2,211
Inventories 7,282 6,843
Prepaid and other current assets 721 735
Total current assets 12,926 15,805
Property, plant and equipment, 25,265 25,947
net
Operating lease assets 6,753 6,812
Intangibles, net 848 866
Goodwill 2,624 2,674
Other assets 1,075 1,486
Total Assets $ 49,491 $ 53,590
LIABILITIES AND SHAREOWNERS'
EQUITY
Current Liabilities
Current portion of long-term
debt including $ 1,838 $ 827
obligations under finance leases
Current portion of operating
lease 664 673
liabilities
Accounts payable 10,775 10,183
Accrued salaries and wages 1,206 1,315
Other current liabilities 3,935 3,701
Total current liabilities 18,418 16,699
Long-term debt including
obligations 15,159 17,132
under finance leases
Noncurrent operating lease 6,497 6,546
liabilities
Deferred income taxes 1,184 1,387
Pension and postretirement
benefit 409 376
obligations
Other long-term liabilities 1,978 2,173
Total Liabilities 43,645 44,313
Shareowners' equity 5,846 9,277
Total Liabilities and
Shareowners' $ 49,491 $ 53,590
Equity
Total common shares outstanding
at end 596 662
of period
Total diluted shares 612 664
year-to-date
Table 3.
THE KROGER CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
CASH
FLOWS FROM OPERATING YEAR-TO-DATE
ACTIVITIES: 2026 2025
──────────────────────────────────────────────────────────────────────────────
Net
earnings including $ 1,546 $ 1,478
noncontrolling interests
Adjustments
to reconcile net earnings
including noncontrolling
interests
to net cash provided by
operating activities:
Depreciation 1,726 1,829
and amortization
Asset
impairment and store closure 66 114
charges
Operating 314 318
lease asset amortization
LIFO 91 102
charge
Share-based 101 83
employee compensation
Deferred 94 (31 )
income taxes
Gain (26 ) (6 )
on the sale of assets
Gain (20 ) (37 )
on investments
Other 15 (29 )
Changes
in operating assets and
liabilities:
Store 185 179
deposits in-transit
Receivables (162 ) (12 )
Inventories (460 ) 92
Prepaid (85 ) (91 )
and other current assets
Accounts (4 ) (14 )
payable
Accrued 38 181
expenses
Income 219 6
taxes receivable and payable
Operating (367 ) (291 )
lease liabilities
Other (186 ) (183 )
Net
cash provided by operating 3,085 3,688
activities
CASH
FLOWS FROM INVESTING
ACTIVITIES:
Payments
for property and equipment, (2,437 ) (1,968 )
including payments for lease
buyouts
Other 42 (139 )
Net
cash used by investing (2,395 ) (2,107 )
activities
CASH
FLOWS FROM FINANCING
ACTIVITIES:
Payments
on long-term debt including (604 ) (122 )
obligations under finance
leases
Dividends (431 ) (422 )
paid
Proceeds 36 163
from issuance of capital stock
Treasury (1,271 ) (203 )
stock purchases
Other (78 ) (73 )
Net
cash used by financing (2,348 ) (657 )
activities
NET
(DECREASE) INCREASE IN CASH (1,658 ) 924
AND TEMPORARY CASH
INVESTMENTS
CASH
AND TEMPORARY CASH
INVESTMENTS:
BEGINNING 3,334 3,959
OF YEAR
END $ 1,676 $ 4,883
OF PERIOD
Reconciliation
of capital investments:
Payments
for property and equipment, $ (2,437 ) $ (1,968 )
including payments for lease
buyouts
Payments 37 11
for lease buyouts
Changes
in construction-in-progress (251 ) (73 )
payables
Total
capital investments, excluding $ (2,651 ) $ (2,030 )
lease buyouts
Disclosure
of cash flow information:
Cash
paid during the year for net $ 372 $ 370
interest
Cash
paid during the year for $ 159 $ 415
income taxes
Table 4. Supplemental Sales Information
(in millions, except percentages)
(unaudited)
Items identified below should not be considered as alternatives to sales or any
other GAAP measure of performance. Identical sales is an industry-specific
measure, and it is important to review it in conjunction with Kroger's financial
results reported in accordance with GAAP. Other companies in our industry may
calculate identical sales differently than Kroger does, limiting the
comparability of the measure.
Kroger defines identical sales, excluding fuel, as sales to retail customers,
including sales from all departments at identical supermarket locations, jewelry
and ship-to-home solutions. Kroger defines a supermarket as identical when it
has been in operation without expansion or relocation for five full quarters. We
include Kroger Delivery sales as identical if the delivery occurs in an existing
Kroger Supermarket geography or when the location has been in operation for five
full quarters.
IDENTICAL SALES
E…
A…
S… Y…
Q… 2… 2… (… 2… 2… Y… 2… 2…
──────────────────────────────────────────────────────────────────────────────
… $ 2… $ 2… $ 6… $ 6… $ 7… $ 6…
…
… 0… % 3… % 0… % 3… % 0… % 3… %
…
Identical
sales, excluding fuel, were adjusted to exclude stores involved in the
(a) labor disputes in Colorado in the first quarter of 2025. Identical
sales, excluding fuel, were excluded for the first four weeks of the
first quarters of 2026 and 2025 for stores involved in this
labor dispute.
Table 5. Reconciliation of Net Total Debt and
Net Earnings Attributable to The Kroger Co. to Adjusted EBITDA
(in millions, except for ratio)
(unaudited)
The items identified below should not be considered an alternative to any GAAP
measure of performance or access to liquidity. Net total debt to adjusted EBITDA
is an important measure used by management to evaluate the Company's access to
liquidity. The items below should be reviewed in conjunction with Kroger's
financial results reported in accordance with GAAP.
The following table provides a reconciliation of net total debt.
2026 August 15, 2025 August 16, Change
──────────────────────────────────────────────────────────────────────────────
Current
portion of
long-term debt
including $ 1,838 $ 827 $ 1,011
obligations
under finance
leases
Long-term
debt including
obligations 15,159 17,132 (1,973 )
under finance
leases
Total 16,997 17,959 (962 )
debt
Less:
Temporary cash 1,475 4,668 (3,193 )
investments
Net $ 15,522 $ 13,291 $ 2,231
total debt
The following table provides a reconciliation from net earnings
attributable to The Kroger Co. to adjusted EBITDA, as defined in the Company's
credit agreement, on a rolling four quarter basis.
ROLLING
FOUR QUARTERS
ENDED
2026 August 15, 2025 August 16,
──────────────────────────────────────────────────────────────────────────────
Net
earnings $ 1,085 $ 2,727
attributable to
The Kroger Co.
LIFO 146 135
charge
Depreciation 3,230 3,347
and amortization
Net 661 586
interest expense
Income 251 685
tax expense
Adjustment
for loss on 57 6
investments
Adjustment
for severance - 79
charge and
related benefits
Adjustment
for impairment 50 30
of intangible
assets
Adjustment
for labor - 44
dispute charges
Adjustment
for store - 100
closures
Adjustment
for executive
stock - (21 )
compensation for
a former
executive
Adjustment
for - 361
merger-related
costs (a)
Adjustment
for
merger-related 63 136
litigation and
settlement
charges
Adjustment
for property - 25
losses
Adjustment
for opioid
settlement (28 ) (5 )
charges and
vendor reserves
Adjustment
for gain on sale
of Kroger - (79 )
Specialty
Pharmacy
Adjustment
for fulfillment
network 2,497 -
impairment and
related charges
Adjustment
for 119 -
transformation
costs (b)
Other (9 ) (14 )
Adjusted $ 8,122 $ 8,142
EBITDA
Net
total debt to 1.91 1.63
adjusted EBITDA
ratio
Merger-related
(a) costs primarily include third-party professional fees and credit
facility fees associated
with the terminated merger with Albertsons Companies, Inc.
Transformation
(b) costs primarily include costs related to third-party professional
consulting fees associated
with business transformation and cost saving initiatives.
Table 6. Net Earnings Per Diluted Share Excluding the Adjustment Items
(in millions, except per share amounts)
(unaudited)
The purpose of this table is to better illustrate comparable operating results
from our ongoing business, after removing the effects on net earnings per
diluted common share for certain items described below. Adjusted net earnings
and adjusted net earnings per diluted share are useful metrics to investors and
analysts because they present more accurately year-over-year comparisons for net
earnings and net earnings per diluted share because adjusted items are not the
result of normal operations. Items identified in this table should not be
considered alternatives to net earnings attributable to The Kroger Co. or any
other GAAP measure of performance. These items should not be reviewed in
isolation or considered substitutes for the Company's financial results as
reported in accordance with GAAP. Due to the nature of these items, as further
described below, it is important to identify these items and to review them in
conjunction with the Company's financial results reported in accordance with
GAAP.
The following table summarizes items that affected the Company's financial
results during the periods presented.
SECOND
QUART… 2026 2025 YEAR-T… 2026 2025
──────────────────────────────────────────────────────────────────────────────
Net
earn…
attr…
to $ 641 $ 609 $ 1,543 $ 1,475
The
Krog…
Co.
Adju…
for
gain (26 ) (43 ) (16 ) (28 )
on
inve…
(a)(…
Adju…
for
labor - - - 33
disp…
char…
(a)(…
Adju…
for
store - - - 77
clos…
(a)(…
Adju…
for
exec…
stock
comp… - - - (16 )
for a
form…
exec…
(a)(…
Adju…
for
merg…
liti… 9 92 29 102
and
sett…
char…
(a)(…
Adju…
for
opio…
sett…
char… - - - 17
and
vend…
rese…
(a)(…
Adju…
for
seve…
char… - 37 - 37
and
rela…
bene…
(a)(…
Adju…
for
tran… 43 - 91 -
costs
(a)(…
Exec…
stock
comp…
for a
form… - - - (7 )
exec…
inco…
tax
adju…
2026
and
2025 26 86 104 215
Adju…
Items
Net
earn…
attr…
to
The
Krog… $ 667 $ 695 $ 1,647 $ 1,690
Co.
excl…
the
adju…
items
above
Net
earn…
attr…
to
The
Krog… $ 1.05 $ 0.91 $ 2.51 $ 2.20
Co.
per
dilu…
comm…
share
Adju…
for
gain (0.04 ) (0.06 ) (0.03 ) (0.04 )
on
inve…
(j)
Adju…
for
labor - - - 0.05
disp…
char…
(j)
Adju…
for
store - - - 0.12
clos…
(j)
Adju…
for
exec…
stock
comp… - - - (0.03 )
for a
form…
exec…
(j)
Adju…
for
merg…
liti… 0.01 0.14 0.04 0.16
and
sett…
char…
(j)
Adju…
for
opio…
sett…
char… - - - 0.03
and
vend…
rese…
(j)
Adju…
for
seve…
char… - 0.05 - 0.05
and
rela…
bene…
(j)
Adju…
for
tran… 0.07 - 0.15 -
costs
(j)
Exec…
stock
comp…
for a
form… - - - (0.01 )
exec…
inco…
tax
adju…
(j)
2026
and
2025 0.04 0.13 0.16 0.33
Adju…
Items
Net
earn…
attr…
to
The
Krog…
Co.
per $ 1.09 $ 1.04 $ 2.67 $ 2.53
dilu…
comm…
share
excl…
the
adju…
items
above
Aver…
numb…
of
comm…
shar… 608 665 612 664
used
in
dilu…
calc…
Table 6. Net Earnings Per Diluted Share Excluding the Adjustment Items
(continued)
(in millions, except per share amounts)
(unaudited)
(a) The
amounts presented represent the after-tax effect of each adjustment.
The
pre-tax adjustments for gain on investments were $(34) and $(56) in the
second quarters of
(b) 2026 and 2025, respectively. The year-to-date pre-tax adjustments for
gain on investments
were $(20) and $(37) on the first two quarters of 2026 and 2025,
respectively.
The
(c) pre-tax adjustments to Sales, COGS and OG&A expenses for labor dispute
charges were $44.
(d) The
pre-tax adjustment to OG&A expenses for store closures was $100.
The
(e) pre-tax adjustment to OG&A expenses for executive stock compensation
for a former executive
was $(21).
The
pre-tax adjustments to OG&A expenses for merger-related litigation and
settlement charges
were $13 and $121 in the second quarters of 2026 and 2025,
(f) respectively. The year-to-date
pre-tax adjustments to OG&A expenses for merger-related litigation and
settlement charges
were $38 and $136 for the first two quarters of 2026 and 2025,
respectively.
The
(g) pre-tax adjustment to OG&A expenses for opioid settlement charges and
vendor reserves
was $22.
The
(h) pre-tax adjustment to OG&A expenses for severance charge and related
benefits was $47.
The
pre-tax adjustment to OG&A expenses for transformation costs was $56 in
the second quarter
of 2026. The year-to-date pre-tax adjustment to OG&A expenses for
(i) transformation costs
was $119 for the first two quarters of 2026. Transformation costs
primarily include costs
related to third party professional consulting fees associated with
business transformation
and cost saving initiatives.
The
(j) amounts presented represent the net earnings (loss) per diluted common
share effect of each
adjustment.
2026
Note: Second Quarter Adjustment Items include adjustments for the gain on
investments, merger-related litigation and settlement charges and
transformation costs.
2026 Adjustment
Items include the Second Quarter Adjustment Items plus the adjustments that
occurred in the first quarter of 2026 for loss on
investments, merger-related litigation costs and transformation costs.
2025 Second
Quarter Adjustment items include adjustments for the gain on investments,
merger-related litigation and settlement charges and the
severance charge and related benefits.
2025 Adjustment
Items include the Second Quarter Adjustment Items plus the adjustments that
occurred in the first quarter of 2025 for the loss on
investments, labor dispute charges, store closures, executive stock
compensation for a former executive, merger-related litigation
costs, opioid settlement charges and vendor reserves and executive stock
compensation for a former executive income tax.
Table 7. Operating Profit Excluding the Adjustment Items
(in millions)
(unaudited)
The purpose of this table is to better illustrate comparable operating results
from our ongoing business, after removing the effects on operating profit for
certain items described below. Adjusted FIFO operating profit is a useful metric
to investors and analysts because it presents more accurately year-over-year
comparisons for operating profit because adjusted items are not the result of
normal operations. Items identified in this table should not be considered
alternatives to operating profit or any other GAAP measure of performance. These
items should not be reviewed in isolation or considered substitutes for the
Company's financial results as reported in accordance with GAAP. Due to the
nature of these items, as further described below, it is important to identify
these items and to review them in conjunction with the Company's financial
results reported in accordance with GAAP.
The following table summarizes items that affected the Company's financial
results during the periods presented.
SECOND
QUART… 2026 2025 YEAR-T… 2026 2025
──────────────────────────────────────────────────────────────────────────────
Oper… $ 971 $ 863 $ 2,378 $ 2,185
prof…
LIFO 39 62 91 102
char…
FIFO
oper… 1,010 925 2,469 2,287
prof…
Adju…
for
labor - - - 44
disp…
char…
Adju…
for - - - 100
store
clos…
Adju…
for
exec…
stock - - - (21 )
comp…
for a
form…
exec…
Adju…
for
merg…
liti… 13 121 38 136
and
sett…
char…
Adju…
for
opio…
sett… - - - 22
char…
and
vend…
rese…
Adju…
for
seve…
char… - 47 - 47
and
rela…
bene…
Adju…
for
tran… 56 - 119 -
costs
(a)
Other (3 ) (2 ) (6 ) (5 )
2026
and
2025 66 166 151 323
Adju…
items
Adju…
FIFO
oper…
prof…
excl… $ 1,076 $ 1,091 $ 2,620 $ 2,610
the
adju…
items
above
Transformation
(a) costs primarily include costs related to third-party professional
consulting fees associated
with business transformation and cost saving initiatives.
Table 8. Gross Margin
(in millions, except percentages)
(unaudited)
In the Consolidated Statements of Operations within Table 1, the Company
separately presents rent and depreciation and amortization to evaluate
operational effectiveness. The table below calculates gross margin in accordance
with Generally Accepted Accounting Principles ("GAAP") by including a portion of
rent and depreciation and amortization related to the Company's manufacturing
and warehousing and transportation activities.
The following table provides the calculation of gross profit and gross margin in
accordance with GAAP.
SECOND
QUART… 2026 2025 YEAR… 2026 2025
──────────────────────────────────────────────────────────────────────────────
Sales $ 34,6… $ 33,940 $ 80,742 $ 79,0…
Merc…
cost…
incl…
adve…
ware…
and
tran…
and 26,7… 26,130 62,256 60,6…
LIFO
char…
excl…
rent
and
depr…
and
amor…
Rent 12 13 29 31
Depr…
and 96 151 235 344
amor…
Gross $ 7,750 $ 7,646 $ 18,222 $ 18,0…
prof…
Gross 22.4 % 22.5 % 22.6 % 22.8 %
marg…