The grocery and pharma businesses are performing steadily, even if the company, with its 2,700 stores, may be running out of spots to build new ones
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The grocery chain Kroger reported fourth quarter and full-year 2025 earnings Thursday, with some noise in the headline numbers but not enough to distract Wall Street. Kroger stock popped 3.4%, compared to the S&P 500’s move into the red of 0.9% and the Dow's almost 700-point fall.
Full-year earnings per share came in at $1.54, a seemingly big drop from $3.67 last year. But the comparison isn’t apples to apples. A previously announced $2.5 billion impairment charge related to the company’s automated fulfillment network caused the change. Strip that out and adjusted EPS actually grew by about 9%, a meaningful increase.
The grocery and pharma businesses are performing steadily, even if the company, with its 2,700 stores, may be running out of spots to build new ones. Identical sales without fuel increased 2.4% in the fourth quarter, consistent with 2024's results, while e-commerce sales grew a healthy 20% to top $16 billion for the year. Gross margins edged up over 23%, driven by decreased supply chain costs and “lower shrink.” The company’s high-margin alternative profits segment, with its advertising and financial-services arms — or “data and traffic plays” as the company terms them — contributed a tidy $1.5 billion.
For 2026, Kroger is estimating identical sales growth of 1% to 2% and adjusted EPS in the range of $5.10 to $5.30. Here again, there’s more to the headline numbers. While the guidance looks conservative on its face, it includes approximately 130 basis points of further pressure from the Inflation Reduction Act — which, among other effects, is depressing pharmacy reimbursement rates. Back that out and underlying growth expectations are closer to 2.3% to 3.3%.
The company also announced a new $2 billion share repurchase authorization, fresh off completing a $7.5 billion buyback program, a signal that management is confident in the cash engine. Free cash guidance for 2026 came in at $2.7 to $2.9 billion.
All in all, it's enough to see Kroger buck the broad trend down spreading across the market. In a world where nothing seems certain, a reliable and even relatively boring business selling Kraft Dinner and jugs of milk to millions of people every day can seem like a beautiful thing.
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