The companies on the Global 500 employ 70.2 million people, and their revenue represents more than one-third of the world’s GDP.

Fortune Global 500

With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

The 300 companies on this year’s list brought in over $12.5 trillion in revenue for the latest 12 months, with the median revenue figure at $24 billion.

America's Most Innovative Companies

The corporations on our annual list of the world's 500 largest companies combined to generate $41.7 trillion in revenue over the past year.

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

The corporations on our annual list posted aggregate revenues of $41 trillion for the second year in a row.

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

G500-2023-Kroger

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

F500 2023-Kroger

The highlight of 2022 for Kroger—already the country's largest grocery store chain—was the October announcement of a $24.6 billion merger with competitor Safeway-Albertsons. Kroger CEO Rodney McMullen vowed to take legal action if regulators blocked the deal over concerns of corporate consolidation. Approval of the deal is not expected until early 2024. 
<ul> 
 	<li>Kroger’s delivery business grew 22% in 2022, largely driven by the national rollout of its paid subscription program Kroger Boost, which offers free delivery on orders over $35 and hopes to compete with the likes of Amazon Fresh and Instacart.</li> 
 	<li>After questions surrounding compensation for employees, Kroger responded by investing $800 million into raises for frontline employees in 2022, raising minimum pay for all its employees to $18 an hour.</li> 
 	<li>In the fourth quarter of 2022 Kroger ended its relationship with the Cigna-owned pharmacy benefit manager Express Scripts after contract renewal talks broke down. The rupture was expected to cost Kroger $100 million in sales at its in-store pharmacies.</li> 
</ul>

Just as it dominates our economy, Big Tech now dominates Fortune’s annual ranking of corporate reputation.

World's Most Admired Companies

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

This year’s Fortune 500 marks the 68th running of the list.

F500 2022 Kroger

During a time of high inflation and supply-chain issues, grocery chain Kroger remained competitive by focusing on its digital infrastructure; the company reported in 2021 that its e-commerce sales had grown by 113% over the previous two years. Investors benefited from the continued pandemic boom in grocery sales, with Kroger shareholders earning a total return of 45% in 2021. Some Kroger workers, however, felt left out: In a survey of more than 36,000 Kroger employees, published by the Economic Roundtable in January 2022, about three-quarters reported suffering from food insecurity. (Kroger has characterized the survey as misleading and says that it pays wages and benefits higher than those of its retail peers.)

After a year in which humanity leaned more heavily than ever on tech giants, see which companies topped Fortune's ranking of corporate reputation.

Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

G500-2021-40-Kroger

Before the pandemic, Kroger had been trying to become a bigger e-commerce player, with some success in the grocery wars with Walmart and Amazon. But the COVID-19 outbreak forced the grocer’s hand and led it to speed up a number of digital initiatives to support faster delivery. The upshot is that Kroger’s digital business doubled in 2020, leading to an 8.4% increase in overall sales. The company is now eyeing a target $20 billion in annual online sales by 2023. To do so, it has opened a 375,000-square-foot, fully automated distribution center outside Cincinnati, with nine other facilities coming on line in the next two years.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-17-Kroger

For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune Global 500 generated $33.3 trillion in revenues and $2.1 trillion in profits.

G500-2020-051-Kroger

Kroger has performed consistently amid stiff competition from the likes of Walmart, which already has an outsize share of U.S. grocery sales, and Amazon, which is making increasing inroads into the segment. Kroger's same-store sales edged ahead 2% in 2019, which is about average for U.S. grocers, while operating profits increased 7.5%. After a slow start in ecommerce, the Cincinnati-based company has been investing to ramp up its online operations through a partnership with U.K. grocer Ocado. It aims to eventually have 20 highly automated fulfilment centers operating across the U.S. The first three of these warehouses—in Ohio, Georgia and Florida—are due to open in 2021. At least one prominent investor likes Kroger’s prospects: Warren Buffett’s Berkshire Hathaway revealed it had taken a 2.4% stake in the grocer in the fourth quarter.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-023-Kroger

Here are the World's Most Admired Companies for 2019 as ranked in their industries. See who made the list.

This year's Fortune Global 500 generated $27.7 trillion in revenues and $1.5 trillion in profits.

This year's Fortune 500 marks the 65th running of the list.

Here are the World's Most Admired Companies for 2018 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 64th running of the list.

Here’s our look at 57 companies that do well by doing good.

Change the World

Here are the World's Most Admired Companies for 2017 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 63rd running of the list.

Here are the World's Most Admired Companies for 2016 as ranked in their industries. See who made the list.

This year's Fortune Global 500 generated $27.6 trillion in revenues and $1.5 trillion in profits.

This year's Fortune 500 marks the 62nd running of the list.

Business insiders have spoken: Asked which companies they most admire, more than 4,100 executives, directors, and analysts chose these top 50 All-Stars.

The world's 500 largest companies generated $31.2 trillion in revenues and $1.7 trillion in profits in 2014. Together, this year's Fortune Global 500 employ 65 million people worldwide and are represented by 36 countries.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Sector

Industry

Industry Rank

Previous Industry Rank

Overall Score

Innovation

People Management

Use of Corporate Assets

Social Responsibility

Quality of Management

Financial Soundness

Long-Term Investment Value

Quality of Products/Services

Global Competitiveness

Strongest Dimension

Years on list

Previous rank

State

Key Financials (last Fiscal Year)

Revenues ($M)

Profits ($M)

Assets ($M)

Total Stockholder Equity ($M)

Profit Ratios

Profit as % of Revenues

Profits as % of Assets

Profits as % of Stockholder Equity

Earnings Per Share (last Fiscal Year)

Earnings Per Share ($)

EPS % Change (from prior fiscal year)

EPS % Change (5 year annual rate)

EPS % Change (10 year annual rate)

Total Return

Total Return to Investors (last year)

Total Return to Investors (5 year, annualized)

Total Return to Investors (10 year, annualized)

The Kroger Co. is one of the largest U.S. grocery retailers, operating supermarkets under banners including Kroger, Ralphs, Fred Meyer, King Soopers, Fry’s, Smith’s, Harris Teeter, Mariano’s, and others. In addition to grocery stores, its network includes fuel centers, pharmacies, and digital shopping services. Customers can order groceries online for same-day Kroger Pickup—formerly ClickList—or delivery. Kroger has expanded its offerings for professional and at-home meal occasions through prepared foods and its Home Chef business, while growing its private-label portfolio with Kroger Mercado, a Hispanic-inspired line launched in 2023 with more than 50 products.

Q2 2027

Q1 2027

Q4 2026

Q3 2026

Q2 2026

Q1 2026

Q4 2025

Q3 2025

Kroger (KR): Company Profile, Stock Price, News, Rankings

legacy

Kroger

kroger

Good morning, and welcome to the Kroger Co. Second Quarter twenty twenty five Earnings Conference Call. Please note this event is being recorded. I'd now like to turn the conference over to Rob Quast, Vice President, Investor Relations. Please go ahead.

Good morning. Thank you for joining us for Kroger's second quarter twenty twenty five earnings call. I am joined today by Kroger's Chairman and Chief Executive Officer, Ron Sargent and Chief Financial Officer, David Kennerly. Before we begin, I want to remind you that today's discussions will include forward looking statements. We want to caution you that such statements are predictions and actual events or results can differ materially.

A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings. The Kroger Company assumes no obligation to update that information. After our prepared remarks, we look forward to taking your questions. In order to cover a broad range of topics from as many of you as we can, we ask that you please limit yourself to one question and one follow-up question if necessary. I will now turn the call over to Ron.

Thank you, Rob. Good morning, everyone. Thank you for joining our call today. We're happy to report another quarter of strong results, which demonstrates the clear and measurable progress we're making on our key priorities: to simplify the organization, to improve the customer experience and to focus on work that creates the most value.

Today, I want to talk about what we've accomplished, the proof points we see in our quarterly results and how our priorities are positioning Kroger for sustained long term growth. Over the last several months, we've made good progress to position the company for future success. A key part of that success is a strong leadership team. And during the quarter, we continued to upgrade our team. We promoted a top division president to lead our brands, one of our key growth initiatives.

We hired a new Head of Product Sourcing, who will help us lower our cost of goods sold and close the gap with the industry's best in class. We welcomed a new General Counsel, and we continue to elevate strong retail leaders across the company, including several new division presidents. As we continue to build our leadership team, we're also looking at our costs, especially those expenses that don't directly support our priorities or deliver value to our shareholders. As we shared last quarter, we've begun closing approximately 60 unprofitable stores. Last month, we also reduced our corporate administrative team by nearly 1,000 associates.

While these decisions are difficult, they're also necessary for the company's long term success. Additionally, in order to create greater focus and simplify our business, we're reviewing all noncore assets to determine their ongoing contribution and role within the company. And finally, we recently put an issue behind us by reaching a legal settlement with C and S Wholesale Grocers. We are pleased to resolve the claims so that we can remain focused on serving our customers and running great stores. Our efforts to create greater focus are showing up in today's second quarter results.

Identical sales without fuel grew 3.4%, which was ahead of our expectations. This is our sixth consecutive quarter of identical sales without fuel improvement. Sales growth was led by pharmacy, e commerce and fresh categories. We know that fresh products are important to our customers, specifically in meat and produce. These categories continue to outpace center store sales and reflect the growing demand for healthier options.

Our sales growth in fresh category shows that we're making strong progress in the categories our customers care most about. Improving grocery volume is also important to us. We're making strategic price investments, which led to another quarter of sequential improvement. In fact, since the beginning of the year, we've lowered prices on more than 3,500 incremental products across our stores, which is improving our price spreads against our major competitors. As we lower prices for our customers, we're committed to doing so in a way that keeps our gross margins stable.

We're making our promotions simpler and have continued to reduce complex promotional offers. Additionally, we're making it easier for non digital customers to take advantage of all the value Kroger offers by reintroducing paper coupons in every store. Our customers are recognizing these changes, and they're giving us credit for them. We know this because customer price perception improved in nearly every division this quarter, and we saw another quarter of sequential improvement in share. Beyond the price of the shelf, families are also looking for quality and value.

Our Brands products had another strong quarter with sales growth again outpacing national brands. Our brands offer unique products with high quality and represent a point of differentiation for Kroger. Simple Truth and Private Selection brands again led our growth. Looking ahead, we see our brands as a critical strategic asset, helping us grow sales and build loyalty with customers. E commerce.

E commerce also continues to be an important and growing part of our business. Sales were strong in the second quarter with 16% growth, led by good performance in delivery. We continue to make progress on improving profitability, and we saw improvements in both pickup and delivery profitability on a quarter over quarter basis. E comm remains a top priority for us. Running great stores is also critical to our future, and our store teams are delivering on the basics: being in stock, showing clean and uncluttered aisles and making shopping easier for our customers.

Our internal composite scores, which track key metrics like in stock levels, fresh product quality and customer service are showing consistent quarter over quarter improvement. And as we are improving our store and e commerce shopping experiences, we're also taking meaningful steps to reduce our cost structure. In the second quarter, we were pleased with our OG and A rate improvement, and we'll continue to aggressively look for ways to reduce costs throughout the company. We believe that many cost opportunities remain. So to summarize, we've made strong progress so far this year, and we also know that we have a lot more work to do.

Looking ahead, we're focused on investments that will grow our core business. The first of these is new stores. We're on track to deliver 30 major storing projects in 2025, and we're accelerating new store projects with more efficient layouts and faster construction timelines. In 2026, we expect to increase store openings by 30%, helping us grow both in store and online sales faster. While we are growing our physical footprint, we're also modernizing our business to operate more efficiently and serve customers better.

Artificial intelligence is one of the key tools to help us get there. Accelerating our AI efforts is a natural step for Kroger, given our long history of leadership in data and machine learning. Where we've implemented AI in different parts of the organization, we're seeing results with more competitive pricing, shrink improvements and faster fulfillment, which enables two hour pickup for customers. These are just a few examples of what AI is doing to help us better serve our customers with more and bigger opportunities ahead to both support our associates and improve the customer experience. E commerce will also continue to have a meaningful and growing impact on our financial results, which is why we announced a thorough strategic review last quarter.

We are progressing with two key objectives in mind. First, we will improve the customer experience by using our stores to deliver groceries faster. Stores are our most important asset. And when we use our stores to fulfill online orders, the inventory is closer to customers and the last mile delivery costs are lower. As demand for convenience grows, we can leverage our store footprint to reach new customer segments and expand rapid delivery capabilities without significant capital investments, which leads to our second objective, improving profitability and reducing our cost to serve.

We're examining all aspects of our business to drive greater efficiency, including a full site by site analysis of our Kroger automated fulfillment network. Where we have seen strong demand in high density areas, these facilities deliver better results than those facilities where density is lower and customer adoption has been slower. We continue to evaluate all options across all facilities to improve profitability while continuing to provide a great customer experience. We expect to share an update on our strategic review during the third quarter. We're confident that the outcome of our work will lead to both stronger e comm capabilities and a clear path toward profitability.

Finally, we're starting the foundational work to refresh our go to market strategy. This involves a deep dive into customer data and a rigorous assessment of our competitive positioning. This important work will set us up for even stronger performance in the future. Now I'll turn it over to David, who will review our financial results in more detail. David?

Thank you, Ron, and good morning, everyone. This quarter, Kroger delivered strong results, which reflect continued progress in our core grocery business and robust growth in e commerce and pharmacy. Momentum in our core grocery business is being driven by improved execution as well as a disciplined approach to price investments. By reducing the complexity of our promotions and investing more in everyday prices, we are sharpening our price perception with customers and driving volume improvements while responsibly managing our margins. I'll now walk through our financial results for the second quarter.

We achieved identical sales without fuel growth of 3.4%. Our sales growth was led by strong pharmacy, e commerce and fresh results. We are encouraged by the continued improvement in grocery volumes, particularly in the perimeter of the store. Food inflation was slightly lower in the second quarter compared to the first quarter, but continues to trend in line with our original expectations from the beginning of the year. Our Pharmacy business delivered another strong quarter, driven by core Pharmacy scripts and growth in GLP-1s.

Although strong growth in pharmacy sales impacts our margin rate, it drives positive gross profit dollar growth and improves our overall operating profit. This quarter, we've been pleased to welcome more ESI customers back into our stores. We continue to expect that the full return of the business will take time. And in Q2, ESI had a roughly 15 basis point positive impact on our ID sales. We continue to keep a close watch on the changing tariff environment.

As a domestic food retailer, we expect a smaller impact than some of our competitors. We continue to be proactive to address exposure where we do have it, and our approach remains to raise prices as a last resort to ensure that we keep prices as low as possible for our customers. Tariffs have not had a material impact on our business thus far, and as of now, do not expect them to going forward. Our FIFO gross margin rate, excluding rent, depreciation and amortization, fuel and adjustment items increased 39 basis points in the second quarter compared to the same period last year. The improvement in rate was primarily attributable to the sale of Kroger Specialty Pharmacy, lower supply chain costs and lower shrink, partially offset by the mix effect from growth in pharmacy sales, which has lower margins and price investments.

After excluding the effect from the sale of Kroger Specialty Pharmacy, our FIFO gross margin rate decreased nine basis points, largely in line with our expectations to remain margin neutral. The slight reduction in our FIFO gross margin rate was primarily due to pharmacy mix with good progress on rate in the rest of the business. We have many levers to improve our gross margin rate over time, and we will continue to use those to balance incremental price investments that improve our value perception with customers. We expect our gross margin rate for the full year on an underlying basis to be relatively flat as we balance the impact of pharmacy mix, margin enhancement initiatives and price investments. The operating, general and administrative rate, excluding fuel and adjustment items, decreased five basis points in the second quarter compared to the same period last year.

The decrease in rate was primarily attributable to improved productivity and a favorable comparison to prior year, which included certain nonrecurring charges, partially offset by the sale of Kroger Specialty Pharmacy. After adjusting for the effect from the sale of Kroger Specialty Pharmacy, our adjusted OG and A rate significantly improved, decreasing 41 basis points on an underlying basis. Cost optimization is one of our top priorities, and driving productivity has long been a core competency of this company. We will continue to build on that strong track record by identifying new and innovative ways to deliver cost savings across our business, and our teams are actively pursuing opportunities across multiple areas. One of the areas we're prioritizing is sourcing.

We see significant opportunities to optimize our costs across both cost of goods sold and goods not for resale. We also have a significant and continuing opportunity to modernize work across the enterprise, making us more agile and efficient and leading to a more streamlined operating model going forward. Our adjusted FIFO operating profit in the quarter was 1,100,000,000.0 Adjusted EPS was $1.04 reflecting 12% growth compared to last year and our strongest growth rate since the 2023. Fuel is an important part of Kroger's strategy and offers an additional way to build loyalty with customers through the fuel rewards in our Kroger Plus program. Fuel sales were lower this quarter compared to last year, attributable to a decrease in the average retail price per gallon and fewer gallons sold.

Fuel profitability was also behind the same period last year, and we expect gallons sold to remain lower on a year over year basis for the remainder of 2025. Our e commerce business delivered 16% growth this quarter, driven by an increase in both household and order frequency. This growth was led by delivery with orders fulfilled from both our stores and centralized fulfillment centers. We are seeing a clear trend of customers opting for faster delivery times, an area where we are well positioned based on our conveniently located store network, coupled with our delivery partner, Instacart. Today, we can offer delivery in under two hours from 97% of our stores.

This capability is resonating with our customers, and we continue to see more orders placed in these short windows. This digital momentum directly fuels our Retail Media business, which had a strong quarter and is a key contributor to profitability. While we're encouraged by the performance in the quarter, we believe we have an opportunity to meaningfully accelerate our growth. To support this, we're actively reviewing the operating model and how we engage with Retail Media clients to ensure we are strategically positioned to maximize growth in this area of our business. I'd like to take a moment to provide a brief update on associate and labor relations.

We made significant progress on agreements this quarter, which provides certainty for our associates and our business. In total, we ratified new labor agreements covering approximately 54,000 associates. We continue to meaningfully improve wages and benefits, and we value our strong working relationships with our unions. By working together, we're better able to support associates and improve the experience we provide customers. These collective efforts have helped us build a more stable workforce with improved retention rates, which in turn drives a better customer experience.

I'd now like to turn to capital allocation and financial strategy. Kroger delivered strong adjusted free cash flow this quarter, which reflects the strength of our operating performance. Free cash flow is important to our model, providing liquidity for our operations and strengthening our balance sheet. At quarter end, our net total debt to adjusted EBITDA ratio was 1.63, which is below our target ratio range of 2.3 to 2.5. This provides us with significant financial flexibility to pursue growth investments and other opportunities to enhance shareholder value.

We expect to return to our target leverage ratio over time. Our capital allocation priorities remain consistent and are designed to deliver total shareholder return of 8% to 11% over time. We are focused on investing in projects that will maximize return on invested capital over time, while remaining committed to maintaining a current investment grade rating, growing our dividend subject to Board approval and returning excess capital to shareholders. In the second quarter, we raised our quarterly dividend by 9%, reflecting the strength of our free cash flow and our commitment to returning capital to shareholders. Our quarterly dividend has grown at a compounded annual growth rate of 13% since its reinstatement in 02/2006, and this marks the nineteenth consecutive year of dividend increases.

Dividend increases are just one component of our broader total shareholder return strategy, and we plan to continue returning capital to shareholders through share repurchases. We expect our $5,000,000,000 ASR program to be completed in the 2025. The ASR is being completed under Kroger's $7,500,000,000 share repurchase authorization. After completion of the ASR program, we expect to resume open market share repurchases under the remaining $2,500,000,000 authorization. We expect to complete these open market share repurchases by the end of the fiscal year, which is contemplated in full year guidance.

A key priority for Kroger is to improve ROIC, which includes reallocating capital towards higher return projects such as new storing. We are pleased with the progress we are making on these projects and are on track to complete 30 this year. As Ron mentioned earlier, we plan to accelerate these storing projects beyond 2025 and expect them to be an increasing contributor to our growth, with a 30% increase expected in 2026, positioning us for sustained expansion and market share growth. I would now like to provide some additional detail on our outlook for the rest of the year. We are pleased with our second quarter results, which reflects continued momentum in our business.

Sales have been strong, led by e commerce, pharmacy and fresh, and we are encouraged by the improvement in grocery volumes. As a result, we are raising our identical sales without fuel guidance to a new range of 2.7% to 3.4. For Q3, we expect identical sales without fuel to be slightly below the midpoint of our full year range. We are also raising the lower end of our adjusted FIFO net operating profit and net earnings per diluted share guidance to new ranges of 4,800,000,000 to $4,900,000,000 and $4.7 to $4.8 respectively. I will now turn the call back to Ron.

Thanks, David. The team continues to make progress in running great stores. We are more focused on our core business and our customers. We're moving with speed and we're simplifying the company. We are executing better in our stores and we are seeing it in the results, both our quarterly financial results and our customer metrics.

Our customers are telling us they like lower prices and simpler promotions. They care about quality and value, and they appreciate better store conditions and better service. Our work is far from finished, but I'm proud of the team and the progress we're making. Before we move into Q and A, I'd like to comment briefly on the CEO search. There's no specific news to share at this time, but the Board remains actively engaged in the process. We'll now open it up for questions.

Thank you. Our first question for today comes from Leah Jordan of Goldman Sachs. Your line is now open. Please go ahead.

Thank you. Good morning. Thanks for all the comments today. I mean, the biggest call out for me that was new is it seems like you plan to use your stores a bit more for e commerce fulfillment. Can you help us understand how you plan to implement that?

Any color on timing and cost? How much capacity do you have in your stores today? And then will you have to rework the back of the stores? And how are you thinking about labor? And I guess, ultimately, how does this balance with your CFC network today as well?

Let me start with that. I mean we're using our stores very heavily now to fulfill e commerce orders every day. So it's really not much of a change in that regard. We are taking a hard look at some of our automated facilities. But we had a very strong quarter in both e commerce sales as well as profitability.

Significantly, this quarter was the first time that delivery sales passed store pickup sales. So I think that indicates that delivery is really important to our customers. In terms of the strategic review, we're nearly complete. We plan to update you in the third quarter. And to be clear, we feel like e commerce is incredibly important to our customers.

It's also important to our business. We understand that the path to profitability is also equally important. But in terms of reworking stores, there's not much that we need to do. I mean, we're doing it now. We're delivering the bulk of our e commerce is done by stores today.

And we adjust volumes all the time. I think new store openings will help us as well. But really not a lot of work. We think it's a kind of an asset light delivery possibility and it also allows us to get deliveries to customers within a couple hours time and if they want to pay for it even earlier than that.

That's very helpful. Thank you. And then I wanted to switch and ask about price investments. You called out lower prices on I think 3,500 products and that's a step up from 2,000 I think you said last quarter. And I know you've changed in how you're presenting some of these promotions to be as well.

But just has anything changed in the competitive environment? How do you view your price gap today? Is that 3,500 the end of the line? And are you still making these investments in a margin neutral way at this point? Thank you.

Yes. Let answer that one. The competitive backdrop on pricing remains very rational out there. Our priorities currently are to really simplify our pricing strategy. We do want to lower prices.

We have done that with the 3,500. We'll continue to do that. Any cost increases, we've tried to absorb them as much as possible. Occasionally, the tariffs will have an impact on some of our pricing. But pricing in general is very rational.

We're going to continue to do it and we are reducing our spreads versus our competition. We did that in Q2 and I think we'll continue to do that in Q3. But when you look at pricing, we're a different model than some of our competitors. But when you look at promotional pricing, we're very, very competitive with everybody out there.

Yes, it's David. Just one more thing to add just on the margins. Obviously, this in a responsible way is an important priority for us. We feel we were able to do that in Q2, balancing investments we want to make with a range of cost saving initiatives. And I'd expect us to be able to continue to do that through the balance of the year.

Thank you. Our next question comes from Upsh Parekh of Oppenheimer. Good

morning, and thanks for taking my question. So just going back to your ID sales momentum, now two consecutive quarters above 3%. How does your team feel about sustaining close to that level of momentum going forward?

Rupesh, it's David. Let me take that one. I mean we're very happy with the ID sales performance that we've seen so far this year. Good growth from multiple different areas of the business. Obviously, we've updated the guidance range, which obviously we feel confident about our ability to deliver that.

I think maybe just the one thing that is important to note is the first half of the year was definitely our easiest from a year over year comparison perspective. So as we get into the back half of the year, the comparisons do get a little harder. That's reflected, obviously, in the guidance. And if you look at the two year stacks on our ID sales for the balance of the year, we expect to deliver very healthy and continuing to improve two year stacks.

I would add is that I think our customers are responding simpler promotions, lower prices, better service, cleaner, less cluttered stores. And to also give credit where it's due, our merchants and marketing team are offering promotions that customers are responding to and the divisions and the store associates are executing very well. So we're trying to make less busy work and more customer work.

Great. And then maybe my one follow-up question. Just on retail media, the comment here appears more positive retail media this quarter versus recent quarters. So is my understanding correct? And what do you think is driving that improved performance?

Yes. Rupesh, I come back to the fact that we've just got a really good offering. I mean, we really like the offering that we've got here. We really think it gives the clients that use our retail media assets the ability to do things that others cannot do. And I think customers are responding to that.

So we feel good about the growth that we're seeing. It is a little bit more positive. We did see a slight acceleration in that business this quarter relative to last quarter. And we still think this is a very meaningful opportunity for us. We are tweaking some things in the way that we talk to clients about this, which gives us confidence that this can be a continued growth driver for us both in the balance of the year and also into next.

Thank you. Our next question comes from Simeon Gutman of Morgan Stanley. Your line is now open. Please go ahead.

Good morning. Hey, so if you take the first to second quarter comp, so it got a little bit better sequentially. And the slide deck said that the there was some sequential improvement in volume. I think it still implies that maybe its volume is not positive, but it improved quarter to quarter. Can you explain which one moved more?

Was it ticket growth or volume growth sequentially? Or was it about the same to get to the 3.4?

Here's the way I'd try and explain that one. So I think a couple of things. So we saw the kind of inflation number quarter on quarter was actually slightly more moderate in the second quarter than we'd seen in the first, and our units improved. So, I think it's pretty balanced, but it was more of a unit improvement than it was an inflation improvement.

And just to kind of add a little color commentary there. Then the grocery units have certainly improved for the last several quarters. And at this point, we're almost flat year over year.

Got it. Okay. And related to that, and then I'll put the follow-up. It sounds like in the back half, even though inflation does look like it's picking up a little bit, it's the comparison, which I think you've they're tougher by about 100 basis points, why the back half doesn't get even stronger. So that's the follow-up to that question.

The other question, Ron, I wanted to ask, the not the e commerce strategic review, but it sounds like there's a lot of evaluation of everything in the business going on. I wanted to ask about the value proposition and if there is a debate around the pricing architecture and whether there is a debate around even moving to like a strict EDLP pricing architecture?

Yes, there's no debate about moving to an EDLP pricing architecture. I mean, Kroger is a retailer that for many, many years has been a promotional retailer. Our customers respond to that. Our customers come to us for that. So I don't think there's going to be a dramatic change.

The other hand, you look at white shelf or white tag shelf prices, and you want to narrow that spread on the everyday price items. So I don't think there's just a fundamental shift in our pricing strategy, but we're going to be sharper and we're going to be more focused and we're going to be simpler.

Yes. Let me and then let me just, Simeon, come back to the question on ID sales through the balance of the year. Listen, you rightly point out that we cycle stronger results in the second half of the year. I mean that is a big factor and definitely an important one as we reflected on both our plans for the balance of the year and, of course, where we set the guidance. We feel comfortable about where we've set the range.

And our priority remains, as we've said, is improving grocery volumes whilst being responsible in the price investments that we're making, managing margins. And that's the delicate balancing act that we've got to continue through the balance of the year.

Thank you. Our next question comes from Michael Lasser of UBS. Your line is now open. Please go ahead.

Good morning, Michael. Good morning. Thank you so much for taking my question. With each passing day, the it does seem like you have more and more players across the industry who are looking to the core grocery sector to grab either wallet share or drive other elements of their business and use that as a funding mechanism to harvest other portions of the profit pool across retail, which could put downward pressure on the profit pool within the grocery sector. It seems like your message, Ron, is, listen, we still have a lot of room for internal improvement and repositioning our assets.

How much further can you drive improvement from these actions while maintaining a margin rate that's been around 3.1 for the last few years?

Michael, I think the short answer is much further. I mean, we've got lots of opportunities to improve our margin rate. I mean, I can go through kind of a long list of those, if you would like. But certainly, we've got opportunities on pricing. We've opportunities on our brands, e commerce.

Certainly, sourcing is a big opportunity that we're working really hard on. I get what you're saying about competitors, but food industry, it's always competitive. In terms of the pricing environment out there, I think our competition continues to be very, very rational. All retailers are dealing with kind of similar issues. And our focus is simplifying and focusing on the things that matter most of our customers. I don't know, David, you want

to Yes. Add a just to reinforce the point about the cost opportunity that we think we have. Michael, we're saying Ron's already mentioned sourcing. I think we believe that we've got a very significant opportunity on cost of goods sold as well as on goods not for resale. We've made some people reorganizations in that area to help us really get after it.

We think there's continued opportunity in our OG and A. And we also think what I would there is kind of big opportunities around what I would call sort of modernizing the operating model. So I think as we think about what is undeniably a very competitive environment, what we're very, very focused on is finding the fuel to help us manage that and invest back into the business. I think we feel that we've got quite a long runway on that across the coming months and years.

Understood. Thank you for that. My follow-up question is, can you unpack the back half guidance a little bit more? You raised the ID outlook. You lowered your tax rate.

You took up the low end of both your operating profit outlook and as well as your EPS outlook. So what changes from a margin or below the line perspective have you made to help us frame how we should be thinking about the second half of the year? Thank you very much.

IDs, we've already talked about. I think we've got much tougher comparisons as we get into the back half of the year, improving grocery volumes. So I think we feel good about where we've set the range on that. I think if I understand your question, it's more around the sort of profit puts and takes. So I think a few things that we've got going on there.

Number one, listen, it's undeniable. We still have a consumer environment that is still pretty uncertain. And whilst we have not yet seen what I would call sort of consumer sentiment translate necessarily into action, that remains an area that we continue to watch very, very carefully. I think the second thing is that our pharmacy business, we expect it to continue to grow ahead of the rates of the rest of the business. And whilst that will give us dollars, it does create pressure on mix.

The third thing is really around fuel headwinds. We expect that obviously, it's not in our IDs, but it is in our profit number. We expect that to create a headwind for us the balance of the year as it has done so far year to date. We're working very hard, as we said, to offset all of those things with as much sort of cost and efficiency initiatives as we can. The tax rate you called out, it's very, very marginal.

We had a couple of things really kind of move around mainly on state taxes. And candidly, it's we're talking decimal points that moved that. And so that was the reason that we felt confident enough to kind of raise the floor on the profit guidance but did not change the top end despite the improved ID sales.

Understood. Thank you very much and good luck.

Thank you. Our next question comes from Seth Sigman of Barclays. Your line is now open.

Please go ahead. Hey, good morning, everyone. Thanks for taking the I wanted to ask about e commerce and follow-up there. The growth that continues to accelerate, is there a way to think about the incrementality of what you're seeing there, thinking about new customers versus existing customers? Because you're also obviously seeing non e commerce IDs improve as well.

And then I guess a related question is just thinking about the shorter delivery windows. What are you seeing? What is the consumer looking for as they look for that quicker delivery? Thank you.

Yes, I'll start, David, feel free to add in. But the consumer is looking for kind of the things they look for when they shop our stores, but more. I mean, they want product to be fresh, they want it to be price right, they want the orders complete and they want it delivered fast. I think a few years ago, we might have said next day delivery on food items works just fine. I think today the customer is looking for speed and they're willing to pay for it.

So I think we've tried to adjust kind of how we do business to how the consumer wants us to do business. I'm not sure if I can really say much more, but I think more and more people are willing to pay for incredibly fast service within two hours.

Yes, maybe let me take the sort of comment around incrementality. I think a couple of things here. So number one, we're adding new households. I mean that's really, really important because those new households are new households to Kroger. And we're also growing order volumes with consumers that are already shopping with us.

Kroger (KR) Q2 2026 Earnings Call Transcript

Company Participants