Key Highlights

● Kroger cut its 2026 identical sales outlook to 0.2% to 0.8%, citing a pharmacy headwind.

● Adjusted earnings guidance of $5.10 to $5.30 per share was reaffirmed.

● Second-quarter sales reached $34.6 billion and adjusted earnings rose to $1.09 per share.

● The quarterly dividend rose to $0.39 per share, and $1.0 billion of stock was repurchased.

Kroger (NYSE:KR) lowered its full-year sales outlook on September 11, 2026 while reaffirming its adjusted earnings forecast. The reason is a sharp headwind in pharmacy sales, which the company attributes to the Inflation Reduction Act. That split between sales and profit is the central point of the second-quarter report.

What Kroger reported

Kroger, one of America's largest supermarket groups, reported second-quarter 2026 results for the period ended August 15, 2026. Sales were $34.6 billion, compared with $33.9 billion a year earlier. Net earnings under US GAAP were $641 million, or $1.05 per diluted share. On the company's adjusted, non-GAAP basis, earnings were $1.09 per share, up from $1.04. CEO Greg Foran called the quarter solid, citing adjusted earnings growth of 5%.

Identical sales without fuel, a key operating metric that tracks stores open for at least a year, rose just 0.2%. Kroger said the Inflation Reduction Act cut that figure by 138 basis points, which means that without the pharmacy effect the underlying number would have been noticeably firmer. The company also said its FIFO gross margin rate, a non-GAAP measure that excludes rent, depreciation, amortization and fuel, improved by 13 basis points. Reported GAAP gross margin was 22.4% against 22.5% a year earlier.

The guidance change

Kroger now expects full-year 2026 identical sales without fuel of between 0.2% and 0.8%, down from a previous range of 1.0% to 2.0%. It left several other targets unchanged: FIFO operating profit of $5.0 billion to $5.2 billion, adjusted earnings of $5.10 to $5.30 per share, free cash flow of $2.7 billion to $2.9 billion and capital expenditure of $3.8 billion to $4.0 billion.

The unchanged profit targets suggest cost control and gross margin are carrying more of the load than volume growth. That is plausible, but it leaves less room for error if competition intensifies or if the pharmacy drag persists beyond this year.

Capital returns

Kroger declared a quarterly dividend of $0.39 per share, up from $0.35. The company described the increase as its 20th consecutive annual rise. Kroger also repurchased $1.0 billion of stock in the quarter and $1.2 billion year to date under a $2 billion authorization, with about $800 million remaining. The company expects to complete the program by the end of fiscal 2026. The release does not give a share price for these purchases.

Sector context

Supermarkets operate on thin margins, so small shifts in pharmacy reimbursement, private-label mix and shrink can move profit materially. Pharmacy is both a traffic driver and a margin lever, which is why a policy-driven change in drug pricing can ripple through identical sales. Kroger's reaffirmed profit outlook is therefore a test of whether grocery and fuel-adjacent categories can offset that drag.

Risks and what to watch

Several uncertainties remain. Pricing and competition from discounters and warehouse clubs could pressure volumes. Policy changes affecting drug pricing may continue to weigh on reported sales. The buyback pace depends on cash generation, and guidance can be revised again. The next supported milestone is Kroger's third-quarter report, with timing to be confirmed by the company.

For now, the picture is a retailer growing earnings per share modestly, returning capital steadily and recalibrating its sales ambitions.