Kroger — Income Statement, Cash Flows & Balance Sheet
Is Kroger profitable?
A massive one-time write-down on its automated fulfillment network caused reported profits to collapse, masking an otherwise stable core business.
| Metric | FY2024 (prior year) | FY2025 (current year) | Change |
|---|---|---|---|
| Sales | $147,123M | $147,642M | +0.4% |
| Operating profit | $3,849M | $1,890M | -51% |
| Net earnings (Kroger) | $2,665M | $1,016M | -62% |
| Fulfillment network impairment (in OG&A) | $0 | $2,497M | — |
| Diluted EPS | $3.67 | $1.54 | -58% |
| Effective tax rate | 20.0% | 14.7% | -5.3 pp |
The $2.5 billion impairment charge — taken after Kroger shut down several automated "Ocado" fulfillment warehouses that never met financial expectations — is the primary culprit behind the earnings drop. Strip that out, and the underlying business produced roughly comparable results to the prior year. The lower effective tax rate (partly from tax benefits related to asset sales) cushioned some of the reported hit.
Pharmacy is Kroger's fastest-growing product category, more than offsetting a continued slide in fuel sales.
| Product Category | FY2024 Sales | % of Total | FY2025 Sales | % of Total | Change |
|---|---|---|---|---|---|
| Non-perishable | $77,080M | 52.4% | $77,569M | 52.5% | +0.6% |
| Fresh | $36,317M | 24.7% | $37,189M | 25.2% | +2.4% |
| Pharmacy | $15,691M | 10.6% | $18,171M | 12.3% | +15.8% |
| Supermarket fuel | $14,973M | 10.2% | $13,584M | 9.2% | -9.3% |
Pharmacy is now Kroger's second-largest revenue category and growing rapidly, likely reflecting both volume gains and GLP-1 drug tailwinds. Fuel continued its multi-year retreat, down meaningfully as a share of the mix. Core grocery (fresh and non-perishable) together held steady, growing modestly in dollar terms.
Does Kroger generate cash?
Kroger's operating cash engine remained strong, and free cash flow improved year-over-year despite lower reported earnings.
| Metric | FY2024 | FY2025 | Change |
|---|---|---|---|
| Operating cash flow | $5,794M | $7,311M | +$1,517M |
| Capital expenditures | $(4,017M) | $(3,855M) | +$162M |
| Free cash flow (approx.) | $1,777M | $3,456M | +$1,740M |
| Dividends paid | $(883M) | $(885M) | flat |
| Share repurchases | $(4,156M) | $(2,699M) | -$1,457M |
The large non-cash impairment charge added back to operating cash flow is the main reason reported operating cash jumped. Kroger meaningfully reduced share buyback spending versus the prior year (which included a large $5B accelerated share repurchase program), freeing up cash. Capital spending edged down slightly, and the dividend — now at $1.37 per share annually — was maintained.
How strong is Kroger's balance sheet?
Kroger carries substantial long-term debt, but near-term maturities spiked due to merger-related note redemptions already handled.
| Metric | Feb 1, 2025 | Jan 31, 2026 | Change |
|---|---|---|---|
| Total long-term debt (incl. finance leases) | $17,633M | $15,764M | -$1,869M |
| Current portion of LT debt | $272M | $1,802M | +$1,530M |
| Cash & equivalents | $3,959M | $3,334M | -$625M |
| Total equity | $8,281M | $5,936M | -$2,345M |
Long-term debt declined as merger-related senior notes were redeemed. However, equity fell sharply — driven by the impairment charge and aggressive share buybacks reducing retained earnings and boosting treasury stock. The current portion of debt jumped to $1.8 billion (mostly the $1.4B in senior notes due in 2026), which is manageable against Kroger's cash balance and revolving credit facility of $2.75 billion, which had no outstanding borrowings at year-end. The opioid settlement liability ($1.1 billion remaining) and Albertsons termination fee dispute ($600 million claimed by Albertsons) are two legal overhangs worth monitoring.