Kroger — Financial Results

Kroger's Core Business Grew Steadily, But a $2.5 Billion Write-Off Dominated the Headlines

The headline numbers look alarming, but the drop in reported earnings is almost entirely explained by a $2.5 billion fulfillment network impairment (a write-down of assets that are worth less than what Kroger paid for them). Strip that out, and the underlying business grew earnings per share by 8.5%. Same-store sales also accelerated from 1.5% growth to 2.9%, driven by pharmacy, eCommerce, and fresh food.

Kroger Pulled the Plug on Its Automated Warehouse Network

Kroger had invested heavily in large, robotic automated fulfillment centers (giant warehouses that pack online grocery orders mechanically) built in partnership with Ocado. Several facilities simply did not meet financial or operational expectations. Kroger closed sites in Wisconsin, Maryland, and Florida in early 2026 and cancelled a planned facility in North Carolina, resulting in the $2.5 billion charge ($1.9 billion after tax). Going forward, Kroger plans to fulfill online orders primarily through its existing stores and third-party delivery partners, which it expects will actually improve eCommerce profitability.

eCommerce Grew 16-17% Despite the Strategy Shift

Even as Kroger walked away from its warehouse model, online sales grew 16% year-over-year — or 17% excluding the closed facilities and divested assets like Vitacost.com. Growth was led by Delivery solutions (orders delivered to customers' homes). This matters because eCommerce has historically been a drag on profits; the pivot to store-based fulfillment is Kroger's bet that it can grow online sales while actually making money on them.

Cash Generation Was Exceptionally Strong

Kroger generated $7.3 billion in cash from operations in 2025, up 26% from $5.8 billion in 2024. Much of that came from working capital improvements and the non-cash nature of the impairment charge boosting operating cash flow. The company used that cash to return $4.3 billion to shareholders through buybacks ($3.4 billion) and dividends ($885 million), while also paying down $339 million of debt. The dividend per share rose 9.8% to $1.34.

Rising Costs Are Putting Modest Pressure on Margins

Kroger's OG&A rate (operating, general and administrative expenses as a share of sales — essentially overhead costs) crept up 29 basis points excluding one-time items, driven by higher healthcare costs and increased pension contributions. Multi-employer pension contributions jumped from $398 million in 2024 to $496 million in 2025, as prefunding credits ran out. These are structural cost pressures tied to union labor agreements that will need to be offset by savings elsewhere.

Kroger Is Aggressively Buying Back Its Own Stock

Kroger spent a combined $7.5 billion on buybacks under its accelerated share repurchase program over 2024-2025, reducing diluted shares outstanding from 720 million to 655 million. Fewer shares outstanding mechanically boosts earnings per share even if total profits stay flat — which partly explains the 8.5% adjusted EPS growth. A new $2.0 billion repurchase program was announced in December 2025.