This story was originally published on Grocery Dive. To receive daily news and insights, subscribe to our free daily Grocery Dive newsletter. From cutting-edge apps to e-commerce, Kroger has invested a lot of time and money in boosting the digital shopping experience. But these days, it’s finding that a lot of shoppers just want to go back to paper. Paper coupons, that is. In recent weeks, the country’s largest supermarket chain has begun reintroducing paper coupons to all of its stores. These promotional ...

Financial Data and Key Metrics Changes - Kroger achieved identical sales without fuel growth of 3.4%, marking the sixth consecutive quarter of improvement in this metric [10][22][36] - Adjusted EPS was $1.04, reflecting a 12% growth compared to the previous year, the strongest growth rate since 2023 [28][33] - FIFO gross margin rate, excluding rent, depreciation, and amortization, increased by 39 basis points year-over-year, primarily due to the sale of Kroger Specialty Pharmacy and lower supply chain costs [24][25] Business Line Data and Key Metrics Changes - Sales growth was led by pharmacy, e-commerce, and fresh categories, with e-commerce sales growing by 16% [10][14][29] - The pharmacy business saw strong growth driven by core pharmacy scripts and growth in GLP-1s, positively impacting gross profit dollars [22][23] - Kroger's Brands products outpaced national brands in sales growth, with Simple Truth and Private Selection leading the way [13] Market Data and Key Metrics Changes - Food inflation was slightly lower in Q2 compared to Q1, trending in line with original expectations [22] - The company noted that low and middle-income households are increasingly looking for deals and using coupons, while higher-income households are still spending on premium products [101][102][104] Company Strategy and Development Direction - Kroger is focused on simplifying the organization, improving customer experience, and enhancing value creation [5][6] - The company plans to open 30 major store projects in 2025 and increase store openings by 30% in 2026 [16][35] - Artificial intelligence is being leveraged to improve pricing, reduce shrink, and enhance fulfillment capabilities [17][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining sales momentum, although the second half of the year will present tougher year-over-year comparisons [55][70] - The company is proactively addressing the changing tariff environment and does not expect significant impacts on its business [24][104] - Management remains cautious about consumer sentiment and its potential impact on spending [81][104] Other Important Information - Kroger ratified new labor agreements covering approximately 54,000 associates, improving wages and benefits [31] - The company raised its quarterly dividend by 9%, marking the nineteenth consecutive year of dividend increases [33] Q&A Session Summary Question: Plans for e-commerce fulfillment using stores - Management confirmed that stores are heavily used for e-commerce fulfillment, with no significant changes needed for reworking stores [41][44] Question: Competitive pricing environment and price investments - Management noted that the competitive pricing backdrop remains rational, and they will continue to lower prices while managing margins responsibly [46][48][50] Question: Sustaining ID sales momentum - Management expressed confidence in sustaining ID sales performance, although the second half will have tougher comparisons [54][70] Question: Incrementality of e-commerce growth - Management indicated that new households are being added through e-commerce, and existing customers are increasing order volumes [91] Question: Performance by income segments - Management observed that low and middle-income households are looking for deals, while higher-income households are still spending on premium products [101][102]

Financial Data and Key Metrics Changes - Kroger achieved identical sales without fuel growth of 3.4%, marking the sixth consecutive quarter of improvement in this metric [8][20][34] - Adjusted EPS was $1.04, reflecting a 12% growth compared to the previous year, the strongest growth rate since 2023 [25][31] - FIFO gross margin rate, excluding rent, depreciation, and amortization, increased by 39 basis points year-over-year [22][23] Business Line Data and Key Metrics Changes - Pharmacy sales growth was strong, driven by core pharmacy scripts and growth in GLP-1s, contributing positively to gross profit [20][21] - E-commerce sales grew by 16%, led by delivery performance, with a notable shift where delivery sales surpassed store pickup sales for the first time [12][26][42] - Fresh product sales continued to outpace center store sales, reflecting customer demand for healthier options [8][9] Market Data and Key Metrics Changes - The company noted that food inflation was slightly lower in Q2 compared to Q1, trending in line with original expectations [20] - Low and middle-income households are increasingly looking for deals and using coupons, while higher-income households are still spending on premium products [98][100] Company Strategy and Development Direction - Kroger is focused on simplifying operations, improving customer experience, and enhancing value creation [4][5] - The company plans to open 30 major store projects in 2025 and increase store openings by 30% in 2026 [14][33] - Artificial intelligence is being leveraged to improve pricing, reduce shrink, and enhance fulfillment capabilities [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining sales momentum despite tougher comparisons in the second half of the year [52][68] - The company is closely monitoring the consumer environment, which remains uncertain, and is prepared to adjust strategies accordingly [80][81] - Management expects to maintain a relatively flat gross margin rate for the full year while balancing price investments and margin initiatives [23][34] Other Important Information - Kroger ratified new labor agreements covering approximately 54,000 associates, improving wages and benefits [29] - The company raised its quarterly dividend by 9%, marking the nineteenth consecutive year of dividend increases [31][32] Q&A Session Summary Question: Plans for using stores for e-commerce fulfillment - Management indicated that stores are already heavily used for e-commerce fulfillment, with no significant changes needed for reworking stores [40][42] Question: Competitive pricing environment and price investments - The competitive pricing backdrop remains rational, and Kroger plans to continue lowering prices while managing margins responsibly [46][48] Question: Sustaining ID sales momentum - Management expressed confidence in sustaining ID sales momentum, although the second half of the year presents tougher comparisons [52][68] Question: Incrementality of e-commerce growth - E-commerce is adding new households and increasing order volumes from existing customers, contributing to overall growth [89][90] Question: Pharmacy performance and its impact on other business areas - Pharmacy performance is expected to provide incrementality to the rest of the business, with a normalization of vaccine approvals anticipated [93] Question: Performance by income segments - Low and middle-income households are seeking deals, while higher-income households continue to spend on premium products [98][100]

Core Viewpoint - Kroger's shares increased by approximately 9% following the company's raised full-year sales outlook, driven by consumer demand for lower-priced store brands and alternatives to dining out [1] Group 1: Sales Performance - Kroger now anticipates identical sales, excluding fuel, to rise by 2.25% to 3.25% year-over-year, an increase from the previous forecast of 2% to 3% [2] - For the fiscal first quarter ending May 24, Kroger reported net sales of $866 million, or $1.29 per share, with identical sales, excluding fuel, growing by 3.2% year-over-year [3][4] - E-commerce sales experienced a year-over-year growth of 15% [4] Group 2: Company Changes and Leadership - Kroger has undergone significant changes, including the resignation of longtime CEO Rodney McMullen and the hiring of a new CFO, David Kennerley, previously of PepsiCo Europe [5][6] - The company is currently searching for a new CEO, with the board collaborating with a search firm [14] Group 3: Competitive Landscape - Kroger faces increased competition from Walmart and Costco, particularly as consumers are more price-conscious due to tariff uncertainties [6] Group 4: Consumer Behavior and Strategy - The company is focusing on value-oriented shoppers by simplifying promotions and lowering prices on over 2,000 products [7] - Kroger's private label brands have outperformed national brands for seven consecutive quarters, with Simple Truth and Private Selection being the top performers [8] - The company plans to launch 80 new protein products under the Simple Truth line to capitalize on health trends [9] Group 5: Cost Management and Store Operations - Kroger is reviewing its costs to modernize its business and improve e-commerce profitability, which is currently not profitable [12] - The company plans to close about 60 stores over the next 18 months, resulting in a $100 million impairment charge in the first quarter [12] - Despite store closures, Kroger intends to open new locations in higher-growth areas, with plans to accelerate openings in 2026 [13]

Financial Data and Key Metrics Changes - Kroger reported identical sales growth of 3.2% excluding fuel and adjustment items, with adjusted net earnings per diluted share increasing by 4% to $1.49 [10][26][41] - FIFO gross margin rate, excluding rent, depreciation, and amortization, improved by 79 basis points compared to the previous year, primarily due to the sale of Kroger Specialty Pharmacy and lower supply chain costs [28][30] - Adjusted FIFO operating profit was $1.5 billion, with fuel sales lower than expected due to decreased average retail price per gallon and fewer gallons sold [30][31] Business Line Data and Key Metrics Changes - Strong performance in the fresh category supported identical sales growth, with fresh identical sales outperforming center store sales [10][11] - The Our Brands business grew faster than National Brands for the seventh consecutive quarter, driven by customer demand for high-quality products at various price points [11][12] - E-commerce sales grew by 15%, with ongoing improvements in order accuracy and delivery speed contributing to customer acquisition [13][32] Market Data and Key Metrics Changes - Customers are increasingly cautious in their spending, leading to a rise in promotional product purchases and Our Brands products [17][72] - Inflation was slightly below 2% in the first quarter, aligning with expectations, and is anticipated to remain within the guided range for the year [27][69] - The company is observing a shift in consumer behavior, with more meals being prepared at home and increased use of coupons [72] Company Strategy and Development Direction - The company is focusing on long-term growth by enhancing core business operations, accelerating new store openings, and optimizing capital allocation [7][8][39] - A new e-commerce business unit has been created to streamline online customer experience and improve profitability [8][32] - Plans to close approximately 60 underperforming stores over the next eighteen months are aimed at increasing overall efficiency [15][39] Management's Comments on Operating Environment and Future Outlook - The management acknowledges the uncertain economic environment but remains optimistic about the company's ability to adapt and serve customers effectively [17][43] - The company expects to see continued improvement in grocery volumes throughout the year, supported by strong execution from store teams [68] - Full-year guidance for net operating profit and adjusted earnings per share remains unchanged despite macroeconomic uncertainties [42] Other Important Information - The company is committed to improving associate wages and benefits, with the average hourly rate exceeding $19.50 [20][36] - Kroger's capital allocation strategy aims to deliver a total shareholder return of 8% to 11% over time, focusing on high-return projects [38][39] - The company is actively investing in technology to enhance inventory management and reduce shrinkage [108] Q&A Session Summary Question: Pricing and Value Perception - Management emphasized the importance of competitive pricing and simplifying promotional offers to enhance customer value perception, with a focus on maintaining gross margin [47][48][50] Question: E-commerce Profitability - Management acknowledged that while e-commerce sales are growing, profitability remains a challenge, and efforts are underway to improve this aspect [53][55] Question: Market Share Performance - Management noted modest market share growth attributed to new store openings and improved in-store experiences, with e-commerce growth also contributing positively [76][78] Question: Cost Optimization Strategies - Management is exploring new ways to modernize operations and improve cost efficiency, leveraging fresh perspectives to identify areas for improvement [60][62] Question: Retail Media Growth Trends - Management reported healthy growth in retail media, despite cautious spending from CPG brands, and expects continued growth through the year [106][107] Question: Shrink Improvement - Management highlighted investments in AI technology and improved inventory management processes as key drivers for shrink reduction, with expectations for continued progress [108][110]