- E-Commerce Profitability: Kroger expects to make its e-commerce business profitable in 2026, driven by $400 million in savings from closing automated fulfillment centers and growth from partnerships with Instacart, DoorDash, and Uber Eats.
- Store Expansion Acceleration: The company plans to open 14 new stores in Q4 2025 and increase new store builds by 30% in 2026, focusing on large formats (123,000 sq ft and 99,000 sq ft).
- Sales Growth Momentum: Identical sales without fuel grew 2.6% YoY and accelerated to 4.9% on a two-year stack, with e-commerce sales rising 17% due to delivery demand.
- Capital Returns & Guidance: Kroger returned $5 billion via an ASR program and raised its 2025 adjusted EPS guidance to $4.75–$4.80, with $2.5 billion remaining for share repurchases by year-end.
- Cost Savings & Margin Improvements: FIFO gross margin rate excluding fuel, rent, and supply chain costs rose 49 bps, with $400 million in savings from fulfillment center closures to fuel reinvestment in pricing and technology.
Operational Highlights and Strategic Initiatives
Kroger announced the closure of three automated fulfillment centers and expanded relationships with third-party delivery providers Instacart, DoorDash, and Uber Eats, marking a significant step in its e-commerce strategy. The company expects to break ground on 14 new stores in the fourth quarter, accelerating its store development plans. Additionally, Kroger returned to in-office work five days a week to strengthen collaboration and accelerate decision-making.
E-commerce and Digital Transformation
Kroger's e-commerce business is on track to become profitable in 2026, driven by a $400 million reduction in losses from closing automated fulfillment centers and growth from new partnerships. The company plans to reinvest some of the savings into pricing to stay competitive and improve the customer experience. The retail media business is also growing, with double-digit growth in Q3, and is expected to accelerate in Q4.
Valuation and Outlook
With a P/E Ratio of 15.22 and an EV/EBITDA of 8.38, Kroger's valuation appears reasonable, considering its strong financial performance and growth prospects. Analysts estimate next year's revenue growth at 0.5%. The company's capital allocation priorities remain focused on delivering a total shareholder return of 8% to 11% over time, investing in projects that maximize return on invested capital, and returning excess capital to shareholders.
Consumer Trends and Market Dynamics
Kroger is seeing a change in consumer behavior, with the mid-tier customer pulling back, similar to lower-income customers. The company is responding by focusing on value and serving customers during uncertain times, having taken down another thousand items in Q3 to lower prices. The shift from restaurant purchases to food at home purchases is expected to continue, benefiting Kroger's business.