Kroger Q1 2025 Earnings Report

Introduction to Kroger’s Performance

Shares of Kroger rose more than 9% on Friday as the supermarket operator raised its full-year sales outlook and said it’s drawing shoppers seeking lower-priced store brands and cheaper alternatives to dining out.

Sales Outlook and Performance

The Cincinnati-based grocer said it now expects identical sales, excluding fuel, to increase by 2.25% and 3.25% year over year, higher than its previous expectations for an increase of between 2% and 3%. Identical sales is an industry-specific metric that takes out one-time factors, such as store openings, closures and renovations. Kroger includes stores and delivery sales in regions that have been in operation for five full quarters in identical sales.

Yearly Performance

So far this year, shares of Kroger are up nearly 16%, outpacing the approximately 1% gains of the S&P 500 during the same period.

Quarterly Earnings

Here’s how the company did for the fiscal first quarter compared with Wall Street’s estimates:

• Earnings per share: $1.49 per share, adjusted vs. $1.46 expected
• Revenue: $45.12 billion vs. $45.19 billion

Net Income and Identical Sales

In the three-month period that ended May 24, Kroger’s net income was $866 million, or $1.29 per share. Identical sales, excluding fuel, rose 3.2% compared to the year-ago period, with growth coming from pharmacy, e-commerce and fresh groceries. The company’s e-commerce sales grew by 15% year over year.

Company Changes and Challenges

Kroger, which owns supermarket banners across the country, has gone through significant changes over the past year. A judge blocked its $25 million acquisition of competitor Albertsons in December. Longtime CEO Rodney McMullen resigned in March after a company investigation into his personal conduct. And the company’s legal battle with Albertsons over the demise of the merger deal is ongoing.

New Appointments and Competition

The company also recently hired a new CFO, David Kennerley, formerly the chief financial officer for PepsiCo Europe, after its former CFO Gary Millerchip left for Costco. On top of company-specific challenges, Kroger faces stiffer competition from Walmart and Costco — particularly as shoppers spend cautiously and watch prices closely because of tariff uncertainty.

Strategy to Cater to Value-Minded Shoppers

On an earnings call with analysts on Friday, interim CEO Ron Sargent said Kroger is trying to cater to value-minded shoppers by simplifying its promotions, lowering prices on more than 2,000 products so far this year and emphasizing its private brands that tend to cost less.

Consumer Behavior and Private Labels

"Many customers want more value, and as a result, they’re buying more promotional products and more of our brand’s products," he said. "They’re also eating more meals at home." He said the company has seen a jump in shoppers buying larger pack sizes, using coupons more and buying fewer discretionary items such as snacks and adult beverages. Kroger’s private labels, which tend to be cheaper than name-brand national brands, have been a growth driver as well.

Expansion of Private Labels

For the seventh consecutive quarter, Sargent said Kroger’s own brands grew faster than national brands. Its top two brands were Kroger’s more premium-focused brands: Simple Truth, its line of organic items, and Private Selection, which includes gourmet and artisan-inspired items like brioche dinner rolls and lobster mac and cheese. Sargent said Kroger will try to build on that momentum — and health trends it’s seeing — by launching 80 new protein products to its Simple Truth line, including protein bars and shakes.

Impact of Tariffs

As a grocer that sells many food items from the U.S., Sargent said Kroger isn’t as impacted by higher tariffs on imports from across the globe as other companies. Yet in places where it does import goods, such as fruit and vegetables or flowers, he said it is "proactively looking for ways to avoid raising prices for our customers, and we consider price changes as a last resort." "Tariffs have not had a material impact on our business so far. And given what we know today, we do not expect them to going forward," he said.

Cost Reduction and E-commerce

Kroger is also taking a hard look at its costs so it can modernize its business and get its e-commerce business closer to profitability, Kennerley said on the earnings call. The e-commerce business, a combination of curbside pickup and deliveries to customers’ doors, is not yet profitable.

Store Closures and Openings

The company said Friday that it will close about 60 stores over the next 18 months, which led to a $100 million impairment charge in the first quarter. Sargent said the company had paused its annual store review during the merger process and not all of its stores are "delivering the sustainable results we need," so now it’s catching up with closing unprofitable stores. Still, he said, even as it’s shuttering stores, Kroger plans to open new locations in higher-growth parts of the country and will accelerate those openings in 2026.

Conclusion

Kroger continues to navigate challenges and changes in the retail landscape, focusing on strategies to attract value-minded shoppers and improve its e-commerce business. With a new CFO on board and plans to expand its private labels, Kroger is positioned for potential growth despite the competitive market.

FAQs

Q: What was the increase in Kroger’s shares on Friday?
A: Kroger’s shares rose more than 9% on Friday.
Q: What is Kroger’s expected increase in identical sales for the year?
A: Kroger expects identical sales, excluding fuel, to increase by 2.25% and 3.25% year over year.
Q: How has Kroger’s e-commerce business performed?
A: Kroger’s e-commerce sales grew by 15% year over year, but the business is not yet profitable.
Q: What is Kroger’s strategy to cater to value-minded shoppers?
A: Kroger is simplifying its promotions, lowering prices on more than 2,000 products, and emphasizing its private brands to cater to value-minded shoppers.
Q: How many new protein products will Kroger launch under its Simple Truth brand?
A: Kroger will launch 80 new protein products under its Simple Truth brand, including protein bars and shakes.