Earnings Reset, Low Visibility

Research evidence excerpt

Earnings Reset, Low Visibility

but we do not yet §e == MorganConsensusStanleydataResearchis providedestimatesby Refinitiv Estimates

see enough evidence to shift our view. Quarterly EPS ($)

2026e 2026e 2027e 2027e

We see risk to FY26/FY27 estimates. Although FY26 guidance has been reset, we Quarter 2025 Prior Current Prior Current

would not dismiss the possibility of additional estimate reductions, particularly for Q1 0.55 - 0.42a - 0.50

Q2 0.44 0.43 0.30 - 0.33

FY27. Industry conditions remain difficult, driven by 1) leadership transitions across Q3 0.72 0.75 0.59 - 0.54

Q4 0.48 0.43 0.47 - 0.29

Food Retail increasing competitiveness (see Leadership Reset: Why Grocery

e = Morgan Stanley Research estimates, a = Actual Company reported data

Competition Is About To Accelerate), 2) price investments pressuring margins, 3)

persistent weakness among lower-income consumers, 4) negative unit growth

across the sector (per Nielsen, units in the Food Stores channel have been declining

by ~4% for the last several months), and 5) supplier cost inflation that could

intensify in 2H26. Taken together, these dynamics make it difficult to underwrite a

recovery in top-line and profitability, in our view.

We are also hesitant to give credit for longer-term initiatives at this stage. Across

the industry, new management teams are investing in price and execution while

navigating higher input costs and muted demand. Until operating trends begin to

improve, we see little foundation for a more favorable earnings trajectory. The

recent deceleration in both core grocery trends and e-commerce growth support

this hesitancy: we estimate core grocery drove ~190 bps of headwind to IDs ex-Fuel

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