Kroger Co.: 1Q26 Takeaways – Fewer Details than Hoped, But Savings Are Still Expected to Fund Price Investments

研报英文原文证据摘录

Kroger Co.: 1Q26 Takeaways – Fewer Details than Hoped, But Savings Are Still Expected to Fund Price Investments

1.05 1.10

term macro cost pressures, FY26 goes to $5.12 from $5.30 and FY27 to $5.43 Q3 1.05 1.21 1.29

from $5.58. We establish a December 2027 price target of $63, which is based Q4 1.26 1.28 1.38

FY 4.83 5.12 5.43

on 11x 2028E P/E and 6.5x EV/EBITDAR (both of which are below KR’s

historical averages, given current uncertainty around investments, though Style Exposure

premiums to its current forward valuation multiples). Our prior December

2026 price target was $70.

• 2Q sales and EPS expectations came in a bit below prior expectations. For

2Q26, KR sees ID sales being comparable to 1Q’s 1%, gross margin ex-fuel

improving versus 1Q’s 9 bps Y-Y decline, OG&A ex-fuel being worse than

1Q’s 16 bps Y-Y increase, and EPS being roughly flat Y-Y. At the time of its

4Q25 earnings, KR’s messaging seemed to be about sales momentum building

beyond 1Q and EPS growth accelerating (1Q was expected to grow ~5% Y/Y).

This initial outlook assumed headwinds in 2Q from egg deflation and the

lapping of favorable SG&A in the prior year. But it did not anticipate pressure

from transportation inflation (a 15 bp gross margin headwind in 1Q) and

softening consumer trends broadly. These are the main incremental headwinds

to consider in 2Q, and KR assumes that they will only be partially offset by

more favorable fuel margins (though not to the extent of 1Q).

• KR assumes ID sales and EPS growth reaccelerate in 2H26 – and gave

reasons why. This is implied by KR reiterating its 1-2% ID sales and 5-9% EPS

growth outlook, even though the commentary on 2Q would suggest ~1% ID

sales and ~3% EPS growth in 1H. For sales, KR expects some combination of