Kroger Earnings: Adjusted Beat Amid GAAP Loss
Kroger earnings showed a GAAP loss from a $2.6B fulfillment network impairment while adjusted EPS beat; narrowed FY25 guidance raised buyback and leverage.
KEY TAKEAWAYS
- GAAP loss was driven by a $2.6B non-cash impairment to the automated fulfillment network.
- Adjusted EPS was $1.05, beating the $1.04 consensus, while eCommerce sales grew 17%.
- Management narrowed FY25 adjusted EPS to $4.75-$4.80 and completed a $5.0B accelerated share repurchase.
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Kroger Co. (KR) reported a GAAP operating loss on Dec. 4, 2025, driven by a $2.6 billion non-cash impairment to its automated fulfillment network and higher expenses. Adjusted earnings per share (EPS) beat expectations, and management narrowed full-year adjusted EPS and identical-sales guidance.
Q3 Results and Impairment
For the quarter ended Nov. 8, 2025, Kroger reported total sales of $33.9 billion, below the $34.2 billion estimate. The company recorded a GAAP operating loss of $1.5 billion, reflecting the $2.6 billion impairment charge. GAAP EPS was negative $2.02, with the impairment accounting for a $3.00 per-share hit. Adjusted EPS was $1.05, surpassing the $1.04 consensus.
Operational trends were mixed. Identical sales excluding fuel rose 2.6%, while e-commerce sales surged 17%. Adjusted FIFO (first-in, first-out) operating profit increased 7.1% year over year to about $1.1 billion. Gross margin expanded 40 basis points to 22.8%, supported by private-label growth and lower shrinkage. The sale of Kroger Specialty Pharmacy added roughly 25 basis points to gross margin and 18 basis points to operating margin. Wage investments raised operating, general, and administrative (OG&A) expenses by 27 basis points but were partly offset by productivity gains and lower incentive costs.
Guidance, E-Commerce, and Buybacks
Management narrowed full-year 2025 adjusted EPS guidance to a range of $4.75 to $4.80 and tightened identical-sales guidance to 2.8%–3.0%, excluding further material impairments or one-time charges. The company completed a strategic review of its e-commerce operations and expects the business to reach profitability in 2026, contingent on executing the review’s recommendations. CEO Ron Sargent said, "We have now completed our strategic review which we expect will make our eCommerce business profitable in 2026."
Kroger completed a $5.0 billion accelerated share repurchase and has $2.5 billion remaining in open-market repurchases targeted for fiscal 2025 completion. Average diluted shares fell to 655 million from 728 million, reflecting buyback activity. Net total debt to adjusted EBITDA rose to 1.73 times from 1.21 times after the impairment, a change linked to the accounting write-down and one-time items that investors will monitor for balance-sheet flexibility.
The company’s adjusted results and margin improvements—driven by private-label mix, pharmacy proceeds, and lower shrinkage—helped offset cost pressures despite the fulfillment network impairment. Management narrowed its targets while emphasizing that progress on digital profitability and continued share repurchases depends on executing the strategic plan.
