Kroger Company (NYSE:KR) shares traded higher on Thursday after reporting second-quarter earnings.
The company reported second-quarter adjusted earnings per share of $1.04, beating the analyst consensus estimate of 99 cents. Quarterly sales of $33.94 billion, marginally missing the consensus view of $34.102 billion.
Following the results, Telsey Advisory Group analyst Joseph Feldman maintained an Outperform rating, with a price forecast of $82.
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The identical sales, excluding fuel, increased by 3.4%, compared to a 1.2% increase last year.
"Kroger's second quarter results reflect continued momentum in our business. Sales growth has been strong, led by pharmacy, eCommerce and Fresh, and we are encouraged by the improvement in grocery volumes," said CFO David Kennerley. eCommerce sales increased 16%
The LIFO charge for the quarter was $62 million, compared to $21 million for the same period last year.
Gross margin was 22.5% of sales for the second quarter compared to 22.1% for the same period last year.
The improvement in gross margin was primarily attributable to the sale of Kroger Specialty Pharmacy, lower supply chain costs, lower shrink, and decreased fuel sales.
The FIFO gross margin rate, excluding rent, depreciation and amortization, fuel and adjustment items increased 39 basis points compared to the same period last year.
In the second quarter of 2025, the operating profit reached $863 million, a 5.9% increase from $815 million in the second quarter of 2024.
Capital Allocation
Kroger plans to keep generating strong free cash flow while investing in long-term earnings growth, sustaining its investment-grade debt rating, and raising dividends over time.
The company launched a $5 billion accelerated share repurchase program in fiscal 2024, with completion expected by the third quarter of FY25, followed by $2.5 billion in open-market buybacks by year-end. Kroger's net debt-to-adjusted EBITDA ratio rose to 1.63 from 1.24, still below its 2.30–2.50 target range, giving it room to invest and return value to shareholders.
The company exited the quarter with cash worth $215 million, and temporary cash investments worth $4.668 billion.
Outlook
Kroger lifted its FY25 adjusted EPS outlook to $4.70–$4.80, up from $4.60–$4.80, compared with the $4.77 analyst consensus.
Adjusted identical sales without fuel is expected to rise in the range of 2.7%-3.4% (prior view: 2.25% – 3.25%).
Price Action: KR shares are trading higher by 1.54% to $68.07 at last check Thursday.
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