Kroger cut same-store sales guidance but held profit guidance as media and buybacks offset soft units. I see 12.5% upside to $70.85 as 9% profit growth earns a grocer multiple.
Key points
- $5.20 per share for FY26 is the midpoint of reaffirmed profit guidance for FY26.
- 0.2% for Q2 FY26 was same-store sales growth excluding fuel for Q2 FY26.
- $1.68 billion in cash for Q2 FY26 backs $800 million of buybacks left for FY26.
The call
The price expects little. At $62.98 per share, Kroger trades at about 12 times this-year profit. That multiple asks for flat grocery profits with no digital payoff.
Revenue shows seasonal Q1 peak and flat coreSource: company filings via desk data; Q1 weeks are 16 weeks. Oct 20 2026.
I expect more. I see $5.67 per share next year on 9% growth. Media profit growth plus remaining buybacks fund that rise.
Valuation
| Driver | Estimate |
|---|
| Adjusted profit for FY26 | $5.20 per share for FY26 |
| Growth to FY27 | 9% for FY27 |
| Profit for FY27 | $5.67 per share for FY27 |
| Multiple | 12.5 times earnings for FY27 |
| Target in 12 months | $70.85 per share in 12 months |
Stable grocers earn 12 to 13 times next-year profit. The 12.5 times midpoint credits buybacks and media mix without pricing perfection. Upside of 12.5% in 12 months against flat sales risk supports a buy.
Risks
- Sales stay near zero if baskets shrink further, which you would see in same-store sales near 0.2% for Q3 FY26.
- Margins slip if wages and shrink outrun savings, which you would see in operating profit below $971 million for Q3 FY26.
- Lawsuits bite if Albertsons claims succeed, which you would see in a court ruling or new reserve in FY26.
What would change my mind
I would turn cautious if same-store sales stay below 1% for FY26 while digital profit excluding media stays undisclosed through FY26.