> ## Content Index > Fetch the complete content index at: https://www.investordaycandy.com/llms.txt > Use this file to discover other available public pages before exploring further. # Kroger $KR Blinded by Prices? - URL: https://www.investordaycandy.com/kroger-kr-blinded-by-prices/ - Published: 2026-10-22T22:29:38.000Z - Updated: 2026-11-04T11:09:27.000Z - Description: Greg Foran's first plan is a real move toward everyday low prices, paid for by cutting costs. The targets are modest, though, the sales metric has been redefined, and the EPS target relies on buybacks. - Author: Kris Tuttle - Tags: The Take, retail, consumer **Verdict:** Case improved. Lower shelf prices, new store growth and a much bigger cost program are a new strategy. The plan gives investors measurable checkpoints, chiefly \~700 converted stores by end-2027, and if the test-store lift holds up at scale, 3% looks conservative. Against that, free cash flow stays flat while capex rises, and the EPS target is really the best case of the EBITDA target. This is now an execution story worth tracking, not yet a re-rating. **Price Pressure:** Consumers are struggling with high prices and retailers are forced to adjust. Kroger is shifting away from complicated promotions toward everyday low prices. (Isn't everyone saying that?) They plan to fund it with cost cuts, and try to win back trips. The deck calls this a $5bn "self-funded investment in value" (slide 28). The money comes from fewer promotions plus a $4bn "structural cost takeout" (slide 64), and the savings are "mostly reinvested." The rollout reaches \~250 stores by end-2026 and \~700 by end-2027, with "broad based deployment" in 2028-29 (slide 30). Management says this delivers \~3% comparable sales in 2029, 3-6% adjusted EBITDA CAGR and 7-11% adjusted EPS CAGR for FY2027-29 (slide 76). We agree with the direction. But we'll have to see how they execute. Slide 30 also says cost savings "land ahead of the price change," which is the right order. The evidence so far is thin: test stores showed +230bp comps against the enterprise after four quarters (slide 29), with no store count and no margin data. **What Changed.** - **Pricing:** the everyday-low-price shift above. - **Growth capex:** \~110 new stores by 2029, with capex rising from \~$3.9bn to \~$5.0bn (slides 87-88). - **A bigger cost program:** direct sourcing is meant to rise from under 1% to over 10% (slide 65), and \~3,000 corporate roles are tied to a Bengaluru capability center (slide 67). - **Higher growth:** the old 8-11% TSR target included the dividend. Take out a \~2.5% dividend yield and it implied \~6-9% EPS growth, so the new 7-11% EPS target is about a point higher. - **Sales metrics:** Kroger has always reported identical sales without fuel, which includes pharmacy. The 2029 target excludes pharmacy, and with it the \~140bp Inflation Reduction Act drug-pricing drag in the 2026 guide (and any GLP-1 boost) Everything else (Fresh, Our Brands, data, retail media) is the old value-creation model. It still appears word for word in the press release's risk language. **Observations.** - The 2026 starting bar on slide 80 has no number. Our guess is that underlying grocery comps are near 2%, so the target asks for about one point of acceleration in three years. **In a normal inflation year, 3% is price plus a little volume. That isn't the share gain slide 80 claims.** - The $5.0-5.2bn adjusted FIFO operating profit guide plus roughly $3bn+ of D&A puts adjusted EBITDA near $8.2bn. At the 4.5% midpoint, three years adds \~$1.15bn. That is almost exactly the $1.1bn capex step-up, so **free cash flow (guided at $2.7-2.9bn for 2026) stays roughly flat.** - **No mention of Walmart, Aldi, Costco or Amazon!** Slide 10's "\~2x scale of the next largest supermarket" only compares Kroger with other supermarkets. Slide 9 shows traditional grocers hold just 36% of food-retail dollars, against 22% for mass merchants. Kroger has to know about Walmart's price cuts and Aldi's cheap staples. Pharmacy has no strategy slide at all, just 50 Little Clinic closures (slide 8). The Giant Eagle deal (\~$9bn sales, \~197 stores, $1.65bn) is left out of every target and is expected to close in 2027 (slide 90). From then on, reported results will need a bridge back to these targets. - **$4bn vs $5bn.** The $4bn is "annual" (slide 15). The $5bn has no time period (slide 28). Slide 28 says the savings are mostly reinvested in price, yet slide 84 counts "Cost Out" as an EBITDA lever. Both can't be fully true. - **Test-store selection.** The test markets are ones with "scale and a strong banner position" (slide 30). The +230bp compares test-store comps with total enterprise sales (slide 29). If that lift scaled to the whole fleet, 3% would be easy, so either the target is conservative or management doesn't expect the result to scale. - **New-store productivity.** \~$7bn of sales from \~110 stores (slide 88) is \~$64m each. The fleet averages about $55m ($147.6bn FY25 sales including fuel and pharmacy ÷ \~2,700 stores), and some of the new stores are a 50,000 sq ft format (slide 38). - **Overlap.** Nothing says whether \~$500m of waste savings (slide 73) and +$500m of eCommerce EBITDA (slide 53) are part of the $4bn or extra to it. - **eCommerce.** The deck calls it "profitable, scaled, rapidly growing" (slide 46) but gives no growth or margin target. Q2's 20% growth was "adjusted" to strip out fulfillment-center exits, Vitacost and Ship. - **Retail media.** There's no revenue, profit or target, just the same flywheel shown three times (slides 47, 55, 59) and an advertiser survey (slide 57). Q2 retail media profit grew 24%. - **The bridges.** The 2026 base for the new comp metric (slide 80) and the size of each EBITDA lever (slide 84, "not to scale") are missing. - **Phasing.** There's no timing for the $4bn cost cuts or the $5bn price investment, and nothing on gross versus net. - **Margins.** Slide 84 says "expand EBITDA margins over time" with no number. Pharmacy and fuel get no outlook. - **Labor.** The Q2 OG&A rate rose 33bp on wages and health care. The deck gives no labor-cost assumption, even with robots planned for 2,100+ stores (slide 71). ## The targets | Metric | Target | Horizon | Our read | | ------------------------------------- | ------------------------------------------ | ----------------------------- | --------------------------------- | | Comparable sales ex fuel, ex pharmacy | \~3% | 2029 | New metric, no base given | | Adjusted EBITDA CAGR | 3-6% | FY2027-29 | Midpoint absorbed by capex | | Adjusted net EPS CAGR | 7-11% | FY2027-29 | Needs top-half EBITDA or leverage | | Investment in value | $5bn, self-funded | Not stated | No time period given | | Structural cost takeout | $4bn annual | Not stated | "Mostly reinvested" | | Value rollout | \~250 / \~700 stores; broad after | End-2026 / end-2027 / 2028-29 | Best near-term checkpoint | | Our Brands penetration | 35% → 40% | Not stated | Lowers ticket, raises margin | | New stores | \~110; \~$7bn sales; 6-7% four-wall EBITDA | 2029; at maturity | \~$64m/store looks rich | | Incremental eCommerce EBITDA | +$500m ex media | 2029 | No sales target behind it | | Waste savings | \~$500m | 2029 | Overlap with $4bn unclear | | Capex | \~$5.0bn | FY2029 | Up from \~$3.9bn | | Net debt / adj. EBITDA | 2.3-2.5x | Ongoing | Room to fund the EPS gap | | Shareholder yield | 5-6% | Ongoing | A yield, not a dollar amount | ## What to watch - **Rollout pace and comps in converted stores.** Does the \~700-store count for end-2027 hold, and does Kroger report the lift? - **Gross margin as conversions scale.** Do savings really land before the price cuts? - **Restated history for the new comp metric.** And how 2027 guidance compares with \~3%. - **Free cash flow against the $5bn capex path.** Plus whether leverage drifts toward 2.5x to fund buybacks. - **Giant Eagle close and the bridge** back to the ex-Giant Eagle targets. **Materials:** [The Kroger Co. investor day materials](https://ir.kroger.com/events-and-presentations/default.aspx?ref=investordaycandy.com)