Kroger’s latest earnings report might seem typical for a grocery chain at first glance. However, a closer look reveals a digital profit story within the supermarket.
The company faces the same challenge all grocers do: shoppers are cautious, prices matter, and competitors like Walmart and Costco force everyone to work harder for every cart. Still, Kroger’s first-quarter results revealed something important for investors. Digital sales and advertising are becoming genuine profit drivers, not just side projects.
This is significant because grocery margins are low. A more profitable segment within Kroger could change how Wall Street values the company over time.
Digital Growth Is No Longer Just a Nice Add-On
In Kroger’s first-quarter 2026 results, the company reported adjusted e-commerce sales growth of 19%. Kroger Precision Marketing profits increased by more than 20%. Meanwhile, Kroger maintained its full-year 2026 guidance.
These numbers stood out because the rest of the report was mixed. Identical sales without fuel rose only 1.0%. Total sales for the company reached $46.1 billion, up from $45.1 billion the previous year. Adjusted EPS was $1.58, while operating profit hit $1.407 billion.
That isn’t explosive growth. It reflects steady growth in groceries.
However, the digital side tells a stronger story. Grocery stores have spent years trying to make online ordering profitable. Costs related to delivery, pickup, fulfillment, labor, and logistics can easily outweigh the profits. Kroger’s digital results suggest the company is getting closer to making online grocery shopping a viable business rather than just a customer convenience.
E-Commerce Finally Has a Profit Story
According to Grocery Dive, Kroger’s e-commerce operations turned a profit for the first time in the first quarter. This is significant.
For years, e-commerce in grocery was often viewed as a necessary expense. Companies needed pickup and delivery options because customers expected them, but making a profit was tough. Kroger is now working to change that narrative. It wants e-commerce to boost margins, not hurt them.
Grocery Dive reported that digital sales grew 19% year-over-year, driven by delivery. Kroger also welcomed a record number of new households into its e-commerce business. Orders delivered in under one hour accounted for about half of Kroger’s e-commerce growth during the quarter, as stated by CFO David Kennerley.
This is the kind of detail investors should monitor. Quick delivery can foster customer loyalty. It can also create more opportunities for advertising, personalized offers, and repeat orders.
Kennerley mentioned that Kroger anticipates e-commerce profitability to keep growing and become a larger driver of margin improvement over time, according to Grocery Dive.
That is the true hidden growth story.
Retail Media Is Becoming Kroger’s Quiet Power Center
Kroger Precision Marketing is more than just a marketing department. It serves as Kroger’s retail media business, utilizing customer data, digital ads, and brand partnerships.
This is Kroger’s advantage. The company knows what millions of households buy. This purchase data is valuable to food companies, consumer brands, and advertisers looking to reach customers right before they make a purchase.
In the traditional grocery model, Kroger mainly made money by selling products. Now, it can also profit from selling advertising access to its shopper network.
This is why the 20% profit growth at Kroger Precision Marketing is significant. Advertising and data-driven media can have better margins than traditional grocery sales. If retail media continues to expand, it could help offset costs related to pricing, transportation, and pressures from falling food prices in categories like eggs.
This is why larger investors should take note. Kroger isn’t just a tech company, but it is generating tech-like profit streams within a traditional business.
The Consumer Still Looks Stretched
The optimistic digital story doesn’t eliminate the pressure on the core business.
Reuters reported that Kroger shares dropped about 7% after the company announced rising inflation concerns for the second half of the year. Kroger also noted that shoppers are becoming more selective.
CEO Greg Foran remarked, “Customers are being more deliberate with their spending,” as reported by Reuters. He also noted that Kroger is seeing too many promotional trips and not enough full basket shopping.
This is a significant warning. It means customers may still buy groceries, but they are hunting for deals, making fewer trips, and avoiding unnecessary purchases.
Arun Sundaram, an analyst with CFRA Research, told Reuters, “The value war seems to be escalating,” as grocers focus more on price to maintain market share.
This presents a risk. Kroger can grow its digital sales and advertising profits, but if shoppers continue to prioritize lower prices, the core grocery business will remain under pressure.
Foran Is Pushing Urgency, Not Comfort
Foran’s tone is worth noting. He isn’t pretending everything is fine.
In Kroger’s official statement, he expressed satisfaction with the first-quarter results but added that “there is more work to do.” Grocery Dive also reported that Foran feels about 60% of Kroger’s stores need to improve their results.
Neil Saunders, managing director at GlobalData Retail, told Grocery Dive that Kroger’s new management has recognized issues and is using more urgent language, which he called “a critical shift.”
This urgency is crucial because Kroger cannot rely solely on digital growth. Physical stores still matter, fresh food is essential, and pricing remains important. The optimal version of Kroger is not an e-commerce replacement for stores. It involves stores, delivery, data, private label products, and retail media working in harmony.
This is where the market may be missing the bigger picture.
Kroger’s headline quarter wasn’t flashy. Same-store sales were modest, margins faced pressure, and shoppers appeared cautious. However, beneath this surface, the company demonstrated that e-commerce and digital advertising are beginning to generate real financial impact.
For investors, Kroger’s hidden growth story is clear: groceries attract customers, but digital ads and e-commerce might reveal the next layer of profit.