Kroger Targets $4 Billion in Annual Savings and More Than 10% Direct Sourcing
Key Facts
Kroger announced a plan at an investor update held on October 20, 2026, to deliver $4 billion in annual savings by 2029, as it seeks to redirect resources toward customers and simplify the business. CEO Greg Foran said the company wants to "make value more obvious and put resources closer to the customer where we see the highest returns." The plan combines direct sourcing, disciplined buying, process simplification and a more scalable operating model. The company says technology and artificial intelligence will help improve execution and operational efficiency. This coincides with a previously announced $5 billion investment in customer value, including price cuts and improvements to the shopping experience, which Kroger says is self-funded.
Increasing the share of direct sourcing is one of the plan's main operational shifts; it currently accounts for less than 1% of Kroger's sourcing, while the company is targeting more than 10%. The shift comes alongside smarter goods purchasing, lower indirect spending and expansion of Kroger's capability center. The company also aims to simplify operations and make its operating model more scalable, using technology and artificial intelligence to improve execution. The plan also includes growing e-commerce and retail media revenue, alongside investment in fresh food, meals, private-label brands and the Boost program. The gap between the current share and the stated target puts execution of direct sourcing at the center of the savings plan.
The savings and customer value investment targets come as identical sales growth excluding fuel has slowed: sales rose 0.2% in the second quarter of fiscal 2026, compared with a 3.4% increase in the same period of 2025. Sales totaled $34.6 billion in the second quarter, versus $33.9 billion a year earlier. The company attributed margin pressure to fuel sales mix, deflation and logistics, and also cited the impact of its investments in customer value. In its results update, Kroger lowered its 2026 guidance for identical sales excluding fuel, while reaffirming its full-year adjusted earnings guidance. These figures provide context for the new targets, which link cost reductions to improving value for consumers.
Kroger set a target of about 3% identical sales growth in 2029, excluding fuel and pharmacies, and is also targeting compound annual growth of 3% to 6% in adjusted earnings before interest, taxes, depreciation and amortization, and 7% to 11% in adjusted net earnings per share during fiscal years 2027 through 2029. These targets do not include the pending acquisition of Giant Eagle. The earnings-per-share growth target replaces a previous target for total shareholder return of 8% to 11%, which included dividend yield. The company thus links its long-term financial framework to sales growth, operating earnings and earnings per share, alongside reinvestment in customers. Kroger reaffirmed in its investor update the guidance for fiscal 2026 it had previously provided with its second-quarter results.
Kroger shares rose as much as 2.6% on October 20, the day it announced the investor update targets, according to Reuters, which also linked the gains to the target of about 3% identical sales growth by 2029. The plan was part of new CEO Greg Foran's effort to revive the core grocery business amid intensifying competition and cautious consumer spending. The Associated Press reported that the company said it would cut 3,000 administrative jobs over three years, while expanding the use of artificial intelligence to simplify operations. Kroger also faces pressure from Walmart and discount chains such as Aldi and Lidl, as well as Amazon. The investor update was set to cover e-commerce, retail media, in-store execution, operations and the long-term financial framework, and the company said the presentation and its materials would be available on its investor relations website.