During the first quarter, which ended June 20, 2025, Kroger (NYSE:KR) delivered a solid performance, reporting identical sales (excluding fuel) up 3.2% year-over-year, fueled by strength in pharmacy, fresh perimeter categories, and a 15% surge in eCommerce. Adjusted earnings per share came in at $1.49, marking a 4% increase.
The company also continued to outpace national brands within its “Our Brands” portfolio and unveiled plans to expand and realign its physical store footprint, with 30 major store projects this year and closures of roughly 60 underperforming stores.
Amid these results, Kroger emphasized its growing focus on technology and digital transformation.
A newly centralized eCommerce unit led by Chief Digital Officer Yale Kassett aims to enhance order accuracy, delivery speed, and profitability. Additionally, investments in AI-driven inventory management, improved associate tools, and modernized infrastructure all emerged as key strategic priorities aimed at boosting operational efficiency and customer experience.
Why It Matters: From unifying its digital platforms to deploying AI-driven tools for associates and supply chain visibility, Kroger is reshaping itself into a modern, tech-savvy retailer. These efforts offer a compelling example of how established businesses can use advanced technologies to upgrade legacy systems, drive efficiency, and navigate ongoing economic challenges while supporting long-term growth.
- Creation of Centralized eCommerce Unit: Kroger unified its eCommerce operations under Chief Digital Officer Yale Kassett, establishing a single leadership structure to oversee all aspects of the online business, from order fulfillment to digital customer engagement. This structural shift is already producing tangible results, with a 15% increase in eCommerce sales and what executives called “our best profit improvement yet” compared to the prior quarter. Interim CEO Ron Sargent emphasized that having one accountable leader enables a sharper focus, saying, “This allows us a lot better focus on our eCommerce business than we’ve had in the past… looking at every market, every element.” The team is now reviewing its full strategy to boost accuracy, reduce wait times, and increase profitability across both delivery and pickup channels.
- AI-Enabled Inventory and Shrink Management: Kroger continues to scale its use of artificial intelligence to improve operational efficiency, particularly in inventory management. CFO David Kennerly highlighted that AI-driven systems now give the company “much better visibility of the inventory we’ve got in store,” including expiration tracking and product-level insights that inform smarter ordering decisions. This has led to significant reductions in shrink across both fresh and center-store categories. The integration of AI tools is not only enhancing Kroger’s operational discipline but also helping improve margins by reducing waste, optimizing supply chain inputs, and aligning inventory more closely with customer demand.
- AI-Driven Store Associate Tools: In a further commitment to workforce enablement, Kroger rolled out a virtual AI assistant designed to support in-store associates with real-time information, task management, and productivity tools. CEO Ron Sargent noted that these tools have directly contributed to operational improvements, including better on-shelf availability and enhanced employee engagement. “This well-rounded approach is producing results,” he said, citing that both store-level and company-wide associate retention reached record highs this quarter. These AI tools also help reduce onboarding time, standardize best practices, and improve the customer experience through more efficient service.
- Modernization of Stores and Infrastructure Strategy: Kroger is accelerating its investments in physical infrastructure with a tech-enabled lens, planning 30 major store projects in 2025 and targeting expansion in high-growth geographies starting in 2026. Simultaneously, it is closing about 60 underperforming stores to improve operational efficiency and asset utilization. CEO Ron Sargent emphasized that these decisions are being driven by clear performance data, and all affected associates will be offered roles in other locations. These moves reflect a more data-driven, ROI-focused approach to physical infrastructure that balances traditional retail with digitally influenced store planning and execution.
- Optimization of Cost and Capital with Tech-Enabled Processes: Under the guidance of new CFO David Kennerly, Kroger is undergoing a renewed push toward cost discipline and capital efficiency. The company is targeting a broad transformation of its cost structure through modernized, tech-enabled processes spanning corporate, supply chain, and store-level operations. “This is about going from good to great,” said Kennerly, who outlined a roadmap focused on both direct and indirect costs, as well as what he called “ways of working” that improve how teams collaborate and execute. These efforts are designed to unlock capital that can be reinvested in high-return projects, digital innovation, and improving customer-facing operations.
Go Deeper -> Kroger Quarterly Earnings – MarketBeat
