On October 20, 2026, Kroger lived in two time zones at once.
In a Delaware courtroom, former CEO Rodney McMullen testified under oath that the $24.6 billion Albertsons merger he negotiated was “doomed from the beginning.”
In New York, CEO Greg Foran stood in front of investors and laid out his plan to build “America’s Favorite Grocer.”
One man was defending the past. The other was presenting the present and the future.
The two events were literally connected. Kroger’s Chief Digital Officer, Yael Cosset, and General Counsel, George Vincent, were absent from the Investor Day stage. As Foran told the audience, “Yael and George could not join us as they’re with the Kroger team in Delaware.”
I have been writing about Kroger since 2013. I have never seen a single day that captured the company’s trajectory so clearly. This article examines both, what the market thinks of Foran’s plan, and the decisions Kroger has not yet made that will determine whether the plan works.
The Past: Rodney McMullen
McMullen became Kroger’s CEO in 2014, succeeding Dave Dillon. That same year, Greg Foran became CEO of Walmart U.S.
The two men then ran very different races.
Foran moved quickly to fix Walmart’s stores: cleanliness, in-stocks, pricing consistency, and service. Kroger, under McMullen, placed two enormous bets.
The first bet was Ocado. In 2018, Kroger partnered with Ocado and announced plans for up to 20 automated customer fulfillment centers (CFCs). Eight were built. In November 2025, Kroger announced it would close three of them (Frederick, Maryland; Pleasant Prairie, Wisconsin; and Groveland, Florida), take approximately $2.6 billion in impairment and related charges, and cancel a planned CFC in Charlotte. Kroger agreed to pay Ocado $350 million.
Kroger’s interim CEO, Ron Sargent, later acknowledged the opportunity cost: heavy spending on fulfillment centers had left too little capital for new stores.
The second bet was Albertsons. McMullen negotiated the $24.6 billion acquisition in 2022. Federal and state courts blocked it in December 2024. Albertsons terminated the deal and sued. It is now seeking more than $8 billion in damages, alleging Kroger failed to take “any and all actions” required to win regulatory approval and offered weak stores for divestiture to protect its own profitability.
On the stand this week, McMullen defended Kroger’s efforts. According to reporting from the trial, he testified that:
- The FTC under Lina Khan opposed mergers broadly, and the deal was “doomed from the beginning, unfortunately.”
- He personally negotiated the $600 million termination fee and the 650-store divestiture cap with Stephen Feinberg of Cerberus.
- Kroger would have sold up to 650 stores had the FTC required it.
- His role in selecting divestiture stores was limited, and he left the package to antitrust counsel.
Albertsons’ lawyers pressed him on instances where he weighed the financial details of specific stores. McMullen maintained that his role was limited.
McMullen left Kroger in March 2025 following a board investigation into his personal conduct. He testified that his departure was unrelated to the merger or his performance.
The court will decide the legal questions. The business verdict is already in. Foran delivered it himself on Tuesday.
The Present: Foran’s Diagnosis
Foran did not soften the assessment of what he inherited. In his own words:
- “Execution became inconsistent. The store experience varied too much.”
- “Operating costs grew faster than sales.”
- “Our value position did not keep pace. The promotions became overly complicated.”
- “We made capital investments that did not produce the returns we expected, and we did not build enough new stores at a time when much of the industry was expanding quickly.”
Then he delivered the verdict: “The result is, we lost share. We own that.”
Every one of those failures occurred before Foran arrived. That is the past, described by the man who replaced it.
The numbers support him. In the second quarter of fiscal 2026, Kroger’s identical sales without fuel grew just 0.2%. Kroger cut its full-year identical sales guidance to 0.2% to 0.8% while holding its earnings guidance.
Foran has already started cleaning up. Kroger has sold Vitacost, closed 50 Little Clinic locations, closed approximately 60 underperforming stores, closed three automated fulfillment centers, and announced that approximately 3,000 corporate roles will be impacted over time as work moves to the Kroger Capability Center in Bengaluru, India.
Those are the actions of a CEO clearing the decks.
The Future: Foran’s Plan
Kroger introduced a new long-term financial framework, excluding the pending Giant Eagle acquisition:
- ~3% comparable sales growth in 2029, excluding fuel and pharmacy
- 3% to 6% adjusted EBITDA CAGR from 2027 to 2029
- 7% to 11% adjusted net EPS CAGR from 2027 to 2029
The new EPS target replaces Kroger’s previous 8% to 11% total shareholder return target, which included the dividend.
The plan rests on three pillars: Win With the Customer, Drive Profitable Digital Growth, and Modernize How We Operate. The specifics matter more than the labels.
$5 billion investment in value. Kroger will lower everyday prices and simplify promotions, funded by cost savings and by moving money out of complex promotions. The rollout reaches approximately 250 stores by the end of 2026, adds approximately 450 more in 2027, and covers “broadly the whole estate” by the end of 2029. In stores where the approach has been in place for a year, sales ran 230 basis points ahead of the enterprise, with gains in both unit and dollar share. Foran credited Mary Ellen Adcock with starting the test before he arrived.
Kennerley was candid about the cost of the transition. In the first 12 months of a market’s rollout, unit gains are “not enough to fully offset the new lower everyday prices,” creating “modest near-term pressure on our reported top line in those markets.”
$4 billion in structural cost savings. Sources include direct sourcing (from less than 1% of purchases today to more than 10%), smarter buying in cost of goods, lower indirect spending, and the Kroger Capability Center. Kroger called it its “largest cost takeout ever.” Critically, the company said cost savings will “land ahead of the price change.”
~110 new stores by 2029. Three formats ranging from 50,000 to 99,000 square feet, generating approximately $7 billion in annualized sales at maturity with a 6% to 7% four-wall EBITDA margin. Kennerley clarified that these are new stores, not relocations, and that stores not accretive to current margins “are very, very unlikely to get approved.” Kroger is on track to open about 39 stores this year.
E-commerce. Kroger’s e-commerce business is approximately $18 billion. Only 1 in 7 Kroger shoppers buys online through Kroger. Kroger is targeting an additional $500 million of e-commerce EBITDA by 2029, excluding retail media.
Capital. Annual capex rises from approximately $3.9 billion in fiscal 2026 to approximately $5.0 billion in fiscal 2029. Kroger will hold leverage at 2.3x to 2.5x net debt to adjusted EBITDA and targets a 5% to 6% combined yield from dividends and share repurchases.
It is a credible plan. It is also a back-loaded one. CFO David Kennerley said 2027 EBITDA growth will come in below the 3% to 6% range before accelerating. And because EBITDA grows 3% to 6% while EPS grows 7% to 11%, a meaningful share of the earnings growth will come from a lower share count rather than from operations.
How Wall Street Reacted
The market’s response was measured. Kroger shares rose as much as 2.6% during the presentation and closed essentially flat.
Before the event, UBS analyst Michael Lasser set the bar. He described the corporate restructuring as “a redesign of the operating model rather than a simple effort to trim overhead,” expected most savings to be reinvested, and questioned whether Kroger’s earnings algorithm was realistic for 2027.
Kroger’s answer was to change the algorithm and acknowledge that 2027 will be a transition year.
The Q&A showed where the analysts’ skepticism sits:
- Lasser asked whether the 3% comp depends on e-commerce growing 20% to 25% while store sales stay flat, and what happens to EBITDA if Kroger falls short. Foran answered that he sees “an opportunity to get some comp store growth in stores.”
- Simeon Gutman of Morgan Stanley did the math on roughly $8 billion of EBITDA. The $500 million e-commerce target plus Retail Media growth gets close to $1 billion of incremental EBITDA, which alone would deliver the 3% to 6% EBITDA CAGR. What, he asked, does that imply for core retail? Kennerley replied that Gutman had “cherry picked a few pieces” and pointed to the investments that offset the gains.
- Ed Kelly of Wells Fargo noted that pricing surveys put Kroger’s shelf prices “double digits above Walmart,” and “mid-high-single digits” once promotions and loyalty are included. Foran declined to give a target, saying only that Kroger’s basket “needs to sit x percent above some of our competitors, not that close and not that far away.”
- Kelly Bania of BMO asked about the pace of the price rollout. Foran said, “We’re not sure exactly what the competitor reaction is going to be,” and that Kroger controls the pace.
Investors heard a strategy they agree with. They are waiting to see the savings show up before they pay for it.
Retail’s Best Analyst Reacts to Kroger’s Strategy
Karen Short of Melius Research has covered Kroger and Walmart for more than a decade, and Institutional Investor’s All-America Research Team ranked her No. 3 in food and drug retailing in both 2014 and 2015, the era she describes below. When she writes about Kroger, executives and investors read it.
She published her reaction to Kroger’s Investor Day the following morning. It deserves to be read in full, so I am presenting it here as she wrote it.
Kroger: Back to the Future, My Take on their 2026 Analyst Day
By Karen Short, Melius Research
Yesterday, KR senior management team outlined their strategy and long-term financial framework to create shareholder value:
- ~3% comps by 2029
- 3%-6% EBITDA CAGR from 2027-2029 excluding Giant Eagle
- 7%-11% net EPS CAGR from 2027-2029 excluding Giant Eagle and excluding the dividend yield.
The plan was eerily reminiscent of KR’s strategy circa 2012-2014 when Kroger was at its peak valuation due to peak performance and most importantly, consistency of performance. In fact, by 2014, it wasn’t clear if KR should be valued in line with any supermarket, and we advocated that its multiple should break from the pack and that it should trade closer to WMT and CPG. Recall, in that era, WMT’s fundamentals were deteriorating rapidly, yet it was trading at a meaningful premium to KR. We even wrote a KR report named “Is it a Bird or a Plane” advocating meaningful multiple expansion more in line with both WMT and CPG.
In the 2012-2014 era, KR had:
- Price gaps within the 5%-8% range of WMT, more than acceptable given:
- Simplicity and consistency on pricing
- Far superior service to WMT
- Far superior product quality in fresh
- Very high in stocks
- Happy employees
- Clean stores
WMT, on the other hand, was in disarray. Employees were rude and unhappy, in stocks were high, product quality was poor, and pricing within the store was inconsistent, meaning end cap pricing didn’t match aisle pricing, stores lacked cleanliness, out-of-stocks were high, and subsequently, customers “turned right” (to quote Greg Foran yesterday) to go to KR.
Fast forward, in late summer of 2014, Greg Foran became WMT’s U.S. CEO, and he rapidly deployed a strategy to “fix” WMT U.S. because in his view (to paraphrase him in 2014) WMT was rapidly going in the direction of Kmart and as such, he moved aggressively to stop the Kmart momentum and turn WMT U.S. around.
KR, meanwhile, had lost the strength of leadership in Dave Dillon, who retired in 2014, to be replaced by Rodney McMullen. Under Rodney, KR became flat footed, while WMT was moving at warp speed to fix the U.S. under Greg’s leadership. It was the perfect storm.
As any retail analyst knows, retailers don’t die overnight: it is a long, slow bleed, and this is exactly what happened to KR from 2014 through to today. Kroger’s pricing has become very complex, employees have become increasingly dissatisfied, customers have become increasingly dissatisfied and confused, store cleanliness has slipped, and KR had been distracted by their foray into the debacle of the Ocado relationship as a solution to E-commerce and their attempt to acquire ACI. As a result, consumers have been “turning left” increasingly to WMT and other retail formats. In fact, when we covered WMT, it was our top pick under Greg’s U.S. stewardship, because as it is with a retailer in decline, a slow tanker, it is tough to change momentum when momentum turnaround, as it did with WMT. Momentum rarely shifts.
Fast forward to yesterday’s KR analyst day, what we heard was “Back to the Future”. The plan certainly had Greg’s stamp on it, but it was eerily similar to the strategy engaged under Dave Dillon’s leadership, with the very meaningful exception of E-commerce playing a very big role in success, and WMT’s momentum is certainly not slowing down.
To summarize, what we heard yesterday versus the 2012 playbook was:
- Price gaps within the 5%-8% range of WMT, not too high and not too low (although specific gaps were not provided),
- Simplification and consistency on pricing,
- Improved customer service,
- Improved product quality in fresh
- Very high in stocks
- Happy employees
- Clean stores
This strategy is seemingly very simple and obvious, and in our WMT analogy, turning a tanker around takes time, but once the momentum takes hold, it rarely fades, especially for a retailer operating more than 2,700 units. KR has the added benefit of a very robust loyalty program, a very robust fuel rewards program, and Kroger Boost, a paid subscription loyalty program designed to give shoppers free grocery delivery, doubled fuel points, and exclusive savings.
So can the current management team execute on their plan? We believe the odds are in their favor given the strength of the bench (very lacking under Rodney’s leadership), the elimination of the Ocado distraction, as well as the partial elimination of the ACI debacle (lawsuit still in progress).
So may the odds be ever in your favor KR and we wish the management team best of luck in their endeavors.
My take on Karen’s analysis
I agree with Karen’s diagnosis. It is the reason this article is titled the way it is. McMullen’s tenure was the departure from what worked. Foran is the return to it.
But the 2012 playbook was written for a store-only grocer in a different competitive landscape. Returning to Dillon-era execution is necessary. It is not sufficient. Kroger faces decisions in fulfillment, delivery, membership, and M&A that did not exist in 2014.
The Fulfillment Decision: Micro-Fulfillment, Ocado, and SBA
The most important strategic shift in Foran’s plan received the least attention.
Kroger is now committed to its stores as its fulfillment network. Chief eCommerce Officer Nate Faust described the network as “our 2,700 stores” and said Kroger will add automation in its stores “to fulfill orders faster, lower costs, and improve capital efficiency.” The investor presentation states that “all stores serve the customer in the aisle and the order at the door.”
In the Q&A, John Heinbockel of Guggenheim asked the question I would have asked. If e-commerce reaches 30% penetration, what does Kroger need to do differently in its older stores? Should it move picking “behind the wall” and create “a quasi-dark store”?
Mark Ibbotson, Kroger’s Chief Store Operations Officer, said there is “a tipping point” and that Kroger is measuring it. His answer on automation: “the mechanization goes into your current estate.” He would automate the head of the assortment, approximately 3,000 to 5,000 SKUs, pick fresh and frozen from the shop floor, and “probably test the water in the short-term on micro-fulfillment in the store.”
Foran then added: “When we get too busy, John, picking out of the store, our first objective would be to go and find another location to open another store.” On the 30% figure, he said, “the 30% is our best guess, in five, seven years.”
I agree with the foundation. Kroger has already built 2,700 stores. They should be the primary network for fulfilling online orders.
But Kroger has announced a test, not a strategy.
Consider the math. Kroger delivered more than $16 billion in e-commerce sales in fiscal 2025 on $147.6 billion in total sales, roughly 11%. Management’s best guess is that e-commerce could reach 30% of the business in five to seven years. I have long argued that store-based manual picking hits a structural ceiling at roughly 12% to 15% online penetration. Kroger is approaching that ceiling now while planning to nearly triple its online penetration through the same stores.
Building more stores to absorb picking volume is an expensive answer to a capacity problem. A new store is 50,000 to 99,000 square feet. An automated fulfillment module is a fraction of that.
This is where Ocado’s Store Based Automation (SBA) belongs in the conversation. SBA can be deployed in three ways:
- Inside an existing store
- In an addition attached to a store
- As a standalone site serving a cluster of nearby stores
Ocado’s own framework positions its side-of-store hybrid at roughly 20,000 SKUs plus the store range, with low labor intensity, best suited for pickup and point-to-point delivery. By contrast, Ocado positions its large automated CFCs for planned same-day and next-day deliveries at much higher volumes.
That distinction matters because Kroger’s customers are moving toward speed. In the second quarter, 60% of Kroger’s store-based delivery orders were delivered in under two hours, including 23% in under one hour. Express delivery grew more than 50%. The order types Kroger is growing are the order types CFCs were not designed for.
The word “Ocado” was never spoken during the Investor Day. Neither prepared remarks nor the Q&A addressed the five remaining CFCs. The only supply chain automation project Kroger named was a new automated distribution site in Franklin, Kentucky, serving the Nashville and Louisville divisions, due in 2028.
Kroger’s exclusivity with Ocado has expired. Kroger is free to choose. What it needs is a decision rule:
- Rank every store by online volume and growth. Below the threshold, pick manually in the store. Above it, automate.
- Choose the format by site. SBA inside the store where space allows, in an addition where it doesn’t, and standalone where several stores in a trade area are congested.
- Design automation into the ~110 new stores from day one. Kroger says the new formats are built for omnichannel fulfillment. Building it in costs far less than retrofitting later.
- Test each of the five remaining CFCs (Monroe, Dallas, Atlanta, Denver, and Detroit) against the store-based alternative on cost per order, including exit costs. Keep the ones that win. Close the ones that don’t, when the data says to.
- Re-run the network as penetration rises, at 15%, 20%, and 30%.
The past chose one fulfillment model for the entire country. The present retreated to the stores. The future should be a portfolio of fulfillment models, chosen market by market, driven by data.
The Delivery Decision: Where Is Kroger’s Autonomous Strategy?
Kroger’s 92-page investor presentation did not mention autonomous delivery. Neither did nearly three hours of prepared remarks and Q&A. The word “autonomous” was never spoken. Faust said only that Kroger is “looking at ways to expand our express delivery options through capital-efficient models.”
Kroger was early. It partnered with Nuro in 2018 and piloted autonomous delivery in Scottsdale and Houston. It tested drone delivery in 2021. Today, Kroger relies heavily on Instacart, DoorDash, and Uber for delivery, and the company has said those partnerships add only incrementally to online sales.
Walmart is moving in a different direction.
Walmart integrated Nash as its last-mile orchestration layer across approximately 5,000 stores in five weeks, connecting Walmart to multiple delivery providers through a single integration. In the same week as Kroger’s Investor Day, Walmart announced expanded drone delivery with Wing and Zipline and a goal of reaching more than 270 stores by 2027, covering more than 10% of the U.S. population.
The vehicle matters less than who controls the orchestration layer between the store and the customer’s door. Walmart owns its orchestration layer. Kroger has largely ceded that layer to third-party marketplaces that control the customer handoff and the data that comes with it.
Kroger’s $500 million e-commerce EBITDA target depends on last-mile economics. Autonomous delivery will reset those economics. Kroger needs a strategy for it.
The Membership Decision: Walmart Just Raised the Bar
On October 20, the same day as Kroger’s Investor Day, Walmart launched a combined Walmart+ and Sam’s Club Plus membership for $120 a year. Walmart says the bundle saves customers roughly $100 a year versus buying both separately, and it includes free delivery from both retailers, streaming, fuel discounts, and rewards.
Walmart CEO John Furner said, “For $120 a year, we’re raising expectations for what a membership can deliver.”
Kroger’s answer is Boost, its paid membership, along with Flex Rewards, a new Kroger credit card, and a delivery membership tier. Those are sound moves. But Kroger is about to spend $5 billion making its value visible, and Walmart just made its own value more visible through a membership bundle Kroger cannot match.
Amazon is the other variable. I have recommended that Amazon and Whole Foods extend the Whole Foods employee discount to Prime members, and eventually to anyone who shops at Whole Foods or buys groceries online from Amazon. If Amazon does it, the value conversation in grocery changes overnight. A discount that large, attached to the largest membership program in retail, would put pressure on every conventional grocer’s price perception, Kroger included.
Kroger’s $5 billion investment in price is being made into a market where the two largest retailers in America are competing on membership value, not just shelf price. Kroger’s loyalty data, covering 95% of sales and 65 million households, is a genuine advantage. Kroger needs to show how Boost competes in a bundle war.
The M&A Decision: Ahold Delhaize USA or Pieces of Albertsons
Kroger’s presentation included a slide titled “Approach to M&A.” The criteria: customer-focused, complementary, strong returns, and preserving financial flexibility for customer investment and capital returns.
Kroger has already made one move. In July, it agreed to acquire Giant Eagle for $1.65 billion, adding 197 supermarkets across northern Ohio, western Pennsylvania, West Virginia, Maryland, and Indiana. The deal is expected to close in 2027, pending regulatory approval, with some store divestitures expected.
Giant Eagle is a regional tuck-in. The bigger decisions are coming, and Kroger will have to make them while litigating with Albertsons.
Albertsons is in play. On October 13, Albertsons launched a comprehensive business review covering its banner portfolio, market assets, cost structure, and capital allocation. Executive Chair Meg Whitman said, “Everything should be on the table.” BMO’s Kelly Bania said she “wouldn’t be surprised” to see Albertsons sell banners, regions, or real estate.
A full Kroger-Albertsons combination was blocked once. But if Albertsons sells banners or regions, Kroger will have to decide whether to bid for the pieces that fit its network, and how to do so while defending an $8 billion lawsuit from the seller.
Ahold Delhaize USA is the other strategic question. Ahold Delhaize USA operates Food Lion, Stop & Shop, Giant Food, The GIANT Company, and Hannaford, concentrated on the East Coast, where Kroger’s presence is limited outside of Harris Teeter’s markets. Kroger must decide whether its long-term geographic future runs through the Northeast and Mid-Atlantic, and if so, whether that future is built one store at a time or acquired.
These decisions compete for the same capital. Every dollar Kroger commits to M&A is a dollar not spent on price, stores, automation, or buybacks within its 2.3x to 2.5x leverage target. The board needs to decide which path creates more value before an opportunity forces the decision.
Conclusion: The Past Is on Trial. The Future Is Undecided.
Rodney McMullen is defending his decisions in a Delaware courtroom. The judge will decide whether Kroger met its contractual obligations. History has already decided the strategy: the Ocado bet produced billions in charges, the Albertsons bet produced a lawsuit, and Kroger lost share while Walmart, led by the man now running Kroger, took it.
Greg Foran has done what a new CEO should do. He owned the share loss, named the problems, cleared the decks, and committed to a plan built on price, fresh, stores, and execution. Karen Short is right: it is the playbook that made Kroger great a decade ago.
But the playbook has missing chapters. Kroger’s board should be asking five questions:
- What is our decision rule for store-based automation, and when do we deploy SBA inside stores, in additions, or as standalone sites?
- Which of our five remaining CFCs beat the store-based alternative on cost per order, and what is the plan for the ones that don’t?
- What is our autonomous delivery strategy, and who owns the orchestration layer between our stores and our customers?
- How does Boost compete against Walmart’s $120 bundle and a potential Amazon move on Whole Foods pricing?
- What is our position on Albertsons’ assets and Ahold Delhaize USA, and how do we pursue either without compromising the $5 billion investment in value?
Foran has shown Kroger where it has been and where it is today. The answers to those five questions will determine where it goes.