Kroger (KR) Stock Forecast & Price Target

Kroger's 3Q25 performance demonstrated a notable operating margin increase of nine basis points to 3.1%, along with an adjusted gross margin rise of 44 basis points to 22.8%, indicating effective management and strong cost controls. The company is experiencing significant growth in digital sales, which surged approximately 17%, contributing around $14 billion or 11% of total sales, and reflecting continued consumer demand in this segment. Furthermore, Kroger's focus on expanding its store openings, particularly with a 30% increase planned for 2026, positions the company well for future growth and profitability in both food and non-food segments.

Kroger's outlook appears negative due to anticipated flat-to-slightly lower gross margins, with expectations of a 5 basis points erosion impacting profitability amid challenging market conditions. Contributing factors include declining food volumes and the need for the company to manage increased competitive pressures, particularly from ecommerce and emerging food retailers. Additionally, Kroger's leverage ratio, while below its long-term target, raises concerns about the potential for future borrowing to address elevated healthcare and pension expenses that could further strain margins.