The Maze: Kroger has reported two consecutive quarters of profitable ecommerce growth. Adjusted digital sales rose 20% in fiscal Q2 2026, helped by online deal days, new customers and faster delivery. But the decisive phrase is “combined with retail media.” Kroger Precision Marketing profit grew 24%, adding a higher-margin layer above picking, packing and transport. Kroger has not proved that the last mile pays for itself. It has shown that one grocery order can produce both a basket and an advertising opportunity.
The digital business is growing while the storewide sales engine sputters. Identical sales excluding fuel increased only 0.2%, down from 3.4% a year earlier. Produce fears linked to the cyclospora outbreak cut roughly 35 basis points from the result. Egg deflation removed another 30, while pharmacy pricing created a 140-basis-point drag. Kroger cut full-year identical-sales guidance from 1%–2% to 0.2%–0.8%. Against that backdrop, adjusted ecommerce sales grew 20% and new ecommerce customers increased 20%. Digital is now one of the few clear growth lanes.
Stores are becoming local logistics infrastructure. Kroger is refocusing on store-based fulfillment and seeing growth in orders delivered in under an hour. A dense store network can shorten the distance between inventory and customer without a dedicated warehouse in every market. It does not make delivery cheap: transportation remains a margin pressure. The advantage is optionality. One store can serve a walk-in trip, pickup order or urgent delivery from the same inventory base.
Retail media changes the unit-economics question. Kroger Precision Marketing uses purchase data from more than 62 million verified households to build ad audiences and match media exposure to store and ecommerce sales. Brands can activate those audiences across Kroger properties, social platforms, connected TV, video, display and audio. The official mechanism compares exposed with unexposed groups. Each digital order adds behavioral data, creates ad inventory and helps Kroger sell closed-loop measurement to brands.
The profit claim is real, but bundled. Kroger’s official release says ecommerce profitability and media helped improve its adjusted FIFO gross-margin rate by 13 basis points. Pharmacy mix, sourcing and tariff refunds helped too; shrink, transport and price investment pushed the other way. Kroger does not disclose an ecommerce margin, retail-media dollar profit or standalone delivery contribution. Its 20% adjusted digital-growth measure also excludes exited fulfillment markets, the Vitacost sale and the discontinued Ship Marketplace. The evidence supports a profitable combined system, not a victory lap for last-mile economics.
Why it matters: Grocery delivery fights thin product margins with expensive labor and transport. Kroger’s answer is to monetize the customer twice: through the basket, then through brand spending tied to verified purchases. That favors retailers with loyalty data, advertiser demand and enough stores to make fast fulfillment credible. Smaller grocers may match the delivery promise but lack the media engine that helps fund it. Measure order economics and ad economics separately—then see whether the flywheel works when one slows.
