Adds details on strategy and capex target, updates shares in paragraph 5

By Savyata Mishra

March 5 (Reuters) - Supermarket chain operator Kroger KR.N forecast muted annual sales and profit on Thursday, as it navigates uncertain demand under a new CEO by focusing its spending on digital business and promotions to draw budget-strapped shoppers.

The company is reporting its first set of results under CEO Greg Foran, who had delivered 20 straight quarters of comparable-sales growth as former Walmart U.S. chief. Wall Street analysts had last month cheered his appointment.

CFO David Kennerley said the outlook is based on Kroger's efforts "to invest more aggressively in value for customers while improving gross margin".

Walmart CEO John Furner too had kicked off his tenure with a conservative annual outlook, reflecting the fragile state of the U.S. consumer.

Kroger expects 2026 identical sales, excluding fuel, to grow in the 1% to 2% range, whose midpoint is below expectations of a 2% growth. Shares of the company were marginally down in premarket trading.

The outlook also takes into account a 130‑basis‑point drag on sales from the Inflation Reduction Act, which forces Kroger to book lower prices on 10 Medicare‑covered drugs.

It forecast adjusted profit per share between $5.10 and $5.30, largely below market expectations of $5.29, according to data compiled by LSEG.

LEADERSHIP RESET

The company ousted CEO Rodney McMullen in March 2025 after a board investigation found that he violated company policies, leaving the retailer without a permanent leader for nearly a year until Foran's appointment in February.

In the interim, chairman Ron Sargent pushed premium private‑label brands and leaned more on promotions to counter rising pressure from Walmart WMT.O and Amazon AMZN.O, which have been winning more spending across income groups with faster delivery and lower prices.

Kroger targets capital spending between $3.8 billion and $4 billion in fiscal 2026. It has spent $3.86 billion so far in 2025.

The company's digital sales rose 20% in the fourth quarter, on strong pickup, delivery demand and growth through partners such as DoorDash DASH.O, Instacart CART.O and Uber Eats UBER.N, and excludes the impact of Ocado fulfillment center exits last year.

The retailer posted sales of $34.73 billion for the quarter ended January 31, missing analysts' estimates of $35.06 billion. It earned $1.28 per share on an adjusted basis, beating estimates of $1.20.