Key takeaways
- The strongest Q1 2026 grocery retail earnings came from operators with a second revenue engine. Walmart’s advertising business grew 44%, Costco’s membership income reached $1.37 billion, and Kroger’s retail media profit grew more than 20%.
- Walmex and Chedraui faced the same peso headwind, yet Chedraui outpaced Mexico’s ANTAD benchmark for the twenty-third consecutive quarter and ended Q1 with a net cash position. The gap reflects cost control and private label investment built over years.
- LuLu Retail’s net income fell 33% as the Iran conflict suppressed footfall across all six of its GCC markets. Currency can be hedged and margin can be managed, but a regional conflict that keeps shoppers at home cannot be planned around.
Nine grocery operators. Five geographies. One consistent pattern across Q1 2026 grocery retail earnings: the companies posting strong results are not doing it on food alone. Walmart made 36% more from selling advertising to brands than it did a year ago. Costco’s membership renewal rate held at 89.7%. Both figures come from businesses that grocery retailers have built around their stores — retail media networks, membership programs, loyalty data sold back to suppliers — and in Q1 2026, those secondary revenue streams made all the difference in the world.
Q1 2026 grocery retail earnings and the second business model
Walmart posted Q1 revenue of $177.8 billion, up 7.3% year-on-year, with US comparable sales rising 4.4% — the strongest transaction growth in six quarters. Costco reported net sales of $69.2 billion, up 11.6%, with net income up 15.2%. Tesco’s UK like-for-like sales grew 1.8%, with online grocery up 8.9% and more than 500 new and improved products launched in the quarter.
The financial architecture behind each result is the same. Walmart Connect, the company’s retail media network, grew 44%. Costco’s membership fee income grew 10.7% year-on-year to $1.37 billion. Tesco Media grew strongly in Q1 with CEO Ken Murphy confirming retail media as a direct contributor to profit growth on the June 18 analyst call. None of that income requires a customer to buy an additional item of food.
Kroger is the most instructive data point in the group. Total sales reached $46.1 billion, up 2%, with identical sales excluding fuel up 1%. Kroger Precision Marketing, the company’s retail media business, delivered profit growth of more than 20%, while adjusted e-commerce turned profitable ahead of schedule. The stock still fell 8.43% on June 18 — on a one-penny EPS miss and gross margin compression from higher fuel costs and egg deflation. One penny. The company is building the same parallel business as Walmart and Costco. Q1 results showed it has not yet generated enough of that income to absorb the full weight of traditional grocery margin pressure.
The currency test: Latin America and Europe in Q1
The Q1 2026 grocery retail earnings from outside the US tell a more complicated story. Ahold Delhaize reported €22.3 billion in Q1 revenue. Its European operations, led by Albert Heijn in the Netherlands, grew 2.7% at constant exchange rates. The US grew 1.5%, held back by egg price deflation, reduced SNAP eligibility and pharmacy pricing pressure from the Inflation Reduction Act. Diluted underlying EPS rose 8.9%, beating consensus. The European business and the American business are effectively running at different speeds inside the same company, and that gap reflects something structural rather than a one-quarter anomaly. The US operations are navigating a set of headwinds that have nothing to do with how well Ahold Delhaize executes: government benefit reductions, regulatory pharmacy pricing and commodity deflation that compresses revenue without improving volume. Europe has none of those specific pressures in Q1.
In Latin America, both results are shaped by the same currency dynamic. When the peso appreciates against the dollar, revenues earned in Mexico look smaller when translated, which is exactly what happened in Q1. Walmex reported revenue growth of 4.1% in constant currency, with Mexico same-store sales up 3.1% and e-commerce up 14.4%. On a reported basis, after the currency translation, that became 1.7%. CEO Cristian Barrientos put it plainly on the analyst call: “Not good results in the quarter, very clear.” Chedraui faced an identical 14.3% currency headwind on its US operations, but delivered Mexico same-store sales growth of 2.1%, outpacing the ANTAD industry benchmark for the twenty-third consecutive quarter, with EBITDA margin expanding 22 basis points to 8.6% and a net cash position at quarter end.
What separates Walmex and Chedraui in Q1 is the margin structure and operational discipline that each company built before the quarter began. Chedraui has outpaced the ANTAD benchmark for nearly six years running. That kind of consistency does not come from a good quarter. It comes from cost control, format strategy and private label investment compounding over time. Walmex is a larger, more complex business with a Central American portfolio that underperformed Mexico in Q1, adding pressure on top of the currency hit. The gap between them in Q1 is a measurement of decisions made long before January.
The signal for the broader sector is quite plain: in a market where currency swings, regulatory changes and geopolitical disruption can hit revenue without warning, the operators with the tightest cost structures and the strongest private label penetration have the most room to absorb the blow. Chedraui ended Q1 with a net cash position. Walmex is investing its way back to growth. Both are rational responses to the same environment, but one of them arrived at Q1 already holding the stronger hand.
How does conflict affect grocery retail?
LuLu Retail Holdings, the GCC’s largest grocery operator, reported Q1 revenue of $2.02 billion — down 2.9% year-on-year. Net income fell 33% to $46.8 million. Profit margin compressed from 3.4% to 2.3%, missing analyst estimates by 5.5%. The stock has fallen approximately 18% since reporting and trades around 25% below its 2024 IPO price.
The Iran conflict suppressed footfall and consumer confidence across all six of LuLu’s GCC markets within the quarter. Panda Retail, operating within Saudi Arabia’s Savola Group, reported retail segment profit rising marginally to SAR 40 million from SAR 39 million, with revenue edging lower amid competitive market conditions.
Both companies are operationally sound. LuLu operates more than 240 stores across six GCC countries and has been steadily expanding its private label range and digital channels since its 2024 IPO. Panda has been restructuring its store network in Saudi Arabia with a focus on margin improvement rather than volume growth. Neither strategy failed in Q1. What happened is that the conflict took away the basic conditions any grocery business needs to work: people moving around freely, feeling confident enough to spend, and shopping as often as they normally would.
That is a different kind of risk from currency exposure or margin pressure. Currency can be hedged. Margin can be managed. But when a regional conflict keeps people at home, there is no operational playbook that fixes it. The GCC grocery market is a real long-term growth story; the region has a rising population, a growing middle class, and far fewer modern supermarkets per person than Western markets. Q1 showed that this growth depends on regional stability in a way that grocery markets in the US or Europe do not.
What Q1 tells us about the rest of 2026
Across global food retail, grocery sector growth in Q1 2026 is less uniform than headline figures suggest at first. The sector is sorting itself into two structural futures: operators who built a second revenue engine before the pressure arrived (advertising income, membership fees, transactional loyalty data) and operators still depending on the store alone. The Q1 2026 grocery retail earnings show the former absorbing currency shocks, geopolitical disruption and margin compression, while the latter carry the full weight of grocery’s historically thin margins into a second half with no relief in sight.
As Q1 2026 fashion earnings showed, the structural divides emerging across retail in 2026 share the same logic. A one-dimensional retail model is a fast way to fail when things turn difficult. The more revenue streams a company can lean on when the core business comes under pressure, the more room it has to absorb the shock and keep growing. Q1 was the quarter that made this difference visible.
