Publix suffers rare earnings decline

Publix Super Markets posted a rare earnings decline for its fiscal first quarter, citing sales pressure from the new Medicare drug pricing program.

The Lakeland, Fla.-based retailer posted net income of $794 million for the three months through March 28, a 21.5% decline from $1 billion in the year-ago first quarter. Most of the decline was due to the impact of unrealized losses on equity securities, the company said. However, excluding those losses, net income still would have been down 3% in the first quarter of 2026, to about $1.1 billion, vs. $1.2 billion in Q1 2025.

Sales for the first quarter of 2026 totaled $16.1 billion, a 2% increase over year-ago levels, which the company attributed primarily to new-store openings, partially offset by a decrease in prescription drug sales. Comparable-store sales were unchanged vs. year-ago levels.

The new Medicare Drug Price Negotiation Program, which limits the amount that pharmacies can be reimbursed for 10 prescription drugs as part of the Inflation Reduction Act of 2022, took effect on Jan. 1 and was a drag on Publix’s sales in the quarter, the company said.

In its 10-Q filing with the Securities and Exchange Commission, Publix said its operating and administrative expenses totaled 18.8% of sales in Q1 of this year, up from 18.3% in last year’s first quarter. The company attributed the increase in O&A expenses as a percent of sales to the decrease in pharmacy sales from the Medicare change and to increases in facility costs as a percent of sales and payroll costs as a percent of sales. As a result, operating profits were 8% of sales in the most recent quarter, vs. 8.5% in the year-ago period.

The results follow a robust performance in fiscal 2025, when Publix reported net income gains of 2.1% on comp-store sales gains of 3.5% and a total sales increase of 5%, vs. the preceding year.

During the first quarter of this year, Publix opened seven supermarkets, including three replacement stores. It also closed eight supermarkets, one of which was already replaced and six others that are slated to be replaced in the future.

As previously reported, Publix is continuing to expand its geographic reach, including several new stores planned for Kentucky, and to implement a new store design that includes wider aisles, self-checkout lanes, expanded deli options, larger displays in the bakery, meat and seafood departments and expanded service for online ordering, delivery and curbside pickup.

The company operated 1,431 supermarkets across the Southeast as of the end of the first quarter.