As grocery retailers deal with rising pressure from inflation and tougher competition, many are starting to turn to artificial intelligence in order to protect their profits and reduce food waste. In fact, traditional strategies like raising prices or offering broad discounts are becoming less effective, especially as shoppers increasingly split their purchases across multiple stores to find the best deals. Because of this shift, discount chains like Dollar General (DG) and warehouse clubs like Costco (COST) have been gaining market share, forcing traditional grocers to rethink how they compete.
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In response, many companies are now using AI and data to make more precise decisions, especially when it comes to pricing perishable goods. Instead of marking down entire categories, retailers can adjust prices on individual items as they get closer to their “best-by” dates. This is important because about 30% of food in U.S. grocery stores is wasted each year, which represents roughly $18.2 billion in lost value. At the same time, with inflation and higher gas prices putting pressure on household budgets, grocers are trying to reduce these losses, often referred to as “shrink.”
For example, Kroger (KR) has said that it is already seeing benefits from using AI to improve pricing and efficiency. Specifically, tools like Flashfood are helping retailers put this strategy into action. The platform allows customers to buy discounted food that is close to expiration through an app, which helps stores turn potential waste into revenue. As a result, grocers can reduce shrink while still attracting value-focused shoppers. In addition, Flashfood says that its partners, including Kroger and regional chains, have cut shrink by about 27% while also increasing customer visits and spending.
Is KR Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on KR stock based on eight Buys, six Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average KR price target of $76.31 per share implies 12.7% upside potential.
