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Kroger Company (KR)
NYSE:KR
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Kroger Company
(NYSE:KR)68Neutral
Positive Factors
Financial Performance
Potential for an 8-10% upside move in the stock as it begins to get credit for defensive growth characteristics amidst a choppy consumer landscape.
Leadership Transition
Ron Sargent stepping in as interim CEO is a positive, given his extensive knowledge of Kroger's operations and his ability to provide steady leadership during transitions.
Strategic Partnerships
Materially positive announcement about the return of ESI (Express Scripts) which should help to accelerate ID sales.
Negative Factors
Competitive Pressure
Competition from Walmart, Amazon, Costco, and peers who take up over half the growth in U.S. Retail Sales and most of the growth in Grocery land.
Leadership Change Challenges
The CEO transition presents a challenge as it coincides with a blocked merger and a CFO transition, creating uncertainty.
Market Competition
Competition from Walmart, Amazon, Costco and peers is a risk as they take up over half the growth in U.S. Retail Sales.
Kroger Company (KR) vs. S&P 500 (SPY)
Market Cap
$45.51B
Dividend Yield1.99%
Average Volume (3M)5.39M
Price to Earnings (P/E)16.6
Beta (1Y)0.11
Revenue Growth1.41%
EPS Growth46.58%
CountryUS
Employees414,000
SectorConsumer Defensive
Sector Strength73
IndustryRetailers - Staples
Share Statistics
EPS (TTM)3.78
Shares Outstanding723,606,140
10 Day Avg. Volume6,440,946
30 Day Avg. Volume5,388,456
Financial Highlights & Ratios
PEG Ratio0.36
Price to Book (P/B)N/A
Price to Sales (P/S)0.28
Price to Cash Flow (P/CF)10.10
P/FCF Ratio36.60
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$68.79Price Target Upside8.88% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering15
Kroger Company Business Overview & Revenue Model
Company DescriptionFounded in 1883, The Kroger Co. is a Ohio-based retailer, which is engaged in the operation of retail food and drug stores, multi-department stores, jewellery stores, and convenience stores. It also manufactures and processes some of the food for sale in its supermarkets.
How the Company Makes MoneyKroger makes money primarily through the sale of groceries and related products across its vast network of retail stores. The company's revenue model is built on a combination of in-store sales, e-commerce, and private label products, which offer higher margins. Key revenue streams include the sale of fresh produce, meat, dairy, and packaged foods, as well as health and beauty products, household essentials, and fuel. Kroger also earns revenue from its pharmacy operations and financial services. Significant factors contributing to its earnings include strategic partnerships with technology companies to enhance its digital capabilities and customer loyalty programs that drive repeat business. Additionally, Kroger leverages its extensive distribution network and data analytics to optimize inventory management and pricing strategies.
Kroger Company Financial Statement Overview
Summary
Kroger exhibits stable financial performance with strong profitability metrics such as a gross profit margin of 21.48% and a net profit margin of 1.85%. The balance sheet is stable, though high leverage is a concern with a debt-to-equity ratio of 2.31. Cash flow generation is robust relative to net income, but declining free cash flow poses a risk to future flexibility.Income Statement
Kroger's income statement reflects solid profitability with a TTM gross profit margin of 21.48% and a net profit margin of 1.85%. The EBIT margin stands at 3.01% and EBITDA margin at 5.19%, indicating efficient operations. However, the revenue has shown minimal growth over the past year, with a slight decline in TTM compared to the previous annual period.75
Positive
Balance Sheet
The balance sheet reveals a stable equity position with a debt-to-equity ratio of 2.31 and an equity ratio of 20.67%. While the company maintains a strong asset base, the high leverage poses a potential risk. Return on equity is robust at 21.45% for the TTM, reflecting effective use of equity to generate profits.70
Positive
Cash Flow
Kroger's cash flow statement shows a decrease in free cash flow from previous periods, with a TTM free cash flow of $2.21 billion. The operating cash flow to net income ratio is 2.29, indicating strong cash generation relative to net income. However, the free cash flow growth is negative, suggesting challenges in sustaining cash generation from operations.68
Positive
| Breakdown | |||||
| TTM | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 | Mar 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 149.88B | 150.04B | 148.26B | 137.89B | 132.50B | 122.29B | Gross Profit |
| 32.20B | 30.24B | 31.78B | 30.35B | 30.90B | 26.99B | EBIT |
| 4.51B | 3.10B | 4.13B | 3.48B | 2.78B | 2.25B | EBITDA |
| 7.78B | 7.04B | 7.03B | 6.06B | 7.29B | 5.21B | Net Income Common Stockholders |
| 2.77B | 2.16B | 2.24B | 1.66B | 2.58B | 1.66B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 3.10B | 3.10B | 2.06B | 2.90B | 2.78B | 1.58B | Total Assets |
| 50.51B | 50.51B | 49.54B | 49.09B | 48.64B | 45.16B | Total Debt |
| 19.25B | 19.25B | 20.41B | 20.44B | 20.59B | 21.18B | Net Debt |
| 17.36B | 17.36B | 19.58B | 18.62B | 18.90B | 20.78B | Total Liabilities |
| 38.90B | 38.90B | 39.52B | 39.66B | 39.09B | 36.59B | Stockholders Equity |
| 11.62B | 11.62B | 10.01B | 9.43B | 9.55B | 8.57B |
| Cash Flow | Free Cash Flow | ||||
| 2.21B | 2.88B | 1.23B | 3.58B | 3.95B | 1.54B | Operating Cash Flow |
| 6.34B | 6.79B | 4.31B | 6.19B | 6.82B | 4.66B | Investing Cash Flow |
| -3.41B | -3.75B | -3.02B | -2.61B | -2.81B | -2.61B | Financing Cash Flow |
| 8.73B | -2.17B | -2.29B | -3.44B | -2.71B | -2.08B |
Kroger Company Technical Analysis
Neutral
63.18
Price Trends
61.94
Positive
59.95
Positive
56.19
Positive
Market Momentum
0.57
Positive
48.33
Neutral
23.73
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For KR, the sentiment is Neutral. The current price of 63.18 is below the 20-day moving average (MA) of 64.64, above the 50-day MA of 61.94, and above the 200-day MA of 56.19, indicating a neutral trend. The MACD of 0.57 indicates Positive momentum. The RSI at 48.33 is Neutral, neither overbought nor oversold. The STOCH value of 23.73 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for KR.
Kroger Company Risk Analysis
Kroger Company disclosed 15 risk factors in its most recent earnings report. Kroger Company reported the most risks in the “Production” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Kroger Company Peers Comparison
Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $460.27B | 60.89 | 30.98% | 0.44% | 5.35% | 16.22% | |
77 Outperform | $762.93B | 39.41 | 22.33% | 0.85% | 5.07% | 25.86% | |
76 Outperform | $12.19B | 11.83 | 30.82% | 2.42% | 0.97% | -24.43% | |
72 Outperform | $14.33B | 38.71 | 28.79% | ― | 12.90% | 50.20% | |
70 Outperform | $53.67B | 12.41 | 30.16% | 3.69% | 0.64% | 20.16% | |
68 Neutral | $45.51B | 16.64 | 21.45% | 1.99% | 1.41% | 46.58% | |
63 Neutral | $20.85B | 13.27 | -10.88% | 7.48% | 1.13% | 11.50% |
* Consumer Defensive Sector Average
Performance Comparison
KR
Kroger Company
63.18
14.76
30.48%
COST
Costco
1,036.87
281.06
37.19%
TGT
Target
117.14
-46.40
-28.37%
WMT
Walmart
94.97
35.64
60.07%
SFM
Sprouts Farmers
145.35
82.47
131.15%
ACI
Albertsons Companies
19.76
0.02
0.10%
Kroger Company Earnings Call Summary
Earnings Call Date: Dec 5, 2024 | % Change Since: 5.97% | Next Earnings Date: Mar 6, 2025
Earnings Call Sentiment Neutral
Kroger demonstrated resilience with strong digital and alternative profit growth, maintaining household engagement and achieving earnings growth despite some challenges such as organized retail crime and economic pressures on consumers. The company made strategic investments in pricing and promotions to support consumer spending. However, flat identical sales and the impact of Express Scripts remain concerns.Highlights
Strong Digital Performance
Kroger's digital business delivered double-digit growth in both pickup and delivery services, with digital sales growing 11% in the third quarter.
Alternative Profit Growth
Growth in alternative profit businesses remained strong, contributing significantly to Kroger's earnings, with Kroger Precision Marketing continuing to expand.
Fuel Segment Success
The fuel team exceeded expectations with customers saving 14% more in rewards, leading to gallon sales outpacing the industry.
Improved Financial Metrics
Kroger achieved adjusted earnings per share growth of 8% and maintained strong free cash flow, with a net total debt to adjusted EBITDA ratio of 1.4.
Customer Loyalty and Engagement
Kroger achieved its 10th consecutive quarter of total household growth, with increased engagement from budget-conscious households.
Lowlights
Flat Identical Sales
Identical sales without fuel decreased by 0.6%, with underlying growth adjusted to 1% due to the terminated agreement with Express Scripts.
Shrink and Organized Retail Crime
Shrink was a headwind to gross margin due to rising theft and organized retail crime, impacting profitability.
Economic Pressure on Consumers
Economic factors such as higher interest rates, reduced savings, and fewer government benefits pressured consumer spending.
Impact of Express Scripts Termination
The termination of the agreement with Express Scripts negatively affected identical sales and contributed to a slight increase in the OG&A rate.
Company Guidance
During the Kroger Co. Third Quarter 2023 Earnings Call, the company provided guidance on several key metrics. Kroger achieved an adjusted earnings per share growth of 8% for the quarter and expects full-year identical sales without fuel to be in the range of 0.6% to 1%. The adjusted FIFO net operating profit is anticipated to be within $4.9 billion to $5 billion. Digital sales grew by 11%, with significant contributions from both pickup and delivery services. The company's gross margin was reported at 22% of sales, with a FIFO gross margin rate, excluding fuel, increasing by 3 basis points year-over-year. Kroger's OG&A rate rose by 32 basis points, excluding fuel and adjustments, driven by investments in wages and benefits, as well as strategic initiatives. The company also highlighted growth in alternative profit businesses, with Kroger Precision Marketing celebrating its sixth anniversary, and the health and wellness segment exceeding internal expectations. Looking ahead, Kroger expects to exit the fourth quarter with a stronger sales trend and anticipates adjusted EPS to be between $4.50 and $4.60. Additionally, Kroger is on track to close its proposed merger with Albertsons in early 2024, having certified substantial compliance with the FTC's second request.Kroger Company Corporate Events
Executive/Board ChangesFinancial Disclosures
Kroger Announces CEO Resignation Amidst Investigation
Negative
Mar 3, 2025
Kroger has announced the resignation of its CEO, Rodney McMullen, following a Board investigation into his personal conduct, which was found to be inconsistent with the company’s ethics policy. Ronald Sargent has been appointed as the interim CEO and Chairman of the Board, while Mark Sutton will serve as the lead independent director. The company expects its full-year sales and earnings to exceed the high end of its guidance range, indicating strong financial performance despite the leadership transition.
Executive/Board ChangesBusiness Operations and Strategy
Kroger Company Appoints New Chief Financial Officer
Neutral
Feb 13, 2025
On February 12, 2025, Kroger Co. announced the appointment of David Kennerley as the new Senior Vice President and Chief Financial Officer, effective April 3, 2025. Kennerley, who has a long history with PepsiCo, will join Kroger on March 10, 2025, to ensure a smooth transition alongside Todd Foley, the interim CFO. This strategic leadership change reflects Kroger’s commitment to maintaining its market strategy of providing fresh, affordable food while fostering long-term shareholder value.
M&A TransactionsStock BuybackBusiness Operations and Strategy
Kroger Ends Albertsons Merger, Focuses on Core Strategies
Neutral
Dec 11, 2024
Kroger Co. has terminated its merger agreement with Albertsons Companies after a court injunction blocked the merger. The company now plans to focus on its core strategies, including significant investments in lowering grocery prices, enhancing employee wages, and supporting local communities. Additionally, Kroger has launched a $7.5 billion share buyback program, signaling confidence in its financial health and commitment to returning capital to shareholders.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.