Kroger Shares Still Lacking A Near-Term Catalyst

After some field visits to Roundy’s locations in the Milwaukee, Wisconsin area, Oppenheimer analyst Rupesh Parikh said he walked away encouraged by Kroger Co KR pricing and merchandising efforts to date following the $866 million acquisition earlier this year. However, the analyst noted that a near-term positive catalyst isn’t in sight.

“We continue to view KR shares as appropriate for investors with a longer-term horizon,” said Parikh, who noted that Kroger appears to be reinvesting synergies over boosting near-term profitability.

On the field visits to Roundy’s Pick n Save locations, Parikh noted new price reductions averaging 11 percent throughout the store. Kroger’s Simple Truth brand already has a presence in the stores as well, according to the analyst.

“We are impressed by the speed at which merchandising changes have already taken place. Retailer private label efforts in natural/organic represent a continued headwind to natural/organic suppliers,” said Parikh.

Oppenheimer expressed a Stock Rating of Outperform and a 12-18 month Price Target of $40 for the stock.

At time of writing, shares  were trading at $29.06.