Intensifying Competition
"Grocery is a mature low-growth sector characterized by relentless competition that appears to be intensifying," stated Tanal. E-commerce challengers have gained traction while hard discounters, specialty players and even conventional grocers have been opening stores.
"Coupled this with the sector's thin margins, low barriers to entry, and consumers unwavering focus on price...where there are losers, there are winners," stated Tanal.
Winners and Losers
Tanal believes The Kroger Co KR will continue to enjoy advantages of being a top-line competitor, while Whole Foods Market, Inc. WFM will not.
In addition, Whole Foods, which operates in higher density areas than Kroger, is expected for face heightened competition in comparison to Kroger.
SUPERVALU INC. SVU also faces challenges from an "intrusion of hard discounters," said the analyst.
According to TipRanks, Stephen Tanal is among the better analyst's covering the food retail sector having a 70 percent success rate and a +7.1 percent average return per recommendation.
At the time of writing, Kroger traded at $36.17, up 1.09 percent on the day.
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