Does Kroger Have The Recipe For A Healthy Q4?

Karen Short of Barclays is “less enthusiastic” on the near-term prospects of Kroger Co KR, which is set to report fourth-quarter results on March 2.

Short maintains her Equal-Weight rating on the shares and expects EPS of $0.48 that came in below Street’s $0.52 estimate.

The analyst’s below consensus view comes as many investors think the company would benefit from an uptick in food inflation and lesser exposure to potential border adjustment tax or other import duties. In addition, a severe flu season may have boosted Kroger’s pharmacy and OTC sales.

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That said, Short sees headwinds in the form of slowing tonnage growth due to the tough retail backdrop, increasing competitive disruption from Wal-Mart Stores Inc WMT, persistent deflation, operational inefficiencies and willingness for turnaround M&A deals.

“We would get more constructive on the name if KR were to meaningfully redeploy capital spending towards share buybacks and a higher dividend, but for now, we maintain our Equal Weight rating and $33 price target,” Short wrote in a note.

At last check, shares of Kroger fell 3.12 percent to $32.25.