Market Overview

Kroger Stands Its Ground In Price War With Wal-Mart, But Do Market Share Gains Offset Declining Comps?

Share:
Kroger Stands Its Ground In Price War With Wal-Mart, But Do Market Share Gains Offset Declining Comps?
Related KR
Wall Street's M&A Chatter From August 11-13: Altice, Costco-Kroger, United Technologies-Rockwell Collins
Benzinga's Top Upgrades, Downgrades For August 11, 2017
Hahn Capital Management Llc Buys East West Bancorp Inc, Sells The Kroger Co, CIT Group Inc (GuruFocus)
Related WMT
Back To School: Target Teams Up With Barnes & Noble To Take On Amazon's Big Man On Campus
White House Chief Strategist Steve Bannon Is Out In Latest Shakeup Of Trouble-Plagued Presidency
Walmart's New Growth Story (GuruFocus)

Deutsche Bank’s Shane Higgins continues to believe Kroger Co (NYSE: KR) is well positioned to drive market share gains as well as EPS growth over time, given the numerous advantages the company has.

The analyst maintains a Buy rating on the company, while lowering the price target from $39 to $35.

Results And Guidance

Kroger reported its EPS for Q4 at $0.53, in line with the estimate and marginally ahead of consensus.

However, non-fuel identical store (ID) sales decline 0.7 percent, coming in below expectations.

Related Link: Kroger's CFO Talks Food Deflation

The first-quarter guidance was also below the consensus forecasts.

“Deflation in 4Q was sequentially worse than 3Q, and competition was more intense – confirming what many investors already knew, which was that Wal-Mart Stores Inc (NYSE: WMT) and others were accelerating price investments and improving the shopping experience,” Higgins mentioned.

In response, Kroger stepped up price investments and promotions, which adversely affected gross margins.

Intensifying Competition

The analyst expressed concern regarding intensifying competition, stating that the guidance for a robust rebound in second half, following the very weak Q1 guidance, highlighted the above average uncertainty being faced by the business at present.

“KR remains fully committed to its Customer 1st strategy and will continue taking costs out and driving efficiencies to reinvest in its four keys (prices, people, products, and shopping experience), which should drive loyalty and sales,” Higgins added.

At Last Check

Latest Ratings for KR

DateFirmActionFromTo
Aug 2017Stephens & Co.Initiates Coverage OnUnderweight
Jun 2017Morgan StanleyDowngradesOverweightEqual-Weight
Jun 2017JP MorganDowngradesOverweightNeutral

View More Analyst Ratings for KR
View the Latest Analyst Ratings

Posted-In: Analyst Color Earnings Long Ideas News Guidance Price Target Analyst Ratings Movers Best of Benzinga

 

Related Articles (KR + WMT)

View Comments and Join the Discussion!