Market Overview

The Biggest Threat To Kroger Isn't Amazon And Whole Foods — It's Still Walmart

Share:
The Biggest Threat To Kroger Isn't Amazon And Whole Foods — It's Still Walmart
Related KR
Grocery Gunfight: Can Incumbents Fend Off Amazon?
Checking In On Instacart, The Uber For Groceries
The Vetr community has upgraded $KR to 3.5-Stars. (Vetr)
Related AMZN
Needham's Laura Martin Offers A Few Reasons Roku Shouldn't Be Affected By Amazon's Apple TV, Chromecast Offering
3 Factors That Can Help Determine If A Stock Will Outperform Or Underperform
Costco Is Anything But Dead (Seeking Alpha)

Kroger Co (NYSE: KR) and other multiregional grocery chains nosedived Thursday when Amazon.com, Inc. (NASDAQ: AMZN) announced the consumer perks of its Whole Foods Market, Inc. (NASDAQ: WFM) acquisition, but grocers have more formidable foes to worry about.

“As the largest seller of groceries and related products in the US, Wal-Mart Stores Inc (NYSE: WMT) has by far the most meaningful competitive effect on the supermarket industry,” Andrew Wolf, managing director of Loop Capital Markets, wrote in a Monday note.

Related Link: Amazon-Whole Foods: Everything You Need To Know As A Shopper And Prime Member

Whole Foods’ 1.9-percent shares of the U.S. grocery industry doesn’t compare with Walmart’s 22-percent-and-counting. Against a 0.4-percent rival average, Walmart boasted second-quarter sales growth of 2.5 percent.

tipranks.png

At the same time, its annual growth is an estimated 37 times that of Whole Foods, which would have to make 52-percent comps growth, a “near impossibility” by Wolf’s standards, even to compete. This represents sales per square foot of about $1,400 compared to a current $925.

And Loop considers such a feat unlikely. By its estimates, Amazon synergies will drive incremental growth in Whole Foods sales of just $225 million, which pales in comparison to Walmart’s $8.3 billion expected growth.

If both firms meet expectations, Walmart’s annual growth, alone, will surpass more than half of Whole Foods’ $16 billion total sales.

Harmless Whole Foods

Other analysts consider Whole Foods a non-threat for simply fundamental reasons, including its highly specific and non-traditional consumer base.

“The quinoa elite and mainline groceries serve different customers and don't directly translate,” Bernstein analyst Brandon Fletcher wrote Friday.

At the same time, its selection of reduced-price products is not as broad as that of Walmart.

tipranks.png

Latest Ratings for KR

DateFirmActionFromTo
Dec 2017Moffett NathansonInitiates Coverage OnBuy
Nov 2017Goldman SachsAssumesNeutral
Nov 2017Northcoast ResearchUpgradesNeutralBuy

View More Analyst Ratings for KR
View the Latest Analyst Ratings

Posted-In: Andrew Wolf Grocery grocery chainsAnalyst Color Commodities Markets Analyst Ratings Trading Ideas Best of Benzinga

 

Related Articles (AMZN + KR)

View Comments and Join the Discussion!