Company Reports

As the largest US dedicated supermarket operator, Kroger should be equipped to navigate an increasingly competitive landscape. However, even as it captures 6% of the grocery retail market, we believe it lacks enduring intangible assets or the structural cost advantages of price-led giants like Walmart and convenience-focused rivals like Amazon. We view the firm’s strategy to leverage its more than 2,700 stores as fresh food and omnichannel hubs as a necessary evolution to maintain relevance in an industry where customer switching costs are virtually nonexistent, rather than affording the ability to carve out an edge.

Kroger's second-quarter numbers showed a 2% net sales increase and adjusted earnings per share of $1.09, up 5.6%. Core FIFO gross margin expanded 13 basis points, driven by e-commerce profitability and tariff refunds, but partly offset by higher shrink and transportation costs.

Kroger has reached an agreement to acquire food and pharmacy retailer Giant Eagle for $1.65 billion in cash, expected to close in 2027. The transaction adds 197 supermarkets, 11 pharmacies, and roughly $9 billion in annual sales across Ohio, Pennsylvania, West Virginia, Maryland, and Indiana.

Kroger's comparable sales increased 1% and adjusted earnings per share rose 6% to $1.58 in the first quarter. Core adjusted FIFO gross margin fell 9 basis points as higher fuel costs, egg deflation, and price investments offset improved e-commerce profitability and a favorable pharmacy sales mix.

As the largest US dedicated supermarket operator, Kroger should be equipped to navigate an increasingly competitive landscape. However, even as it captures 6% of the grocery retail market, we believe it lacks enduring intangible assets or the structural cost advantages of price-led giants like Walmart and convenience-focused rivals like Amazon. We view the firm’s strategy to leverage its more than 2,700 stores as fresh food and omnichannel hubs as a necessary evolution to maintain relevance in an industry where customer switching costs are nonexistent, rather than affording the ability to carve out an edge.

Kroger's fourth-quarter results included a 2.4% comparable-sales increase and adjusted EPS of $1.28, up 12%. Gross margin expanded by 30 basis points, reflecting sourcing improvements and lower shrinkage, which were partially offset by price reductions and a mix shift toward lower-margin pharmacy.

Kroger stands as the largest US supermarket operator with roughly 2,700 stores and a grocery-led mix (77% of sales) augmented by fuel and pharmacy services, but it remains structurally disadvantaged in a cost-led category dominated by mass merchants and bare-bones discounters.

As the largest US dedicated supermarket operator, Kroger should be equipped to navigate an increasingly competitive landscape. However, even as it captures 6% of the grocery retail market, we believe it lacks enduring intangible assets or the structural cost advantages of price-led giants like Walmart and convenience-focused rivals like Amazon. Consequently, we view the firm’s strategy to leverage its more than 2,700 stores as fresh food and omnichannel hubs as a necessary evolution to maintain relevance in an industry where customer switching costs are nonexistent, rather than affording the ability to carve out an edge.

Kroger announced that Greg Foran has taken the CEO reins effective immediately. Foran brings 40 years of retail experience, including various executive positions in Asia and the US at wide-moat peer Walmart. Investors cheered the news, sending the shares up 6% intraday on Feb. 9.

With about 2,700 locations across the United States and a portfolio of over 20 different banners, no-moat Kroger is one of the nation’s leading grocery retailers. It built its vast footprint through expansion of its namesake banner along with numerous acquisitions of competing chains, giving it an ingrained presence in many US communities. Considering this, an immense top line (about $150 billion in fiscal 2024) that brings a strong standing with suppliers, and its private label exposure (about 27% of retail sales before fuel), along with it loyalty membership program, Kroger’s competitive standing appears enviable at first glance.

Kroger's third-quarter same-store sales grew 2.6% with e-commerce sales up 17%, the sixth consecutive quarter of double-digit growth. Pressure on consumption moved full-year guidance for same-store sales growth to 2.9% at the midpoint from 3.05%. Adjusted gross margin increased 24 basis points.

With about 2,700 locations across the United States and a portfolio of over 20 different banners, no-moat Kroger is one of the nation’s leading grocery retailers. It built its vast footprint through expansion of its namesake banner along with numerous acquisitions of competing chains, giving it an ingrained presence in many US communities. Considering this, an immense top line (about $150 billion in fiscal 2024) that brings a strong standing with suppliers, and its private label exposure (about 27% of retail sales before fuel), along with it loyalty membership program, Kroger’s competitive standing appears enviable at first glance.

Kroger's second-quarter same-store sales grew 3.4% and full-year guidance increased 30 basis points to 2.7%-3.4%, helped by inflation and some improvement in volumes (unquantified). Gross margins decreased 9 basis points excluding a sold business amid enduring investments.

With about 2,700 locations across the United States and a portfolio of over 20 different banners, no-moat Kroger is one of the nation’s leading grocery retailers. It built its vast footprint through expansion of its namesake banner along with numerous acquisitions of competing chains, giving it an ingrained presence in many US communities. Considering this, an immense top line (about $150 billion in fiscal 2024) that brings a strong standing with suppliers, and its private label exposure (about 27% of retail sales before fuel), along with it loyalty membership program, Kroger’s competitive standing appears enviable at first glance.

Kroger shares rose 9% on June 20 on outsize first-quarter same-store sales growth of 3.2%. This led the firm to raise its full-year outlook by 25 basis points to 2.25%-3.25%. Operating margin was flat at 2.9%, as cost efficiencies were reinvested in pricing. Kroger held to its 2025 profit forecast.

With over 2,700 locations across the United States and a portfolio of over 20 different banners, no-moat Kroger is one of the nation’s leading grocery retailers. It built its vast footprint through expansion of its namesake banner along with numerous acquisitions of competing chains, giving it an ingrained presence in many US communities. Considering this, an immense top line (about $150 billion in fiscal 2024) that brings a strong standing with suppliers, and its loyalty membership program, Kroger’s competitive standing appears enviable at first glance.

With over 2,700 locations across the United States and a portfolio of over 20 different banners, no-moat Kroger is one of the nation’s leading grocery retailers. It built its vast footprint through expansion of its namesake banner along with numerous acquisitions of competing chains, giving it an ingrained presence in many US communities. Considering this, an immense top line (nearly $150 billion in fiscal 2024) that brings a strong standing with suppliers, and its loyalty membership program, Kroger’s competitive standing appears enviable at first glance.

We plan to raise our $59 fair value estimate for no-moat Kroger by a low-single-digit percentage following the fiscal 2024 fourth-quarter earnings release. Results looked strong as identical sales excluding fuel expanded 2.4%, slightly outpacing our 2% forecast and the 1.7% average annual growth in food at home inflation from November 2024 to January 2025, per the Bureau of Labor Statistics. Encouragingly, growth was underpinned by an uptick in both traffic and average ticket. Management also cited 11% growth in digital sales (about 9% of total revenue). While we suspect online orders remain margin-dilutive due to the added fulfillment costs involved, we commend the retailer for adapting to consumers’ evolving purchasing habits. Also, a larger digital presence should translate into faster growth from alternative profit streams such as media and advertising over time: Management cited 17% growth in media revenue for the full year while alternative profits represented nearly 30% of Kroger’s operating income.

No-moat Kroger announced the resignation of CEO Rodney McMullen on March 3. Few details were provided besides that the departure stemmed from issues concerning McMullen’s personal conduct, separate from Kroger’s business activities. The news comes at the end of a tumultuous year in which Kroger has grappled with the termination of its proposed merger with no-moat Albertsons and the departure of key executives including CFO Gary Millerchip (now CFO at wide-moat Costco) and merchandising officer Stuart Aitken (now CEO of Circana).

With over 2,700 locations across the United States and a portfolio of over 20 different banners, no-moat Kroger is one of the nation’s leading grocery retailers. It built its vast footprint through expansion of its namesake banner along with numerous acquisitions of competing chains, giving it an ingrained presence in many US communities. Considering this, an immense top line (eclipsing $150 billion in fiscal 2023) that brings a strong standing with suppliers, and its loyalty membership program, Kroger’s competitive standing appears enviable at first glance.