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The Kroger Co KR

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Morningstar’s Analysis

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1-Star Price

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5-Star Price

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Economic Moat

PREMIUM

Stewardship

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Dramatic First-Quarter Sales Surge for Kroger Does Not Alter Our Long-Term View; Shares Trade Fairly

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

Our $30 fair value estimate for narrow-moat Kroger should not change significantly after exceptional first-quarter sales growth that suggests it is on track to meet our full-year targets. Our view that the pandemic will accelerate grocery digitization also remains, as does our long-term forecast of low-single-digit top-line growth against 4% adjusted EBITDA margins on average over the next decade.

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Company Profile

Business Description

Kroger is the leading American grocer, with 2,757 supermarkets operating under several banners throughout the country as of the end of fiscal 2019. Around 82% of stores have pharmacies, while over half also sell fuel. The company also operated more than 300 fine jewelry stores at the end of fiscal 2019. Kroger features a leading private-label offering and manufactures around a third of its own-brand units (and 42% of its grocery own-label assortment) itself, in 35 food production plants nationwide. Kroger is a top-two grocer in 90% of its major markets (as of late 2019, according to Planet Retail and Edge Retail Insight data cited by the company). Virtually all of Kroger's sales come from the United States.

Contact
1014 Vine Street
Cincinnati, OH, 45202
T +1 513 762-4000
Sector Consumer Defensive
Industry Grocery Stores
Most Recent Earnings Apr 30, 2020
Fiscal Year End Feb 1, 2021
Stock Type Slow Growth
Employees 435,000

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