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The Kroger Co KR

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Kroger Ends Fiscal 2020 on a Strong Note, but Normalization as Pandemic Ebbs Should Prove Volatile

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

Narrow-moat Kroger’s solid fourth-quarter results, combined with the time value of money, should cause us to lift our $33 per share fair value estimate by a low- to mid-single-digit percentage. Fiscal 2020 was an exceptional year as Kroger benefited from Americans’ pandemic-induced turn homeward, but the nature of postcrisis normalization remains uncertain. We suggest investors await a larger margin of safety despite our expectations of 2%-3% top-line growth and operating margins long term.

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Company Profile

Business Description

Kroger is the leading American grocer, with 2,742 supermarkets operating under several banners throughout the country as of the end of fiscal 2020. Around 82% of stores have pharmacies, while over half also sell fuel. The company also operated more than 150 fine jewelry stores at the end of fiscal 2020. Kroger features a leading private-label offering and manufactures around 30% of its own-brand units (and 40% of its grocery own-label assortment) itself, in 35 food production plants nationwide. Kroger is a top-two grocer in most of its major markets (as of early 2021, according to company data). Virtually all of Kroger's sales come from the United States.

1014 Vine Street
Cincinnati, OH, 45202
T +1 513 762-4000
Sector Consumer Defensive
Industry Grocery Stores
Most Recent Earnings Jan 31, 2021
Fiscal Year End Jan 29, 2022
Stock Type Classic Growth
Employees 465,000