Opinions John O'Connell, CFA
Kroger Co.KRDON'T BUYNov 30, 2015
John O'Connell, CFAStock price when the opinion was issued
As of Jun 08, 2026. Market Open.
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EPS of 93c beat estimates of 91c; revenue of $33.91B marginally missed estimates. Kroger appears well-positioned to navigate an increasingly complex consumer-spending environment. Mainstream households led sales growth in fiscal 2Q amid loyal households and increased visits, a trend that could extend in 3Q, aiding same-store sales gains. Volume expansion appears to be slowly improving, buoyed by strategic promotions. Private-label product sales growth outpaced that of national brands, helping bolster gross margin, which the company believes will expand slightly for the full year, yet might be flat in 3Q. Kroger indicated adjusted EPS in 3Q could be slightly stronger than in 4Q. The company noted that e-commerce profitability is improving, boosted by more orders for its delivery network and store pickup. KR lowered its CEO pay by 18% recently, and it does vary on performance. He needs to get by on $15.7 million total compensation this year. Excessive, but at least it varies with performance, and we have seen much worse.
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A lot of investors have been hanging out in these highly defensive names, which are trading at pretty big PE multiples. The whole business is getting very competitive. Consumers are changing their shopping habits, and grocers are going to have to make increasing efforts to remain competitive. You also have to worry about food price inflation. There are better areas to be invested in.