9. The Kroger Co. (NYSE:KR)
Number of Hedge Fund Holders: 46
The Kroger Co. (NYSE:KR), commonly known as Kroger, is a prominent American retail corporation operating a vast network of supermarkets and multi-department stores across 35 states, totaling over 2,700 locations. This extensive footprint secures its status as one of the world’s leading food retailers.
Jefferies reaffirmed its Hold rating on The Kroger Co. (NYSE:KR) with an unchanged price target of $53.00. This decision precedes the supermarket chain’s upcoming first-quarter earnings report on June 20th. Analysts are closely monitoring consumer behavior trends amid economic pressures, particularly their potential impact on Kroger’s performance. Observations indicate a stabilization in demand, driven by consumer preferences for value, including a focus on lower price points, shifts between shopping channels, and a tendency to opt for more economical choices. Similar patterns seen in the broader retail and manufacturing sectors suggest these dynamics are influencing Kroger as well.
Meanwhile, The Kroger Co. (NYSE:KR) continues to make strategic strides to strengthen its market position. The company has issued an earnings per share guidance of $4.40 for 2024 at the midpoint, with potential to exceed $5 by 2025, contingent upon factors like EBIT growth resumption and effective share repurchase execution. Revenue projections indicate a steady path, targeting $150.039 billion for 2024.
In the first quarter of 2024, Warren Buffett’s Berkshire Hathaway held 50 million shares of The Kroger Co. (NYSE:KR), with a total value exceeding $2.85 billion, representing 0.86% of the firm’s portfolio.
In its fourth quarter 2023 investor letter, Oakmark Global Fund stated the following regarding The Kroger Co. (NYSE:KR):
“The Kroger Co. (NYSE:KR) (U.S.) is the second-largest grocery retailer in America, behind only Walmart. Although the grocery industry is highly competitive, Kroger’s scale advantages allow it to offer a more compelling value proposition than smaller peers and earn higher returns on capital. In recent years, the market has assigned Kroger a lower multiple due to concerns that e-commerce would disrupt traditional brick-and-mortar grocery businesses. However, we believe Kroger’s performance through the pandemic highlighted that its store footprint, distribution infrastructure, technology investments and strong brand all position the company well for a world with higher online grocery adoption. The stock trades for just 10x our estimate of next year’s EPS, which we believe is attractive given Kroger’s competitive positioning and earnings growth outlook. The pending merger with Albertsons could accelerate the company’s earnings growth and produce additional scale advantages. If the merger is not approved, the company will have the capacity to return over 25% of its market cap to shareholders.”
