2. The Kroger Co. (NYSE:KR)
Number of Hedge Fund Holders: 46
The Kroger Co. (NYSE:KR) is the largest supermarket chain in the U.S., operating an extensive network of grocery stores, pharmacies, and fuel centers. Offering over 1,500 unique items, Simple Truth, a private-label brand, provides products free from over 101 artificial colors, flavors, preservatives, and sweeteners. Simple Truth Certified Organic products are produced by USDA-accredited organic growers, free from synthetic fertilizers and genetic engineering.
In Q1 2024, The Kroger Co. (NYSE:KR) reported a 0.5% increase in identical sales without fuel, driven by higher household engagement and visits. The company reported net sales of $45.3 billion, compared to the same quarter last year. Digital sales grew by over 8%, reflecting successful investment in its digital infrastructure.
Gross margin was 22.4%, slightly down from last year due to lower pharmacy margins and increased price investments, but offset by a favorable product mix. A LIFO charge of $41 million, down from $99 million last year, indicated improved inflation expectations. The company reported an adjusted EPS of $1.43, surpassing analysts’ expectations of $1.35.
The Kroger Co. (NYSE:KR)’s strong free cash flow positions it well for growth, especially with merger preparations. The anticipated merger with Albertsons and the resulting synergies, alongside digital enhancements, suggest promising upside potential for the stock. By the end of the quarter, the company’s net debt to adjusted EBITDA ratio stood at 1.25, well below the target range of 2.3 to 2.5.
However, the share price saw a dip of 3.5% in the last month but surged 15.15% on a YTD basis. The 1-month adverse price movement could be attributed to the lawsuit filed by the Federal Trade Commission (FTC) to block the merger on February 26, 2024.
As of Q2 2024, 46 hedge funds, holding a combined investment of $4.1 billion, remained bullish on the stock, as per Insider Monkey’s database. The Kroger Co. (NYSE:KR) has made it to our list of Best Organic Food and Farming Stocks to Buy.
