The Kroger Co. (KR), The Fresh Market Inc (TFM): Why You Should Still Consider These Grocery Stores

Although its headquarters are in North Carolina, store expansion of late has largely been focused on the Washington, D.C./ Virginia region. It has also sold some locations, while remodeling and replacing less profitable stores. In all, it is realizing sales growth, while maintaining the operating margin.

The stock has reached an all-time apex, probably a reflection of its positive comps, while it revitalizes the store base. Accordingly, the likelihood of a sale has dimmed, and Harris Teeter Supermarkets Inc (NYSE:HTSI) shares are also best viewed as a growth investment (Forward P/E 18.1x, fiscal 2013 (September) earnings per share estimated at $2.42).

A 2013 IPO attracting buyers

Shares of Fairway Group Holdings Corp (NASDAQ:FWM) have gained further price momentum since I listed them as one of my favorite IPOs of 2013 in a recent blog. Currently operating only a handful of stores in the New York-metropolitan area, management believes the company can expand throughout the Northeast, possibly to around 300 locations, eventually.

As the store base expands, and the distribution system is in place, margins ought to widen substantially. It is likely that the concept, convenient and high-quality, similar to The Fresh Market Inc (NASDAQ:TFM), will take hold in the region to a greater extent.

Fairway Group Holdings Corp (NASDAQ:FWM) shares are an investment in that operating model and the belief that it will attract a broader consumer contingency, as health food and convenience trends continue to gain acceptance. It is a good selection that offers considerable price upside, particularly if the company can expand profitably.

Summary

Supermarkets are historically some of the most consistent and favorably yielding stocks. Currently, as their prices have climbed to new heights, the investment community is apparently emphasizing their potential for growth. No longer priced as takeout candidates, the companies should be coveted as cash-strong entities.

The article Why You Should Still Consider These Grocery Stores originally appeared on Fool.com is written by Damon Churchwell.

Damon Churchwell has no position in any stocks mentioned. The Motley Fool recommends The Fresh Market. Damon is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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