UBS’ Top Quant Stocks In AI, IT, Healthcare & Other Sectors: Top 33 Stocks In All Sectors

23. Kroger Co (NYSE:KR)

Number of Hedge Fund Investors In Q2 2024: 46

Sector: Consumer Staples

Kroger Co (NYSE:KR) is a diversified American retailer that sells groceries, self-branded food products, and drugs all over the United States. With 2,750 outlets all over the US, it is one of the biggest retailers of its kind and benefits from deep market penetration and high volumes necessary to drive margins in the consumer goods industry. While its scale offers Kroger Co (NYSE:KR) unique advantages when it comes to competing in the grocery retail industry, it also places the firm at risk from disruption by eCommerce stores. Consequently, digital sales are a key driver of its narrative. This was evident following Kroger Co (NYSE:KR)’s second-quarter earnings when the firm beat EPS estimates of $0.91 by posting $0.93, but the beat was driven by its digital business which grew sales by 11% annually. The stock was up 7.2% following the earnings and might see some turbulence down the road if Kroger Co (NYSE:KR)’s merger with Albertsons faces regulatory hurdles.

Kroger Co (NYSE:KR)’s management commented on the deal during the Q2 2024 earnings call:

“Before I open it up for Q&A, I’d like to speak briefly about our pending merger with Albertsons. First, I would like to express my appreciation for our associates and their incredible commitment. It has been a long journey, and our associates have done an excellent job serving customers and running the day-to-day operations of our business, while also preparing for the merger. Integration work continues to progress, and our teams are laser-focused on ensuring a seamless transition for our customers and associates from day one. It is exciting to see the complementary strengths of both Kroger and Albertsons organizations, and we look forward to combining these strengths to provide customers an even better experience.

As part of our merger preparation, Kroger recently launched an exchange offering for Albertsons notes, contingent upon the closing of the merger as well as a successful new offering for $10.5 billion of senior unsecured notes with the net proceeds expected to fund a portion of the cash consideration for the proposed merger. A portion of the proceeds of this offering is subject to a special mandatory redemption if the merger does not close. As the preliminary injunction trial with the FTC nears its conclusion, we are confident in the facts and the strengths of our position. The retail industry continues to be more competitive, and we know how our customers shop. Every day, they are making decisions on where to eat and where to buy their groceries.”