Supermarket chain Kroger
What analysts say:
- Buy, sell, or waffle? Nothing screams success like success, and it also attracts analysts. We've got two more covering Kroger this quarter, and nine of the 16 now say buy. Six rate the stock a hold, and one says sell.
- Revenues. The cash registers are expected to ring 14% higher this quarter, with revenues coming in at $16.79 billion. That's a lot of Cheerios.
- Earnings. Profits are expected to track revenue growth and post at $0.45 per share, or 15% higher than last year.
What management says:
Organic foods have been driving sales lately, and grocers like Kroger may be starting to eat away at the traditional organic produce markets like Whole Foods Markets
Whole Foods saw a 7% increase in comps -- that's sales at stores open for at least a year -- last quarter, which is obviously better than the 5% growth Kroger is forecasting, but less than the 13% it had been achieving. The more Kroger and Safeway
What management does:
Supermarkets in general are a thin-margin business, as Kroger's chart below shows. It's been performing well against the competition, even though it must contend with the ever-present Wal-Mart
06/05 |
09/05 |
12/05 |
03/06 |
06/06 |
|
---|---|---|---|---|---|
Gross |
23.7% |
23.7% |
23.5% |
23.3% |
23.3% |
Operating |
3.2% |
3.4% |
3.4% |
3.3% |
3.4% |
Net |
0.0% |
1.6% |
1.6% |
1.6% |
1.6% |
One Fool says:
While I've never shopped at a Kroger supermarket (I have been in their Littman jewelry stores), I was recently treated to the experience of eating at Whole Foods. Quite different from my expectations, but what translates well into a shopping experience doesn't necessarily mean the same is true operationally.
There are synergies in Whole Foods' Wild Oats acquisition that will boost earnings in the future, but Kroger has the opportunity to eat into that market share. As the nation's largest grocer, it can continue to offer greater organic selections that should boost its own earnings without providing any of the drag a merger would cause. Still, it continues to trade at some of its highest levels, which makes it pricey for a supermarket chain.
Related Foolishness:
- Kroger Profits, Naturally
- Foolish Forecast: Kroger's Not Croaking
- Brown Is Back in the Bag
- Foolish Fundamentals: Margins
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Fool contributor Rich Duprey owns shares of Wal-Mart, but does not own any of the other stocks mentioned in this article. You can see his holdings here. Wal-Mart is an Inside Value recommendation. The Motley Fool has a disclosure policy.