Kroger has offsets to inflation pressures – Northcoast Research

By Sam Boughedda

Northcoast Research upgraded Kroger (NYSE:) shares to Buy with a $60 per share price target in a note on Monday, with analysts stating that Kroger’s medium-term outlook should show how it will navigate the economic uncertainties.

They explained that after reaching $63 per share last April, Kroger has since fallen into the mid-$40 range “despite exceeding earnings expectations throughout the second semester of fiscal 2022.”

“Some value was surrendered following the company’s announcement that it planned to acquire Albertsons,” said the analysts. “However, that transaction is far enough into the future, such that we think investors should focus on the value of the Kroger stock on its own merits as demonstrated in the recently reported .”

The analysts said that while there are inflation headwinds, Kroger has offsets for these that consumers appreciate, such as discounted fuel for loyal members and an “extremely well-developed own-brands program.”

“We believe that Kroger’s ongoing momentum in sales growth, customer loyalty, e-commerce, cost reductions, and operational efficiency will continue to allow it to deal with a competitive environment while providing opportunities for modest margin expansion,” they wrote.