The Kroger Co. (KR) | Investment Case

1. Company Snapshot

1.a. Company Description

The Kroger Co. operates as a retailer in the United States.The company operates combination food and drug stores, multi-department stores, marketplace stores, and price impact warehouses.Its combination food and drug stores offer natural food and organic sections, pharmacies, general merchandise, pet centers, fresh seafood, and organic produce; and multi-department stores provide apparel, home fashion and furnishings, outdoor living, electronics, automotive products, and toys.

The company's marketplace stores offer full-service grocery, pharmacy, health and beauty care, and perishable goods, as well as general merchandise, including apparel, home goods, and toys; and price impact warehouse stores provide grocery, and health and beauty care items, as well as meat, dairy, baked goods, and fresh produce items.It also manufactures and processes food products for sale in its supermarkets and online; and sells fuel through 1,613 fuel centers.As of January 29, 2022, the company operated 2,726 supermarkets under various banner names in 35 states and the District of Columbia.

The Kroger Co. was founded in 1883 and is based in Cincinnati, Ohio.

Show Full description

1.b. Last Insights on KR

Breaking News: The Kroger Co. reported its third quarter 2025 results, posting an operating loss of $1,541 million and EPS of -$2.02. The company recorded $2.6 billion in impairment and related charges for its automated fulfillment network. Adjusted FIFO Operating Profit was $1,089 million and Adjusted EPS was $1.05. Identical sales without fuel increased 2.6% and eCommerce sales rose 17%. Kroger updated its guidance for 2025. Analysts at various firms have recommended a hold for Kroger.

1.c. Company Highlights

Last Price	62.71
Change Percentage	-0.68%
Open	63
Previous Close	63.14
Market Cap ( Millions)	41557
Volume	8058578
Year High	74.9
Year Low	57.69
M A 50	66.38
M A 200	68.1

FCF Yield	5.32%
Dividend Yield	2.14%
ROE	32.54%
Debt / Equity	357.99%
Net Debt / EBIDTA	314.53%
Price To Book	5.9
Price Earnings Ratio	15.22
Price To FCF	18.79
Price To sales	0.28
EV / EBITDA	8.38

2. Kroger's Strong Q2 Results Driven by E-commerce and Pricing Strategy

The Kroger Co. reported a strong second quarter 2025, with adjusted EPS reaching $1.04, exceeding expectations of $0.994. Identical sales without fuel grew 3.4%, marking the sixth consecutive quarter of improvement. Gross margin rate increased 39 basis points, excluding rent, depreciation, and amortization, fuel, and adjustment items, primarily due to lower supply chain costs, reduced shrink, and the sale of Kroger Specialty Pharmacy. The company's adjusted FIFO operating profit reached $1.1 billion, reflecting a 12% growth year-over-year.

Publication Date: Sep -12

                                    📋 Highlights
                                    Strong E-commerce Growth::
                                                E-commerce sales surged 16%, driven by delivery expansion (97% of stores offer 2-hour delivery), with delivery sales surpassing pickup for the first time.
Pharmacy & Fresh Sales Momentum::
                                                Pharmacy, e-commerce, and fresh categories led sales growth, while identical sales (excluding fuel) rose 3.4%, marking six straight quarters of improvement.
Margin Expansion::
                                                Gross margin rate increased 39 bps (excluding adjustments) due to lower supply chain costs and reduced shrink, alongside a 5 bps decline in operating G&A expenses.
Share Repurchase Commitment::
                                                Kroger plans to complete a $5 billion share buyback in 2025 and resume purchases under the remaining $2.5 billion authorization, reflecting capital return priorities.
AI & Cost Efficiency Focus::
                                                AI investments reduced shrink and improved inventory management, with plans to expand into scheduling and personalization, while sourcing initiatives target significant cost savings.

                                

Operational Highlights

The company's e-commerce sales grew 16%, led by delivery, with 97% of stores offering delivery in under two hours. Pharmacy, e-commerce, and fresh categories led sales growth, while grocery volume improved, aided by strategic price investments and a focus on everyday low prices. The company is focused on simplifying its organization, improving the customer experience, and investing in growth, including opening new stores and accelerating AI initiatives.

Guidance and Outlook

Kroger raised its identical sales (excluding fuel) guidance to a range of 2.7% to 3.4% for the full year, up from its previous range. The company also increased its adjusted FIFO net operating profit and earnings per diluted share guidance. Kroger expects to complete a $5 billion share repurchase program in 2025 and resume open market share repurchases under the remaining $2.5 billion authorization.

Valuation and Financial Metrics

With a P/E Ratio of 17.52, P/B Ratio of 5.08, and ROE of 24.25%, Kroger's valuation multiples suggest a relatively stable and profitable business. The company's Dividend Yield stands at 1.91%, indicating a commitment to returning capital to shareholders. As Kroger continues to navigate the competitive retail landscape, its focus on e-commerce, pricing strategy, and cost efficiency will be crucial in driving future growth.

E-commerce and AI Initiatives

Kroger is leveraging AI to drive improvements across various areas, including reducing shrink and improving inventory management. The company is also exploring potential changes to its e-commerce strategy, with a review underway. While specific financial details or a timeline for profitability have not been disclosed, Kroger confirmed that the estimated profit impact from the review could be in the "several hundred million" range.

3. NewsRoom

The Kroger Co (KR) Q3 2025 Earnings Call Highlights: Strong E-commerce Growth and Strategic Store Expansion

Dec -04

Source: gurufocus.com

Dow Jones Today: Major Stock Indexes Little Changed; Weekly Jobless Claims Unexpectedly Fall; Inflation Data on Tap Tomorrow

Dec -04

Source: investopedia.com

Gulf Coast Commercial Group, Nexus Real Estate Co. Partner to Develop Kroger-Anchored Shopping Center in Fate

Dec -04

Source: businesswire.com

Kroger Reports Mixed Q3 Results with Narrower EPS Beat and Adjusted Guidance

Dec -04

Source: gurufocus.com

Top Stock Movers Now: Meta, Dollar General, Kroger, and More

Dec -04

Source: investopedia.com

The Kroger Co. (KR) Q3 2026 Earnings Call Transcript

Dec -04

Source: seekingalpha.com

Kroger: This Time I Disagree With The Strategy (Rating Downgrade)

Dec -04

Source: seekingalpha.com

Why Kroger Stock Dropped Today

Dec -04

Source: fool.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.00%)

6. Segments

Retail Operations

Expected Growth: 2.0%

Kroger's Retail Operations growth is driven by strategic investments in digital transformation, expansion of online shopping and delivery services, and enhancement of store formats to improve customer experience. Additionally, focus on private label brands, loyalty programs, and cost-saving initiatives contribute to the 2.0 growth level.

7. Detailed Products

Fresh Meat and Produce

Fresh meat, seafood, fruits, and vegetables sold in-store

Dairy and Bakery

Milk, cheese, bread, and baked goods sold in-store

Canned and Packaged Goods

Canned goods, pasta, rice, and packaged snacks sold in-store

Pharmacy Services

Pharmacy services, including vaccinations, health clinics, and medication management

Kroger Fuel Centers

Gas stations and convenience stores located near Kroger stores

Online Grocery Delivery

Online ordering and delivery of groceries from Kroger stores

Kroger Marketplace

Convenience stores offering a variety of products, including food, beverages, and household essentials

Private Label Brands

Kroger's own branded products, including Simple Truth, Private Selection, and more

8. The Kroger Co.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The Kroger Co. operates in the grocery retail industry, where there are some substitutes such as online grocery shopping, meal kit delivery services, and discount stores. However, Kroger's strong logistics and distribution network, as well as its loyalty program, make it difficult for customers to switch to substitutes.

Bargaining Power Of Customers

Kroger's customers are fragmented and have limited bargaining power. The company has a large customer base and a strong loyalty program, which reduces the bargaining power of individual customers.

Bargaining Power Of Suppliers

Kroger's suppliers, such as food and beverage manufacturers, have some bargaining power due to the large volume of products they supply. However, Kroger's significant market share and purchasing volume also give it negotiating power.

Threat Of New Entrants

The grocery retail industry has high barriers to entry, including significant capital requirements, complex logistics and distribution networks, and established brand loyalty. This makes it difficult for new entrants to compete with Kroger.

Intensity Of Rivalry

The grocery retail industry is highly competitive, with many established players such as Walmart, Target, and Safeway. Kroger faces intense competition on price, product offerings, and promotional activities, which drives rivalry among competitors.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	75.17%
Debt Cost	4.28%
Equity Weight	24.83%
Equity Cost	7.46%
WACC	5.07%
Leverage	302.74%

11. Quality Control: The Kroger Co. passed 4 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Altria

A-Score: 8.0/10

Value: 6.8

Growth: 5.8

Quality: 7.5

Yield: 10.0

Momentum: 8.5

Volatility: 9.7

1-Year Total Return ->

Village Super Market

A-Score: 6.7/10

Value: 7.4

Growth: 4.9

Quality: 4.7

Yield: 7.0

Momentum: 8.5

Volatility: 7.7

1-Year Total Return ->

Kroger

A-Score: 6.0/10

Value: 5.7

Growth: 5.6

Quality: 4.0

Yield: 4.0

Momentum: 8.0

Volatility: 9.0

1-Year Total Return ->

Kraft Heinz

A-Score: 6.0/10

Value: 8.7

Growth: 3.8

Quality: 4.4

Yield: 9.0

Momentum: 1.0

Volatility: 9.0

1-Year Total Return ->

Natural Grocers

A-Score: 5.7/10

Value: 4.8

Growth: 6.6

Quality: 4.7

Yield: 6.0

Momentum: 9.0

Volatility: 3.0

1-Year Total Return ->

Costco Wholesale

A-Score: 5.4/10

Value: 1.4

Growth: 7.0

Quality: 5.7

Yield: 2.0

Momentum: 6.0

Volatility: 10.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

0.20%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

5.07%

The Kroger Co. - US5010441013

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on KR

1.c. Company Highlights

Strong Momentum

Medium Volatility

Average Yield

Earnings Beats

Average Quality

Stable Momentum

Less Volatile

Average Growth

Revenues Miss

Lower Quality

2. Kroger's Strong Q2 Results Driven by E-commerce and Pricing Strategy

Operational Highlights

Guidance and Outlook

Valuation and Financial Metrics

E-commerce and AI Initiatives

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.00%)

6. Segments

Retail Operations

Expected Growth: 2.0%

7. Detailed Products

Fresh Meat and Produce

Dairy and Bakery

Canned and Packaged Goods

Pharmacy Services

Kroger Fuel Centers

Online Grocery Delivery

Kroger Marketplace

Private Label Brands

8. The Kroger Co.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: The Kroger Co. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

62.71$

Current Price

62.71$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA