Kroger Looks Like A Sell
Weighing Machine • 34 Comments
Weighing Machine • 34 Comments
Kroger: Cleaning Up On Aisle 1 ... And 2, 3, 4 ...
DAG Investments • 19 Comments
DAG Investments • 19 Comments
Wed, Oct. 19, 10:59 AM
- Just a negotiating tactic? Height Securities suggests that Kroger (KR +0.5%) may have intentionally leaked that they were close to stepping away from plans to buy Walgreens and Rite Aid (RAD -5.3%) stores.
- The investment firm speculates that Kroger is still in the mix while it waits for a sweeter offer from Walgreen Boots Alliance (WBA -0.8%).
- Previously: NY Post: Kroger may not buy Walgreens-Rite Aid stores (Oct. 19)
Wed, Oct. 19, 10:14 AM
- Rite Aid (RAD -4.5%) tumbles in early trading after the NY Post reports that Kroger (KR +0.3%) may pass on buying the 650 stores that Walgreens (WBA -1.2%) and RAD would need to sell to gain regulatory approval for their planned merger.
- KR may decide not to buy because the Federal Trade Commission, now a year into its merger review, recently told the company that the stores could not be purchased and closed, with the operations moved inside the grocery stores, according to the report.
- A WBA-RAD merger would create the biggest U.S. drug chain, and the FTC could sue to block the deal without a solution to the stores, but the report quotes a source as saying that both the FTC and WAG remain motivated to find a remedy.
Thu, Oct. 13, 9:11 AM
- As the new threat of Amazon tiptoes into the $575B convenience store industry, GasBuddy puts it into perspective.
- CEO Walt Doyle tells Seeking Alpha that 80% of U.S convenience store sell gasoline. Those 124,374 stores have a clear advantage over a brick-and-mortar play by Amazon.
- "Gas station convenience stores have evolved to providing more amenities and products like groceries and food, to fit the growing needs of the consumer," he notes.
- Major c-store operators in the U.S. include Kroger (NYSE:KR), Casey's General Stores (NASDAQ:CASY), CST Brands (NYSE:CST), Alimentation Couche-Tard (OTCPK:ANCUF), Murphy USA (NYSE:MUSA), Marathon Petroleum (NYSE:MPC), 7-Eleven, Kum & Go, QuikTrip and Sunoco (NYSE:SUN).
- Previously: Amazon threat lingers over C-stores, drug stores and grocery chains (Oct. 11)
Tue, Oct. 11, 1:35 PM
- A large part of the retail sector will need to keep a watchful eye on Project Como at Amazon. The plan from the Seattle company to sell perishables out of small brick-and-mortar stores could be a disrupter if it were to be built out at scale.
- Convenience store chains such as Casey's General Stores (NASDAQ:CASY), Murphy's USA (NYSE:MUSA), and CST Brands (NYSE:CST) are already being targeted by 7-Eleven's aggressive expansion goals in the U.S. A store roll-out by Amazon could also impact drug store chains Walgreens (NASDAQ:WBA) and Rite Aid (NYSE:RAD) - as well as apply pricing pressure to the sensitive grocery store sector (KR, SVU, SPTN, IMKTA).
- Previously: 7-Eleven eyes huge expansion in U.S. (Sept. 22)
- Previously: Amazon considered to be planning convenience stores, curbside pickup locations for grocery products (Oct. 11)
Sat, Oct. 8, 9:09 AM
- Retailers want the U.S. election over and quick. The negative tone has created a degree of uncertainty with consumers that has impacted spending and traffic patterns, according to a host of top execs.
- "There is just great uncertainty as to what is going to happen in the U.S. in particular as a result of the outcome of the election," noted Yum Brands (NYSE:YUM) CEO Greg Creed recently. "People may be hunkering down a little bit," he added.
- Expect the topic to be raised on a large number of Q3 earnings calls over the next month to explain away revenue misses.
- It's not an excuse that everyone is buying into. Retail Metrics president Ken Perkins doubts that daily shopping needs are cut short by election fascination and notes consumer confidence is measuring high. Then there's Amazon (NASDAQ:AMZN) which seems to be rolling right along without any Clinton-Trump fatigue.
- Beyond the election wildcard, two underestimated factors impacting some retailers in a more concrete way are the lower level of SNAP (food stamps) benefits being paid out by the government and the elevated cost of health care. There is also the massive challenge with a millennial generation that shuns chains. Just ask anyone in the restaurant sector (NASDAQ:BITE).
- Add it all up and it makes for a challenging period for a mix of retailers that includes Dollar General (NYSE:DG), Dollar Tree (NASDAQ:DLTR), Fred's (NASDAQ:FRED), Ross Stores (NASDAQ:ROST), Wal-Mart (NYSE:WMT), Target (NYSE:TGT), Staples (NASDAQ:SPLS), McDonald's (NYSE:MCD), Popeyes Louisiana Kitchen (NASDAQ:PLKI), Wendy's (NYSE:WEN), Supervalu (NYSE:SVU), Kroger (NYSE:KR), SIgnet (NYSE:SIG), TJX Companies (NYSE:TJX), and Casey's General Stores (NASDAQ:CASY).
- Retail ETFs: XLY, XRT, VCR, RTH, RETL, IYK, FXD, IYC, FDIS, SCC, RCD, UCC, PMR, UGE, SZK, CNDF, FTXD, JHMC.
Fri, Oct. 7, 7:41 AM
- Citi analyst Alvin Concepcion says it would be "uncharacteristic" for Kroger (NYSE:KR) to make a run at Whole Foods Market.
- He notes that Kroger would have to leverage up to a 3.5X debt/EBITDA ratio to pull off the pricey deal.
- Shares of both Kroger and Whole Foods rose yesterday amid M&A chatter.
- Conception keeps a Buy rating and $39 price target on Kroger.
Thu, Oct. 6, 11:08 AM
- M&A chatter is running up and down the grocery store sector.
- Kroger (KR +1.1%), Sprouts Farmers Market (SFM +2.1%), and Whole Foods Market (WFM +2%) are all way ahead of broad market averages.
- Grocery store names have been sensitive to buyout talk ever since The Fresh Market was taken private at a huge premium.
Tue, Sep. 27, 1:31 PM
- Food prices are in one of their longest period of deflation since 1960 in a devastating trend for grocery store chains.
- USDA data shows nine straight months of year-over-year declines, including the sharpest of the bunch in August when prices peeled back 1.9%.
- While lower commodity costs are in play in many key categories (milk, eggs, meat), it's the relentless pressure from Wal-Mart, Aldi's, Dollar General, and even Amazon to increase traffic that's the real margin pincher.
- "It starts to border on irrational pricing," notes Bloomberg Intelligence analyst Jennifer Bartashus on the development.
- A more detailed look at food prices is available inside the latest CPI report from the Bureau of Labor Statistics.
- Related stocks: KR, SFM, WFM, SVU, WMK, IMKTA, SPTN.
Thu, Sep. 15, 2:25 PM
- Kroger (KR +1.5%) announces an incremental $500M share repurchase program which will supplement the current buyback authorization which still has a balance of $392M as of September 14.
- "Kroger's share repurchase authorization reflects our Board of Directors' confidence in our Customer 1st Strategy and our ability to create value for shareholders," said Rodney McMullen.
- Over the last four quarters, the company says it returned more than $1.5B to shareholders through share buybacks and dividends combined.
- Previously: Kroger declares $0.12 dividend (Sept. 15)Source: Press Release
Thu, Sep. 15, 1:58 PM
Thu, Sep. 15, 9:02 AM
- Retail sales fell in August on a month-over-month comparison. The drop wasn't a large surprise considering the onslaught of warnings from the retail sector on store traffic.
- 8 out of the 13 retail categories showed negative growth during the month, with the largest drops recorded in the building material/garden equipment/supplies dealers and miscellaneous store retailers categories. The broad weakness turned on its head the argument that money freed up from a lower level of auto sales would be funneled into other consumer purchases.
- Food services and drinking places showed a +0.9% M/M and +5.8% Y/Y increase in a somewhat surprising result considering the harsh read from Black Box Intelligence on August same-store sales in the restaurant sector BITE. Is the discrepancy an indication that independent restaurants are taking market share?
- On a year-over-year basis, retail sales were up 1.9%. As expected the Amazon-influenced nonstore retailers category did the heavy lifting with an 11% gain. Larger U.S. retail chains (WMT, SPLS, TGT, BBY, DG, COST, KR, WBA, CVS, LOW, HD, SWY) have been raising the issue of pricing pressure in recent conference presentations and guidance updates which could be a nagging sales deflator for the balance of the year.
- Previously: Retail sales disappoint in August (Sept. 15)
- Retail ETFs: XLP, XLY, VDC, XRT, VCR, RTH, RETL, FXG, PBJ, IYK, FXD, IYC, RHS, FDIS, PEJ, FSTA, PSL, SCC, RCD, UCC, PEZ, PMR, PSCC, UGE, PSCD, SZK, BITE, CNDF, CNSF, IBUY, JHMC, JHMS.
Wed, Sep. 14, 2:09 PM
- All eyes in the retail sector will be on the Department of Commerce's report on August sales tomorrow. Economists will be looking for confirmation that the dip into negative territory in July was only transitory. The impact of the recent slowdown in auto sales has been debated, with some analysts saying it's indicative of tight consumer spending, while others feel it reverses the "crowding out" effect of auto purchases.
- The consensus estimate is for a 0.4% M/M gain after backing out the gas and auto categories. The direction of U.S. retail sales will also give Fed watchers their latest talking point.
- If there's a wildcard in the mix, it could be price deflation in the grocery store category (KR, SFM, WFM, SVU, WMK, IMKTA). That pricing weakness could also spill over to affect general merchandise stores (WMT, TGT), drug store chains (WBA, RAD), and even nip at chains like Casey's General Stores (NASDAQ:CASY) and CST Brands (NYSE:CST).
- Retail ETFs: XLY, XRT, VCR, RTH, RETL, IYK, FXD, IYC, FDIS, SCC, RCD, UCC, PMR, UGE, SZK.
Fri, Sep. 9, 8:21 AM
- Kroger (NYSE:KR) reports sales rose 7.3% in Q2 excluding fuel sales.
- Identical supermarket sales increased 1.7% (excl. fuel).
- Operating margin rate dropped 50 bps to 2.5%.
- Adjusted EBITDA grew 5.5% to $5.89M.
- Return on invested capital, on a rolling four quarters basis was 13.95%.
- FY2016 Guidance: Identical supermarket sales: ~+1.4% to +1.8% (excl. fuel); Adjusted diluted EPS: $2.10 to $2.20; Capex: $3.6B to $3.9B.
- KR -0.83% premarket.
Fri, Sep. 9, 7:54 AM
Thu, Sep. 8, 5:30 PM
Thu, Sep. 8, 8:38 AM
- Execs in the grocery sector have painted a bleak picture this week on current sales trends during their presentations at various retail conferences.
- Weak pricing has been a major talking point, while some companies say a lower level of government benefits have also come into play.
- While the down trend was tipped off a few weeks ago when the Commerce Department reported a drop in grocery store sales for July, the new twist is that companies such as Supervalu (NYSE:SVU) and Sprouts Farmers Market (NASDAQ:SFM) are now talking about the pressure extending through the end of the year.
- Related stocks: KR, WFM, SFS, IMKTA, WFM, CASY, VLGEA, WMK, TGT, WMT.