Kroger (NYSE:KR) is fast emerging as one of the major beneficiaries of the coronavirus pandemic. The largest grocery chain in the U.S. not only managed to evade the broad selloff in February and March 2020 but emerged as an outperformer in those uncertain times. Today, the stock is up 16.35% YTD (year-to-date).
Pandemic or not, people need food, personal care products, and beverages. The stay-at-home orders have caused people to forego going out and instead eat at home. Although there was much stockpiling of food items in the first quarter, consumer shopping patterns are expected to come back to normal levels. But with the global COVID-19 pandemic showing no signs of abating at least in the next few months, the new normal is expected to be different than pre-COVID-19 levels. In this backdrop, Kroger is definitely a solid coronavirus-resilient pick in 2020.
Kroger stands to benefit in the recessionary environment in 2020
It has been definitely challenging for the grocery chain Kroger to manage the food supply chain while rewarding and ensuring the safety of its employees. However, two broad trends continue to favour the stock. In March 2020, PCE (personal consumption expenditures) declined by 7.5% sequentially. The rate of unemployment is 14.7% in the U.S., the highest since the depression. The world is now bracing itself for a recession even though governments across the world have been pumping trillions of dollars as stimulus and slashing interest rates. Historically, consumer staple stocks perform better during times of declining PCE and bear markets on a relative basis.
Although it is too early to conclude whether this trend is permanent, the change in consumer eating habits is here to stay until the end of the pandemic. According to a survey conducted by Gordon Haskett, although U.S. consumers may have peaked on the fear
