Entering text into the input field will update the search result below

Kroger: How The COVID-19 Crisis Could Provide Long-Term Tailwinds

Jun. 28, 2020 9:33 PM ETThe Kroger Co. (KR)35 Comments


  • Despite impressive first-quarter results, the stock barely budged.
  • Kroger’s e commerce sales nearly doubled.
  • Changes in consumer behavior spurred by the COVID-19 crisis could result in long-term growth.

An investor in Kroger (NYSE:KR) cannot be pleased with the results over the last five years. The stock tallied a 12% loss during that time period versus a 47% gain in the S&P. On the other hand, a ten-year timetable has KR stock up nearly 217% versus a 186% gain for the S&P.

So, is a potential investor more likely to own the Kroger of the last 5 years or the company that beat the market? The answer may lie in last quarters’ earnings and recent initiatives launched by Kroger.

Last week, Kroger reported double-digit increases in revenues and sales. Looking at the resulting price action, you would think the company experienced a revenue miss.

Investors know grocers operate in a competitive, low-margin business. With Amazon (AMZN), Walmart (WMT) and Target (TGT) as rivals, it’s easy to believe Kroger is unlikely to experience outsized future returns.

I see Kroger as a dynamic company. I believe the pandemic will provide long-term tailwinds, and I contend the company’s initiatives are bearing fruit.

Recent Developments

Even considering the COVID-19-induced surge in sales, Kroger’s Q1 results were impressive. EPS increased YoY to $1.52 from $0.95, same-store sales (excluding fuel) grew by 19%, and digital sales climbed by 92%.

Kroger also increased gross margins by 2.1% YoY and reported a growth of adjusted operating profit from $957 million to $1.45 billion.

Compare the results tallied by Walmart and Costco (COST). The former company reported a 10% increase in comps and a 74% surge in ecommerce sales. Costco’s comparable sales grew by 9.2% in the US, while online sales were up by roughly 108% (note, the companies’ reporting dates differ).

The Digital Business And Online Orders

According to research provided by Invesp, digital grocery sales should double from 2018 to 2023, to $60 billion.

Future Market

This article was written by

Chuck Walston profile picture
Maximize your income with the world’s highest-quality dividend investments

As of 12/08/2022 I am rated among the top 2.8% of authors in terms of overall results. This is according to TipRanks, which provides a 63% success rate and an average 17.3% annual return for my articles. (I update this score on at least a quarterly basis for readers.)

I could be characterized as a safety first investor.  My primary focus is on dividend bearing stocks.  I seek a degree of safety in my investments by concentrating on companies with competitive advantages and strong balance sheets. 

I am a also value / buy and hold investor.   Since I require a discount in the share valuations of my investments, my  ratings are generally very conservative.  My valuation requirements, combined with the high quality companies that I often highlight mean many stocks I rate as a hold  perform well over the long term.   Readers should consider this when weighing my buy/hold/sell recommendations.  

I am a retail investor, with no formal training in investing.  

I am a graduate of the U.S Army Ranger school and a former member of the 1st Ranger Battalion and The Old Guard (U.S Army Honor Guard.) I am a retired law enforcement officer. I have approximately 20 years experience as a retail investor. 

Best of luck in your investments, Chuck

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I have no formal training in investing. All articles are my personal perspective on a given prospective investment and should not be considered as investment advice. Due diligence should be exercised, and readers should engage in additional research and analysis before making their own investment decisions. All relevant risks are not covered in this article. Readers should consider their own unique investment profile and contemplate seeking advice from an investment professional before making an investment decision.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.