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Kroger Is Not A Post-Pandemic Winner

Apr. 11, 2021 5:47 AM ETThe Kroger Co. (KR)22 Comments


  • KR has rallied hard in recent weeks.
  • But the company is already showing signs it will struggle to replicate 2020 results.
  • The stock is fully valued and Kroger is a pass.
Photo by SeanPavonePhoto/iStock Editorial via Getty Images

It must be said that grocery stores were one of the biggest beneficiaries of the pandemic that shut down much of the world last year. Having been allowed to remain operational due to their essential status, and seeing inflated demand due to

This article was written by

Josh Arnold profile picture

I've been covering financial markets for ten years, using a combination of technical and fundamental analysis to identify potential winners (and losers) early, particularly when it comes to growth stocks.

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.

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Comments (22)

"Kroger has been around since 1883, and while that kind of longevity is to be respected, I’m not sure its business has changed that much since 1883"

This is a very strange comment for a company that has produced a 17% annualized total return (dividends reinvested) over the past 40 years. There aren't many better.
roth1979 profile picture
Seasoned competent management, own the manufacturing for their store branded items, rapidly increasing digital sales, best grocery app I have seen, over 2900 location. Yeah I don't see any competitive advantage.
Agree with most of article. Personal experience with Kroger: they continue to eliminate name brands. Pace is picking up. Trader Joe’s does that with unique niche. Kroger, however, is becoming Aldi - without Aldi’s advantages.
@neds2583 They do not 'eliminate' national brands. The customer makes those choices through what they buy. Kroger has so many advantages over Aldi, I wouldn't know where to begin.
Likrat ha-Tiferet profile picture
@Josh Arnold

its a good article, thank you for this, I "liked it" for you.

my own take on KR is that we are headed for a period of inflation and yield curve control and if we are, then supermarkets are a nice inflation hedge. they collect a boring 2% (or whatever) on the commodity and commodity derivatives they sell, so if commodities go up, their cut goes up; plus, in an inflationary environment, their inventory keeps going up. how fast does Kroger turn over its inventory? thats how many days inflation they will earn. my cream chese is up 10% since March and my favorite tipple just went up 5%.
Article: Kroger Is Not A Post-Pandemic Winner.
Maybe it didn't jump 50% or more after the pandemic but it is up 13.80% in my Portfolio. My other stocks did double or triple KR's gain. Still they have a huge footprint in the grocery sector.
j. hughes profile picture
Before making reservations at a restaurant, or taking in the Masters at your favorite bar, look up the P.1 variant. After Brazil, the most cases per 100,000 can be found in British Columbia, Canada, just north of Washington state. People who have recovered from COVID are catching it and medical professionals, such as my family doctor (he has an MD), are telling me that the vaccines might not be effective against it. It is much more contagious, is infecting people in their 30's and 40's, and has a higher mortality rate than COVID19.
@j. hughes "telling me that the vaccines might not be effective against it.".... and a person "might not" make it across the road if they are looking into their phone while crossing.
@Feckless191 That’s faulty logic. Read up on the the Spanish flu pandemic of 1918. It was the deadliest in history, infected an estimated 500 million people worldwide—about one-third of the planet’s population—and killed an estimated 20 million to 50 million victims, including some 675,000 Americans.
This current pandemic is coming in waves similar to the Spanish flu
@Alnoor Ramji Earthlings in 1918 "might" have wished for the same chance a vaccine gives us today.
mbaietti profile picture
While I would not necessarily put new money into Kroger in the high $30's, I did add to my already large position when it went back to the low $30's and if it gets back down there again - and I sincerely hope it does - I will add again. I personally think you are under estimating a couple things. One, I think that the shift to at-home eating is not going to fully fade away once the economy is reopened. For one thing, the shift to at-home work is going to stick around and that will naturally mean more at-home eating. Secondly, I think there has been a strong psychological impact from Covid. I think there is going to be a segment of society that, even fully vaccinated, etc., will have lingering fears of being in crowded indoor places - restaurants, theatres, airplanes, arenas, etc. I think some of the damage done to these industries is likely to be - if not entirely permanent - certainly longer lasting than many think. The other part I think you might be under estimating is economic. It's sleeping right now, but at some point, it will rear its ugly head. I am referring to rent and mortgage forebearances. There are millions of Americans who are not paying rent or mortgage right now and the landlords and banks can't do anything about it. But those days are numbered. What happens when they need to start paying again? Will all of them be able to? No. There will be lots of evictions and foreclosures. Will it be like the late 2000's? Probably not, but there will be people who lose their homes and banks and landlords who experience a permanent loss of income. That is bound to add a few more people to the 'eat at home' crowd. I decided after 20+ years of being a landlord, to sell my apartments in mid 2019. Boy am I glad I did. I shifted all that money into my dividend stocks. Boy am I glad I did! A big chunk of that went into.... Kroger. Boy am I glad it did! Instead of worrying about tenants that might not be paying me and perhaps asking for mortgage forebearances for myself, I am sitting on healthy capital gains plus dividend income that completely replaced my rental income.
Covid has changed lots of things forever, including the local grocery store. KR always has new ideas, they adapted well to the crisis and will continue to be a leader. PE of 13? Look at the ridiculous PE's in SP500. This stock screams as a must have holding-even buy-and-hold forever.
I bought my KR shares in the early 2019's. The growth has been so great since then I was able to recover my entire original investment, and I now have only appreciated gains as my basis while earning a 2.53% dividend yield. I may or may not buy any more, ever, and certainly not above $25 per share.
And you are on the record with KR shares @ $37.72 prior to market open 4-12-2021.
hawkrnc_19 profile picture
I follow you and enjoy your work and often hit like. Not on this one.
The Quant Investor profile picture
Consumer staples do well during a recession and are resistant to inflation, which I think is the narrative buyers of the stock are hedging against.
postal8081 profile picture
Good read. I agree Kroger is not to be bought. Thanks for confirming my thoughts on this stock.
You lost me when you said KR grocery pickup takes longer than going to the store and shopping.

You are kidding right ? Please stop making false statement without supported evidence.

I assuming you are talking about clicklist. How in the world driving to the store and someone putting your grocery in your car is slower than walking to the store, picking up all the thing you want , check out and put it in your car is faster??
Baldy2000 profile picture
@kmanm I agree, where I live KR pickup is #1 by far and fast. I do feel the stock is fully priced here.
Dreadful read. Company is cheap. Horses for courses...slow consistent EPs growth, pay down debt, FCF.
First today it was "End of Days" for Costco, now the same for Kroger as well this morning. I fully expect things to drop across the board once things are back to "normal". However, following both stocks before the pandemic, both were doing fine. Long term holder will be fine, shorts late to the game, oh well.
Carson7 profile picture
Josh, you repeated your same thoughts in this article three times, so what was your intentions with this article? If you think the world is suddenly returning to normal, you are sadly mistaken just like the cruise line operators
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