Bernstein thinks Kroger (NYSE:KR) will attract an offer as Amazon's purchase of Whole Foods sparks new M&A activity within the grocery sector.
Ahold Delhaize (OTCQX:ADRNY, OTCQX:AHODF) is identified by the investment firm as the most likely acquirer of Kroger. A combination of the two would create a $180B grocery behemoth and generate significant cost synergies.
Shares of Kroger are up 2.33% premarket to $22.18 to cut into last Friday's sharp drop.
Sources say a plan to launch both frozen-only JBS meat stores and food trucks is being talked about and analyzed, while JBS execs concede that the new concept is in the development stage.
A broad roll-out of frozen stores offering beef, lamb, pork, seafood, vegetables and dessert could be another major challenge for the grocery store sector (WFM, VLGEA, IMKTA, WMK, SFM, KR, SVU, SFS, TGT, WMT) - still reeling from news of the Amazon-Whole Foods merger.
Key events are scheduled for the companies listed below.
Expected IPO filings: Altice (Pending:ATUS) on June 22, Mota Group (Pending:MOTA) on June 22, Safety, Income & Growth (SAFE) on June 22, Four Springs Capital Trust (Pending:FSPR) on June 23, Granite Point Mortgage Trust (Pending:GPMT) on June 23.
IPO quiet period expirations: Endra Life Sciences (Pending:NDRA) on June 19, Five Point Holdings (Pending:FPH) on June 19, ASV Holdings (NASDAQ:ASV) on June 21, Gardner Denver Holdings (NYSE:GDI) on June 21, Modern Media Acquisitions (MMDMU) on June 21, National Energy Services Reunited (NESRU) on June 21, Solaris Oilfield Infrastructure (Pending:SOI) on June 21, Veritone (Pending:VERI) on June 21.
Secondary offering lockup expirations: Axsome Therapeutics (NASDAQ:AXSM) on June 19, Arena Pharmaceuticals (NASDAQ:ARNA) on June 19, Diana Shipping (NYSE:DSX) on June 20, La Jolla Pharmaceuticals (NASDAQ:LJPC) on June 21.
Notable annual meetings: Monster Beverage (NASDAQ:MNST) on June 20, BlackBerry (NASDAQ:BBRY) on June 21, Habit Restaurants (NASDAQ:HABT) on June 21, Fortinet (NASDAQ:FTNT) on June 23.
Special shareholder meetings: Farmer Brothers Company (NASDAQ:FARM) on June 20, Eastern Virginia Bankshares (NASDAQ:EVBS) on June 21, Southern National Bankcorp of Virginia (NASDAQ:SONA) on June 21.
Analyst/Investor days: United Technologies (NYSE:UTX) on June 19, General Electric (NYSE:GE) on June 20, Fiserv (NASDAQ:FISV) on June 20, Visa (NYSE:V) on June 22.
Jefferies Global Consumer Conference: Abercrombie & Fitch (NYSE:ANF), Staples (NASDAQ:SPLS), Noodles (NASDAQ:NDLS), Sanderson Farms (NASDAQ:SAFM) and others present on June 20; Denny's (NASDAQ:DENN), Dunkin' Brands (NASDAQ:DNKN), Home Depot (NYSE:HD), Kroger (NYSE:KR) and others present on June 21.
Shares of Whole Foods Market (NASDAQ:WFM) are up 26.95% to $41.97 to trade almost level with the $42 offer price from Amazon (AMZN +3%). But are we done yet?
Analysts from SunTrust and Oppenheimer are questioning if another bidder emerges as a defensive counterplay to the Amazon threat (per Bloomberg).
While an offer from Kroger (KR -12.5%) for WFM could be considered a reach, there are plenty of European grocery store operators that are looking to box out the Seattle e-commerce giant.
The idea of another bidder for Whole Foods is also rather interesting when the broad carnage across the retail sector being seen today is considered. P-E firms have significant ownership interests in many of the chain store stocks trading below market averages today, giving them a vested interest in keeping Amazon's brick-and-mortar ambitions at bay.
Kroger (NYSE:KR) is taking it on the chin after yesterday's sharp cut in guidance due in part to a commitment to win on pricing.
Guggenheim scratches the grocery store stock off its Best Ideas list.
Goldman Sachs moves to a Neutral rating after having Kroger set at Buy. The new price target is $26.
Also moving quickly out of the bull camp, Telsey lowers Kroger to Market Perform and JPMorgan cuts to Neutral. "Unless inflation can start to increase by perhaps 2% or more, the current environment, along with the headwind of wage inflation, likely will eclipse many of inflation's benefits," warns JP.
Not every firm on Wall Street is bailing on Kroger. Oppenheimer still has a positive view for the long term. "Near term the headwinds persist, but we think longer term, these price investments will lead to market share gains," says analyst Rupesh Parikh. "So I think if you're a longer term shareholder, I would buy the weakness today," he adds.