Despite Deflation, Kroger Posts On-track Earnings That Leave Our Outlook Intact; Stock Fairly Valued
We do not plan to materially change our $32 per share fair value estimate for narrow- moat Kroger after the grocer posted second-quarter earnings that leave the firm on pace to meet our long-term targets. Widespread deflation--a reflection of low agricultural commodity costs--led the company to post first-half 4.4% total sales growth and identical supermarket sales (excluding fuel) expansion of 2.1%, near our 5.4% and 2.7% full-year expectations.Although the deflationary environment is subopti...
Kroger operates as a retailer. The company also manufacture and process some of the food for sale in its supermarkets. Supermarkets are operated under one of the following formats: combination food and drug stores (combo stores); multi-department stores; marketplace stores; or price impact warehouses. The combo stores provide food and organic sections, pharmacies, general merchandise, pet centers and perishables such as seafood and organic produce. Marketplace provide grocery, pharmacy and health and beauty care departments as well as perishable offering and general merchandise area that includes apparel, home goods and toys.
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