KR - Embedded Expectations Analysis - 2020 06 02
The Kroger Co. (KR:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 26.1x Uniform P/E. At these levels, the market has somewhat bullish expectations for the firm, but management may be concerned about cost management, free cash flow, and growthSpecifically, management may lack confidence in their ability to invest in digital experience improvements and write food prescriptions, and they may be exaggerating the strength of their relationship with the consumer packaged goods industry and their cost reduction opportunities. Furthermore, they may lack confidence in their ability to continue generating strong free cash flow, sustain non-fuel sales growth, and source talent for their business. Finally, they may be overstating the potential of their facilities in Ohio and their ability to maintain fuel margins, and they may be concerned about their delivery promotions and procurement
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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