Kroger (KR) has its hands full. Navigating rising food costs and strong competitors can be daunting. Kroger competes against big retailers such as Wal-Mart (WMT) who are strong-arming their way into groceries via their massive discount marts.
In fiscal 2010, Kroger barely eked out earnings. But in 2011 Kroger, the nation’s largest grocery market operator, got back on track. It doesn’t just sell groceries, though. There are more than 2,400 supermarkets and multi-department stores under the Kroger name and other banners, such as Ralphs, King Scoopers, Dillons, and Smith’s. The company also owns 786 conveniences stores, including Kwik Shop and Turkey Hill Minit Markets. More surprisingly, Kroger is one of the largest U.S. jewelry sellers. It owns Fred Meyer Jewelers and Barclay Jewelers.
These days, Kroger is chalking up solid gains. Fiscal first quarter revenues climbed 11 percent to $27.5 billion versus $24.8 billion a year ago. Kroger has notched 30 consecutive quarters of identical supermarket sales increases. Grocery store fuel station sales and loyalty discounts helped lift results. Earnings were also healthy, rising nearly 16 percent.
Kroger CEO David Dillon has explained the Kroger strategy as growing “our relevancy to our customers.” Eighty-five percent of its customers have a loyalty card offering discounts and rewards.
For now, analysts like Kroger. Of the 20 tracked by Thomson/First Call, seven have strong buy recommendations and five have buys, with six holds and two underperforms.
However, Goldman Sachs recently downgraded Kroger to a sell, citing softer sales volume. Grocers in strong niches, such as Whole Foods Market (WFM), hold more promise, analysts reckon. The company reports next in mid-September.
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