The Kroger Co. KR, one of the nation’s largest grocery retailers, announced the retirement of president & chief operating officer Mike Ellis. After joining Fred Meyer at the age of 16 as a parcel clerk, Ellis rose to the top management position through diligent service during his tenure of 40 years. The company is yet to announce a successor.
Kroger currently operates 2,626 supermarkets and multi-department stores in 34 states and the District of Columbia under approximately 24 local banners. We believe that the company’s well known corporate and national brands have helped it to gain customer loyalty.
Kroger’s huge customer base and dominant position enables the company to sustain growth, expand store count and boost market share. The company's operational strategies present vast opportunities to augment identical supermarket sales, alleviate gross margin pressure, improve operating margin and enhance return on invested capital. In our view, Kroger’s long term earnings per share growth rate target of 8% to 11% seem achievable.
We expect this Zacks Rank #3 (Hold) company to sustain its earnings growth momentum driven by the Customer 1st strategy, effective cost management and share repurchase activities. However, cautious consumer spending and higher debt-to-capitalization ratio remain causes of concern.
Some better-ranked stocks in the same industry include Ingles Markets, Inc. IMKTA, Koninklijke Ahold N.V. AHONY and Marks & Spencer Group plc MAKSY. All three stocks carry a Zacks Rank #2 (Buy).
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