BofA Turns Bearish On Kroger Ahead Of Tough Comparisons
Grocery chain Kroger Co (NYSE: KR) faces difficult comparisons ahead and the stock's valuation could be pressured by negative identical sales in fiscal 2022.
The Kroger Analyst: BofA Securities analyst Robert Ohmes downgraded Kroger's stock from Neutral to Underperform with a price target lowered from $40 to $28.
The Kroger Thesis: The COVID-19 pandemic resulted in a surge of demand for stockpiling and the upcoming one-year anniversary means Kroger's identical sales will trend negative, Ohmes wrote in the note.
The trend of year-over-year sales declines should start next week as peak stockpiling likely took place in the third week of March 2020. At that time, supermarket sales were up 96% year-over-year compared to 2019.
Related Link: Can Grocers Sustain The 'Pre-Christmas Bump'?
Kroger may also feel the need for more aggressive promotional activity in 2021 and its ongoing build-out and scaling of Ocado face challenges amid the shift towards same-day pickup and delivery.
Finally, the combination of potential stimulus payments, along with pent-up demand for restaurants, could add even more pressure for the food retailer group as a whole.
Bottom line, Kroger's stock is trading at 12 times P/E, and this "leaves room for downside" as the grocery segment will likely return to "normal," the analyst wrote.
KR Price Action: Shares of Kroger were trading lower by 1.6% Tuesday at $33.05.
(Photo: Virginia Retail via Wikimedia Commons)
Latest Ratings for KR
Jan 2021 | Telsey Advisory Group | Downgrades | Outperform | Market Perform |
Jan 2021 | Wells Fargo | Maintains | Equal-Weight | |
Jan 2021 | Morgan Stanley | Downgrades | Equal-Weight | Underweight |
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View the Latest Analyst Ratings
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