A dominant position among the nation's largest grocery retailers
The Kroger Co.
) to expand its store base and boost market share through product
launches. The company's strong corporate and national brands have
helped garner customers' loyalty.
The company has been performing remarkably well with regard to both
its revenues and earnings. Following the company's strong
performance, this Zacks Rank #2 (Buy) stock has surged roughly 67%
year-to-date, demonstrating its inherent strength. We believe that
it could prove to be a solid bet for investors.
We remain optimistic about the company as the acquisition of Harris
Teeter Supermarkets is aiding Kroger to expand its footprint in
high-growth markets, resulting in top-line growth of 11.2% during
the third quarter of fiscal 2014 when compared with the
corresponding period last year.
Additionally, its acquisition of Vitacost.com has given an edge to
the company by helping it penetrate into the online retail market,
thus reaching out to busier customers through online shopping and
Moreover, Kroger, which competes with Target Corp. (
), remains well positioned to perform better than its rivals due to
its Customer 1st strategy which enriches consumers' shopping
experience and convinces them to return to the store. We expect the
company to sustain its earnings growth momentum with this strategy.
Moving on, we also notice that over the trailing 13 quarters,
Kroger has beaten the Zacks Consensus Estimate in 12 quarters while
being in line with the consensus in only one. The average earnings
beat over these 13 quarters comes to an impressive 6.5%.
We believe that given the company's strong identical-store sales
growth for about 44 successive quarters and better-than-expected
bottom-line performance, Kroger is poised to achieve its long-term
earnings per share growth rate target of 8%-11%.
Management now projects fiscal 2014 earnings between $3.32 and
$3.36 per share, up from its earlier projection of a range of
$3.22-$3.28 due to its exceptional results with regard to both
revenue and earnings of $24,987 million and 73 cents per share,
respectively, for the last reported quarter.
Hence, the company looks promising as it has enormous opportunities
to augment identical supermarket sales, alleviate gross margin
pressure, improve operating margin and enhance return on invested
capital. Management continues to deploy capital to concentrate more
on remodels, merchandising and other viable projects.
Other Stocks that Warrant a Look
Other stocks worth considering in the grocery retail sector are
Ingles Markets, Incorporated (
), sporting a Zacks Rank #1 (Strong Buy) and Safeway Inc. (
), carrying a Zacks Rank #2.
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