On Wednesday, Telsey Advisory Group adjusted its price target for Kroger Co (NYSE:KR), raising it to $65 from the previous $62, while reiterating an Outperform rating on the stock.
The firm anticipates that Kroger will continue to see profitable market share gains in the third quarter of 2024, driven by a 2.0% increase in identical sales (ID sales), excluding fuel, compared to the FactSet consensus of 1.8%. Additionally, they forecast an adjusted earnings per share (EPS) growth of approximately 5.0% to $1.00, which is higher than the FactSet estimate of $0.97.
The analyst's outlook is based on the ongoing recovery of units and the positive impact of strategic initiatives that focus on freshness, digital, and loyalty programs. These factors are somewhat balanced by the challenges of an uneven consumer spending environment and an increase in promotional activities. Industry-wide, food sales have remained robust, as indicated by the US Census Bureau's report on Food & Beverage Stores retail sales, which showed an increase of 2.9% in August, 0.6% in September, and 3.9% in October.
Inflation trends in food prices have also been noted, with the Food-At-Home Consumer Price Index (CPI) rising by 0.9% in August, 1.3% in September, and 1.1% in October. The analysis is supported by recent earnings reports from other retailers, which have shown stable demand for groceries. For instance, Albertsons (NYSE:ACI) reported a 2.5% increase in ID sales for the second quarter of 2023, while Grocery Outlet posted a 1.2% comp for the third quarter of 2024.
Additionally, Publix's comp for the third quarter of 2024 was up by 3.4%, Target (NYSE:TGT) reported a low single-digit increase in its food & essentials comp for the same period, and Walmart (NYSE:WMT) US saw its grocery comp rise by a mid single-digit percentage, with health & wellness climbing to mid-teens during the third quarter of 2024.
Kroger's performance and the adjustments in price targets reflect broader trends in the grocery sector, where companies continue to navigate shifting consumer patterns and inflationary pressures. The updates from Telsey Advisory Group suggest confidence in Kroger's strategy and its ability to outperform in the current market climate.
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