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June's Food Fight: To Whom Go the Spoils?

PART:
1 2 3 4 5
Part 4
June's Food Fight: To Whom Go the Spoils? PART 4 OF 5

Why Kroger Stock Bit It in June

Kroger plunged 22% last month

Supermarket giant Kroger (KR) ending up being one of the worst-performing food retail stocks in June, plunging 22% during the month. KR is now trading at $23.13 (as of July 6), which is 64% below its 52-week high price, and has lost 33% YTD (year-to-date). This compares with the stock’s 70% jump between 2014 and 2016.

Why Kroger Stock Bit It in June

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Why the slump in June?

Kroger reported its fiscal 1Q18 results on June 15. While the company posted in-line earnings and beat its top-line estimates, it also lowered its fiscal 2018 EPS guidance to the $2.00–$2.05 range, compared with the $2.21–$2.25 predicted earlier. This revision drove Kroger’s stock price down 18.8% on June 15.

On June 16, after the announcement Amazon.com’s (AMZN) acquisition of Whole Foods Market (WFM), Kroger’s stock price tumbled another 9.3%.

Recent analyst actions

J. P. Morgan downgraded KR stock to “neutral” from a “buy” rating soon after its earnings release on concerns of the rising costs of Kroger’s comps (comparable same-store sales), lack of operating leverage, and weak cash flow.

Goldman Sachs downgraded Kroger from “buy” to “neutral,” and Telsey Advisory lowered it to “market perform” from “outperform.” Morgan Stanley downgraded the stock to “equal weight” from “overweight.” Kroger was also removed from Guggenheim’s best stock ideas list.

Wall Street recommendations

Kroger is covered by 25 Wall Street analysts and now has a 2.6 rating, based on a scale of 1.0 (strong buy) to 5.0 (sell), compared with its 2.3 rating before its latest results. The company has a “buy” rating by 36% analysts, compared with 56% analysts before the results. Now, 56% of the analysts recommend a “hold” for the stock, while 8% suggest a “sell.”

KR’s average target price has been downwardly revised to $26.52 from $34.07. Still, the stock still has an upside of 15% based on its current stock price.

Investors looking to invest in Kroger through ETFs can choose to invest in the First Trust Nasdaq Retail ETF (FTXD). KR has a weight of ~3.6% in FTXD.

Continue to the next and final part of this series for a look at Sprouts Farmers Market’s performance in June.

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