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Plunging Margins Add to Kroger Stock Slide

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Part 5
Plunging Margins Add to Kroger Stock Slide PART 5 OF 6

Deutsche Bank and Oppenheimer Downgrade Kroger

Recent analyst actions on Kroger

Kroger’s (KR) 2Q18 results invited a host of negative reactions from Wall Street. The stock was downgraded to a “hold” from a “buy” rating by Deutsche Bank. Analyst Shane Higgins lowered Kroger’s target price to $21 from $26 citing subdued sales and earnings growth over the next few years. He also added that the company’s investments in the digital and e-commerce platforms “will be critical in positioning the business for long-term growth during a period of rapid change in the U.S. food retail landscape where the lines between traditional grocers, online competitors, discounters, and restaurants are becoming increasingly blurred.”

Kroger was also downgraded to a “perform” from an “outperform” rating by Oppenheimer. The company’s price target was also lowered to $23 from $28.

Deutsche Bank and Oppenheimer Downgrade Kroger

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Target price revisions

Telsey Advisory Group reduced its target price on Kroger from $26 to $24, Jefferies reduced its target price from $24 to $16, and BMO reduced its target price from $24 to $20. However, these brokers reiterated their respective ratings.

Most of the analysts viewed Kroger’s decision to withdraw long-term guidance as a sign of increasing uncertainty about the company’s future and the food retail industry in general.

Kelly Bania, a food retail analyst for BMO Capital Markets, said the guidance revision “underscores the high degree of uncertainty across food retail in the current environment.”

Investors looking for exposure to Kroger through ETFs can invest in the First Trust Consumer Staples AlphaDEX Fund (FXG), which invests 3.2% of its portfolio in the company.

Read the next section to know about the broader Wall Street view on Kroger.

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