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How Did Supermarkets Perform This Month? A Comparison

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A quick look at the US supermarket industry

Supermarkets, which comprise the largest grocery retailing channel in the United States, are characterized by fierce competition and thin margins. Kroger (KR) is the largest US supermarket chain and Whole Foods Market (WFM) is the largest natural food retailer in the country, though it has scrambled to keep pace with the rising competition from Sprouts Farmers Market (SFM). While The Fresh Market (TFM) was recently acquired by Apollo Global Management (APO), SuperValu (SVU) is in the process of separating its Save-A-Lot segment.

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A look at supermarkets’ current valuation

Currently trading at ~29 times its next-12-month EPS (earnings per share), Sprouts Farmers Market (SFM) continues to be the most expensive supermarket. In comparison, Kroger (KR), The Fresh Market (TFM), Whole Foods Market (WFM), and SuperValu (SVU) are currently trading at one-year forward PE (price to earnings) multiples of 15.8x, 18.9x, 18.8x, and 7.1x, respectively, as of April 29, 2016. Although SFM is trading at a premium, it outshines peers in terms of past financial performance as well as future growth and earnings potential.

Kroger (KR) has displayed an impressive performance in the past. The company has registered 49 consecutive quarters of positive same-store sales. It also has a strong earning potential, with a next-12-month EPS growth of 8.2%. The company, currently trading at a one-year forward PE multiple of 15.8x, is operating at the lower end of its 52-week PE range of 15.7x to 19x.

What’s this series all about?

This series focuses on the performance of five supermarkets, namely Kroger (KR), Whole Foods Market (WFM), The Fresh Market (TFM), Sprouts Farmers Market (SFM), and SuperValu (SVU). We’ll compare the companies’ April performance, look at news released during the month, and review companies’ past performance and future earnings potential.

Together, SuperValu (SVU), Kroger (KR), Whole Foods (WFM), The Fresh Market (TFM), and Sprouts Farmers Market (SFM) constitute ~5% of the SPDR S&P Retail ETF (XRT).

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