Kroger’s stock plunges on softer-than-expected fiscal 4Q17 sales comps
Despite cruising ahead of its revenue and earnings estimates, Kroger (KR) stock fell 4.3% after reporting its fiscal 4Q17 results. This fall in its stock price can be linked to the weakness in the company’s fiscal 4Q17 sales comps, which tripped into negative territory after 52 consecutive growth quarters. The company’s year-to-date stock market losses increased to 11% as it closed at $30.67 on March 2, 2017.
Other supermarket stocks have also delivered an equally poor performance during the current year. SuperValu (SVU), Whole Foods Market (WFM), and Sprouts Farmers Market (SFM) are down 20%, 1%, and 2.7%, respectively.
While Kroger stock has a good upside of 15% over the next 12 months, it also trades at a discount to most of its peers and is operating closer to the lower side of the valuations.
The company is currently trading at a one-year forward price-to-earnings (or PE) ratio of 13.8x. It has a 52-week PE range of 13.4x–18.6x.
Kroger operates at a discount to its natural and organic food competitors Whole Foods Market (WFM) and Sprouts Farmers Market (SFM), which trade at 22.9x and 20.9x, respectively. It’s also cheaper than Walmart (WMT) and Costco (COST), which are trading at 16.4x and 28.7x, respectively.
Dividends and share repurchases
Kroger (KR) enhances shareholder returns by offering dividends and repurchasing its shares from time to time. The company repurchased $1.8 billion in shares and paid $429 million in dividends during fiscal 2017.
Investors looking for exposure to Kroger through ETFs can choose to invest in the First Trust Consumer Staples AlphaDEX ETF (FXG). KR constitutes ~2.2% of FXG.