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Sizing up Kroger’s ‘Restock Kroger’ Initiative

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Restock Kroger: an outline

Kroger (KR) recently announced its Restock Kroger initiative, which focuses on making planned capital investments, achieving cost savings, and generating free cash flow.

Under this framework, the company plans to make capital investments of $9 billion over the next three years in redesigning and remodeling its brick-and-mortar stores, growing its private label brands, and improving digital networks. The company will also continue to make price investments in order to stay competitive.

Kroger also plans to levy fines on delivery trucks missing timely deliveries. This will improve inventory management, reduce wastage, and offer improved and timely product selection to customers. This plan is expected to increase the company’s operating margin by $400 million by 2020. It’s also projected to generate $4 billion in free cash flow during the same period.

Kroger also plans to explore strategic alternatives for its convenience store business, which includes the option of a potential sale. The company operates 784 convenience stores across 18 states, and the sales would help Kroger improve its balance sheet by lowering debt outstanding.

Resonating with customers

Kroger’s efforts under the Restock Kroger initiative appear to be working, now that Kroger delivered one of its best Black Friday results. Rodney McMullen, Kroger’s CEO (chief executive officer), stated: “The holidays are always Kroger’s time to shine. In fact, we had our best ever Black Friday results for general merchandise, led by record sales at Fred Meyer.”

Investors looking for exposure in Kroger through ETFs can consider the First Trust Consumer Staples AlphaDEX Fund (FXG), which has 7.3% of its portfolio in KR.

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