A super market?
Kroger (NYSE: KR) stock has been in a slump for much of the past few years, but it’s finally showing some signs of life, partly due to a groundbreaking deal with British online grocer Ocado to address its online order and delivery deficiencies. Kroger needed to show a strong quarter to change its narrative, and it did just that with its recent first-quarter earnings report.
Kroger beat analyst estimates on both the top and bottom lines, with revenue up 3.4 percent to $37.5 billion, and management suggested that upcoming growth would exceed expectations, too.
Naysayers think that the Amazon acquisition of Whole Foods will eventually disrupt the grocery industry, as Amazon has disrupted the business of many other brick-and-mortar retailers. That argument may be wrong, though, or at least premature. For starters, while Amazon has lowered prices at Whole Foods somewhat, they’re not that low.
Meanwhile, groceries — particularly perishable items — are different from other goods. While online shopping and delivery may become a larger portion of grocery sales, most shoppers may continue to shop for groceries through traditional means. With digital shoppers likely seeking grocers with a local presence, Kroger has an edge with its nearly 2,800 stores.
The grocery industry is a tough one with slim margins, but Kroger shares seem attractive at recent levels, and they offer a dividend that recently yielded 2 percent, too.