Kroger enters its Foran era with an emphasis on stability
Few sectors have felt the hit of inflation as directly as groceries. When beef jumps double digits year over year and overall food prices are rising faster than the headline inflation rate, shoppers take notice.
That makes supermarkets a real-time gauge of consumer stress. And Kroger is a useful test case for investors trying to read the tea leaves.
A new CEO for a new playbook?
Kroger stock jumped nearly 4% recently on news that former Walmart exec Greg Foran will take over as CEO. Based on his resume, markets seemed to have good reason for reacting:
- Twenty consecutive quarters of comparable sales growth at Walmart US
- Deep experience integrating digital and store operations
- A turnaround stint as CEO of Air New Zealand during COVID
Kroger’s fundamentals aren’t flashy, but they signal the resilience safety-seeking traders want. Forward P/E is below the industry average, Q3 EPS was up 7.1% year over year, ecommerce growth came in at 17%, and dividends have posted 19 straight years of increases.
Wall Street’s tone is generally constructive, with a “moderate buy” consensus and optimism that Foran’s operational focus may sharpen margins and digital profitability as consumers remain price-sensitive.
The “Kroger Indicator” theory
Some market watchers argue Kroger acts as a barometer during volatile periods. Looking back 30 years, the stock tended to peak or strengthen around major corrections, notably 1999, 2008, 2020, and 2022. The thesis is that dependable grocery cash flows look attractive as uncertainty rises elsewhere.
That theory is playing out against the broader backdrop of persistently elevated food inflation. Monthly food prices were up 0.7% in December.
When essentials rise, shoppers trade down, and that can benefit scaled operators like Kroger, especially if consumers keep swapping restaurant dining for home-cooked meals.
In a world where consumers still have to eat, Kroger’s steady operation and Foran's experience at the helm, boring can be a winning ticket if it’s backed by fundamentals.