KR: Expanded Delivery Partnerships Will Support Stronger Long-Term Earnings Outlook

Kroger's analyst price target has ticked up by approximately $1 to the mid $80s range, as analysts cite the company's expanding delivery partnerships, data driven personalization, and higher long term EPS forecasts as support for a slightly lower fair value and a modestly improved growth outlook.

Analyst Commentary

Analysts view Kroger's expanding third party delivery partnerships and sharpening data capabilities as key drivers of both the recent price target increase and a more constructive long term growth narrative. At the same time, they flag competitive risks in the intermediary landscape and operational execution questions around Kroger's fulfillment strategy.

Bullish Takeaways

• Bullish analysts highlight Kroger's expanded partnership with DoorDash as adding a meaningful third demand channel. This can support higher digital penetration and incremental same store sales without heavy incremental capital.
• The company is seen as leveraging innovative, value oriented private brands and fresh food leadership to defend traffic and pricing power. This is viewed as underpinning higher long term EPS estimates and justifying a move toward the mid $80s fair value range.
• Rich customer data on tens of millions of households is viewed as a durable competitive advantage, enabling targeted promotions and personalization that can improve basket size, loyalty, and marketing ROI.
• Rising EPS forecasts for FY26 and FY27 suggest confidence in Kroger's ability to execute on omnichannel growth and margin efficiency initiatives, supporting a buy rated stance despite a more fully valued multiple.

Bearish Takeaways

• Bearish analysts caution that the loss of grocery exclusivity for third party delivery has historically not produced major share shifts. This implies that the expanded DoorDash relationship may be more defensive than transformative for valuation.
• There is concern that the deepening role of intermediaries like DoorDash could pressure economics over time, as platform fees and promotional intensity weigh on digital profitability even if top line trends improve.
• Some remain focused on uncertainties around Kroger's evolving fulfillment strategy, particularly the long term role and returns from automated solutions such as Ocado, which could introduce execution risk if volumes or utilization fall short of plan.
• Instacart's exposure to Kroger volumes highlights the fluidity of intermediary relationships. Bears argue that shifting partnership priorities may create operational complexity and near term transition costs that cap multiple expansion.

What's in the News

• The Kroger Co. and Instacart expanded their relationship, reaffirming Instacart as Kroger's primary delivery fulfillment partner and introducing AI powered Cart Assistant to enhance digital grocery shopping experiences and retail media opportunities.
• Kroger broadened its third party delivery reach through an expanded partnership with Uber Eats, which will offer access to the full Kroger banner assortment, reciprocal loyalty benefits, and integrated restaurant ordering within the Kroger app.
• The company raised its full year 2025 guidance, now expecting identical sales without fuel of 2.7% to 3.4% and EPS of $4.70 to $4.80, indicating management confidence in its omnichannel execution and margin initiatives.
• Kroger is facing an expanded patent infringement lawsuit from Alpha Modus Corp., which now asserts nine patents related to AI powered retail engagement, analytics, and in store automation technologies used across Kroger's operations.
• A Bloomberg report noted that a planned Trump administration move to cut tariffs on key food imports, including beef and coffee, could ease grocery cost pressures for retailers such as Kroger and its peers (Bloomberg).

Valuation Changes

• Fair Value: lowered slightly from approximately $75.73 to $74.36, reflecting a modestly more conservative intrinsic value estimate.
• Discount Rate: risen slightly from about 7.69% to 7.88%, implying a marginally higher required return and risk assessment.
• Revenue Growth: increased modestly from roughly 2.46% to 2.53%, signaling a small upgrade to long term top line expectations.
• Net Profit Margin: edged down fractionally from about 2.11% to 2.11%, effectively flat and indicating minimal change in profitability assumptions.
• Future P/E: eased slightly from around 15.05x to 14.90x, suggesting a small compression in the forward valuation multiple applied to earnings.