KR: Expanded Delivery Partnerships Will Drive Stronger Long-Term Earnings Profile

Analysts trimmed their Kroger price target slightly to approximately $73.50 from about $74.40, citing modestly higher long term growth and margin expectations, which are offset by a lower future valuation multiple as the company broadens its third party delivery partnerships with platforms like DoorDash.

Analyst Commentary

Analysts view the expanded DoorDash partnership as a strategically important but not transformational shift for Kroger, shaping expectations for both growth and risk around the company’s digital and delivery ecosystem.

Bullish Takeaways

• Bullish analysts highlight that adding DoorDash as a full grocery channel diversifies Kroger’s demand funnel, which can support mid single digit digital growth and help sustain the higher margin profile of online baskets over time.
• The move is seen as evidence that Kroger can flex its scale across multiple intermediaries, reinforcing its bargaining power on fees and service levels. This supports confidence in steady margin execution despite a more crowded delivery landscape.
• Some view the partnership as a way to capture incremental, convenience driven orders without heavy incremental capital, improving return on invested capital from Kroger’s prior digital infrastructure spend.
• Signals around Kroger’s evolving automation and fulfillment strategy, including potential refinements to its Ocado relationship, are framed as a medium term upside lever for operating efficiency if the company can better match capacity with demand.

Bearish Takeaways

• Bearish analysts caution that broader use of third party platforms dilutes exclusivity, increasing competitive intensity among intermediaries and potentially pressuring economics for Kroger over time if fee structures tighten.
• There is concern that DoorDash’s deeper integration may accelerate share shifts away from Instacart, where Kroger represents a meaningful portion of volume, creating execution risk as Kroger manages multiple large scale partners simultaneously.
• Some see the evolving partner mix as a signal that prior automation bets may not be scaling as originally envisioned, introducing uncertainty around long term returns on Kroger’s fulfillment investments and justifying a lower valuation multiple.
• Analysts also flag that incremental growth from marketplace exposure could be offset by higher promotional intensity and customer acquisition costs online, limiting the extent to which digital volume translates into sustained earnings upside.

What's in the News

• President Trump is expected to sign an order cutting tariffs on key food imports such as beef, tomatoes, coffee and bananas, a move intended to ease grocery prices for retailers including Kroger and its competitors (Bloomberg).
• A federal judge in Boston has indicated that the Trump administration’s plan to suspend SNAP benefits is likely unlawful, with courts directing the use of contingency funds to maintain food aid that supports low income grocery spending at chains like Kroger (Bloomberg).
• The USDA plans to tap contingency funds to cover at least part of November’s SNAP payments, helping stabilize near term demand for grocers that rely on federal food benefits, including Kroger (Reuters).

Valuation Changes

• Fair Value Estimate has edged down slightly to approximately $73.52 from about $74.36, reflecting a modestly lower projected valuation.
• Discount Rate has risen slightly to roughly 7.90 percent from about 7.88 percent, indicating a marginal increase in the required return for Kroger’s equity.
• Revenue Growth has increased slightly to around 2.57 percent from approximately 2.53 percent, signaling a modestly stronger long term top line outlook.
• Net Profit Margin has improved slightly to about 2.17 percent from roughly 2.11 percent, incorporating a small uplift in expected profitability.
• Future P/E has fallen meaningfully to about 13.6x from roughly 14.9x, implying a lower earnings multiple applied to Kroger’s forward earnings estimates.