A Look at Kroger’s (KR) Valuation as Store Closures and Cost Cuts Signal Strategic Shift

Kroger (KR) is making significant moves to adapt under challenging market conditions, announcing around 60 store closures and staff reductions aimed at reigning in costs. This comes as the company grapples with inflation and evolving consumer habits.

See our latest analysis for Kroger.

Kroger’s share price has shown resilience this year, rising 8.2% since January, and its total shareholder return was an impressive 11.97% over the past twelve months. While momentum has softened recently, with the 90-day share price return dipping slightly, long-term investors continue to see outsized gains. The five-year total return now stands at 143.85%. News of cost-cutting, alongside mounting competition and legal disputes, has prompted some market uncertainty, but the company’s actions signal a push to shore up margins and adapt to new industry pressures.

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With recent cost-cutting efforts and a healthy discount to analysts' targets, investors may wonder if Kroger’s current share price is too low considering its strong returns. Alternatively, it is possible that the market has already factored all future growth into the valuation.

Most Popular Narrative: 11.5% Undervalued

Kroger’s most followed narrative values the stock at over $75, notably higher than its recent close near $67. This assessment arises from robust expectations for business transformation and future growth.

Aggressive cost optimization efforts, including further supply chain automation, adoption of AI and data analytics for shrink reduction, and a comprehensive review of store performance are expected to enhance operational efficiency, reduce costs, and support margin expansion. These initiatives may help bolster long-term profitability.

Read the complete narrative.

Curious how much Kroger’s future hinges on boosting margins or slimming operational waste? The real story is in the numbers behind these bold projections. Find out what analysts expect for the next chapter of growth and efficiency.

Result: Fair Value of $75.73 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent e-commerce losses and rising labor costs could weigh on Kroger’s margins. These factors may challenge the optimistic outlook for future earnings growth.

Find out about the key risks to this Kroger narrative.

Build Your Own Kroger Narrative

If you have a different outlook or want to dig deeper into the numbers, you can draft your own narrative in just a few minutes. Do it your way

A great starting point for your Kroger research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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