Parker Puls / Bloomberg/Getty Images
Key Takeaways
- Melius Research issued a "sell" rating on Kroger stock on Tuesday due to concerns about the fundamentals of the grocery chain's business.
- Analysts claim that Kroger is losing its market share and leadership positions to Walmart.
- Other Kroger analysts polled by Visible Alpha appear to take a different stance, with half recommending buying Kroger shares, and half giving them a "hold" rating.
Melius Research, on Tuesday, recommended selling Kroger stock. The company cited concerns about the fundamentals and the future of the supermarket chain.
Melius set a price goal of $58 for Kroger (KR), which is 17% lower than the closing price on Tuesday. Melius’s stance seems to be an exception among analysts. Visible Alpha surveyed half of those following the company, and found that half of them gave Kroger shares a “buy” rating and the other half a “hold” rating.
The Melius team of researchers described Kroger as a “deteriorating business”, facing a number of issues. Melius said Kroger was losing customers to Walmart, may be liable in billions for a lawsuit brought against them by Albertsons and has leadership vacancies. Rodney McMullen, the former CEO of Kroger, resigned from his position last month following an investigation into his conduct.
“Investors today believe they can ‘hide’ in [Kroger] Melius wrote on Tuesday that the company has no tariff exposure. “Lacking tariff exposure does not make [Kroger] safe.”
Company executives reportedly said in early March that as a domestic retailer, Kroger has less exposure to international tariffs than some of its rivals, and would not face "a massive impact."
Kroger Stock Rises After Collapse of Albertsons merger
Kroger shares are up nearly 20% in the last six months. Melius said some traders might view the stock as safe because supermarkets have a relatively low tariff exposure.
Investors bought Kroger stock late last season when Kroger and Albertsons reneged on their merger plans after a judge blocked it. (Albertsons sued Kroger for failing to get approvals for the merger, but Kroger denied the allegations.)
Kroger shares ended Tuesday up about 0.6%, at around $68.12. Visible Alpha’s consensus price target of $67.67 is slightly higher.
