A recent investigation by Consumer Reports and other media outlets has uncovered that Kroger (KR, Financial) customers have been charged full price for many items that were supposed to be discounted. The inquiry was prompted by claims from Kroger employees in Colorado, who are participating in union negotiations and have reported persistent inaccuracies in price labeling. These price discrepancies have reportedly been an issue for years, with Kroger allegedly informed of the problem.
The grocery chain has faced criticism from state inspectors for high instances of price tag errors and is also dealing with several class-action lawsuits from customers in states like California, Illinois, Ohio, and Utah, concerning these alleged pricing inaccuracies. To assess the issue's extent, an effort was made to shop at 26 Kroger and affiliated stores, which revealed expired sale labels causing overcharges on over 150 items. This situation continues to place Kroger under increased scrutiny as it addresses these pricing concerns.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 19 analysts, the average target price for The Kroger Co (KR, Financial) is $69.85 with a high estimate of $80.00 and a low estimate of $57.00. The average target implies an upside of 3.26% from the current price of $67.64. More detailed estimate data can be found on the The Kroger Co (KR) Forecast page.
Based on the consensus recommendation from 25 brokerage firms, The Kroger Co's (KR, Financial) average brokerage recommendation is currently 2.3, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for The Kroger Co (KR, Financial) in one year is $52.87, suggesting a downside of 21.84% from the current price of $67.64. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the The Kroger Co (KR) Summary page.
KR Key Business Developments
Release Date: March 06, 2025
- Identical Sales Growth (without fuel): 2.4% for Q4 2024; 1.5% for full year 2024.
- Digital Sales: $13 billion in 2024, with a 10% growth compared to last year.
- Adjusted FIFO Operating Profit: $1.2 billion for Q4 2024; $4.7 billion for full year 2024.
- Adjusted EPS: $1.14 for Q4 2024; $4.47 for full year 2024.
- Gross Margin Rate (FIFO, excluding certain items): Increased 54 basis points in Q4 2024; 32 basis points for full year 2024.
- Operating General and Administrative Rate: Increased 16 basis points in Q4 2024; 31 basis points for full year 2024.
- Alternative Profit Businesses Operating Profit: $1.35 billion in 2024, with a 17% increase in media.
- Capital Allocation: Completed 29 major store projects in 2024; plan to complete 30 in 2025.
- Net Total Debt to Adjusted EBITDA Ratio: 1.79 at the end of Q4 2024.
- 2025 Guidance: Identical sales growth without fuel of 2% to 3%; adjusted FIFO operating profit between $4.7 billion and $4.9 billion; adjusted EPS of $4.60 to $4.80.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The Kroger Co (KR, Financial) delivered strong financial results in 2024, demonstrating positive momentum and positioning the company well for growth in 2025.
- Digital sales were robust, with more than $13 billion in sales, and profitability in the digital channel improved notably in the fourth quarter.
- The company's 'Our Brands' product line expanded significantly, with over 900 new products introduced in 2024, contributing to strong sales and customer loyalty.
- Kroger's alternative profit businesses, including media and health, delivered solid results, generating $1.35 billion in operating profit.
- The company plans to accelerate new store openings, with 30 major projects expected in 2025, supporting long-term growth and market share improvement.
Negative Points
- The Kroger Co (KR) experienced pressure on spending from budget-conscious households due to multiyear inflation and higher interest rates.
- Fuel sales were lower compared to the previous year, impacting overall profitability due to fewer gallons sold and lower average retail prices.
- The company's alternative profit businesses fell short of initial growth expectations in 2024, partly due to slower growth in advertiser spend.
- Inflationary pressures, particularly in fresh commodities like eggs, continue to challenge the business, with egg inflation reaching approximately 70% during the quarter.
- The company faces ongoing challenges in improving digital profitability, with a need to enhance cost efficiency in both pickup and delivery channels.
