Wednesday, Credit Suisse lowered its 2009 EPS estimate for Kroger Co. (KR) to $1.69 from $1.93, and its 2010 estimate to $1.80 from $2.10. The brokerage maintained its Outperform rating with a price target of $26.
Analyst Kelly noted that Kroger's disappointing third quarter earnings and outlook clearly indicate that the secular challenges facing the supermarket industry continue to intensify. The company's EPS of $0.27 fell well short of consensus of $0.36, as a broad increase in price competition, deflation, and the weak consumer pressured IDs, +1.3% vs. consensus of +2.1%, and the selling gross margin, down 109 bps.
The analyst believes Kroger has had to more proactively defend share than it initially expected and is suffering from negative mix issues as consumers search for value. Management cut its full year guidance by 15% to $1.60-$1.70 (vs. consensus of $1.94), as it expects current trends to continue for the next few quarters.
The analyst said that while the near-term outlook remains challenging, many of the issues are temporary and already well known, the stock trades at a trough multiple on trough earnings. The analyst believes at least modest earnings growth will resume in 2010 on a somewhat improved consumer, re-inflation, in dairy, proteins, and produce, easy comparisons, and a better promotional environment.
Currently, KR is down $0.40 or 1.99% and trading at $19.73.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.