Kroger Stock Falls Ahead of Results as Investors Worry About Inflation’s Effect on Margins and the Albertsons Merger Controversy

Kroger Stock

With the grocery store chain’s quarterly earnings announcement scheduled on December 1, Kroger Co. (NYSE:KR) has become a battlefield stock on Wall Street. With food input, labor, and transportation expenses all feeling the effects of inflation, Kroger’s gross margin may fall short of expectations for the sixth quarter.

After a robust second quarter, Wells Fargo predicts that Kroger Co. (NYSE:KR) will have yet another strong quarter in the third as inflation continues to fuel industry growth. The business has lifted its full-year outlook on Kroger and predicts an EPS beat, but it cautions that it will be tough for the company to please investors. According to analyst Edward Kelly, faster price increases should result in stable sales, although this factor is claimed to have peaked, and there seems to be a rising trend toward value forms. One of the most favorable backgrounds in food retail history is ready to expire in 2023, and Wells Fargo maintained its Underweight recommendation on Kroger in advance of the report.

Although food inflation is expected to remain elevated for the foreseeable future, Evercore ISI believes that the risk-reward profile for Outperform-rated Kroger stock remains positive due to further trade-down into food-at-home categories. According to analyst Dave Palmer’s prediction, recent information indicates that price hikes will continue until the first half of 2023 to sustain margins.

A total of 7 Buy recommendations, 12 Hold ratings, and 2 Sell ratings indicate that analysts are still wary about Kroger. Twelve of KR’s previous fourteen earnings per share adjustments have increased in the trailing 90 days.

For example, Seeking Alpha contributor Yannick Frey is quite optimistic about Kroger and views the upcoming merger with Albertsons as a powerful catalyst. Seeking Alpha’s Quant Rating also issued a Strong Buy recommendation for Kroger.

With the Albertsons (ACI) merger in the sights of regulators and Congress, the company might include an update on the timing in the Kroger (KR) earnings report.

Kroger trades around a 14-week high ahead of the announcement and is up 8.1% year to date. Kroger stock is trading around its 200-day simple moving average, barely below it. In the wake of its earnings release, options traders anticipate a 6.4% move in Kroger’s stock price. After the supermarket store’s most recent results report, the Kroger stock price rose by 7.4%.

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About the author: I'm a financial journalist with more than 1.5 years of experience. I have worked for different financial companies and covered stocks listed on ASX, NYSE, NASDAQ, etc. I have a degree in marketing from Bahria University Islamabad Campus (BUIC), Pakistan.