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On Thursday, Guggenheim maintained a Buy rating on Kroger (NYSE:KR) stock and increased the price target to $73 from $71, as the stock trades near its 52-week high of $68.68. The adjustment follows a detailed assessment of Kroger’s recent 10-K filing, which provided new insights into the company’s financial performance, including segment-level disclosures. According to InvestingPro data, the company maintains a strong financial health score, with robust metrics across profitability and momentum indicators.
In the 10-K filing, Kroger reported a merchandise gross margin of 28%, notably higher than the previously reported 22% margin. The filing also revealed a new segment with a robust 60% adjusted EBITDA margin. These figures offer a counter-narrative to the commonly held view that traditional food retail is less profitable. With an overall gross profit margin of 23.5% and annual EBITDA of $7.92 billion, Kroger demonstrates significant operational efficiency for its $44.46 billion market cap.
Despite these positive indicators, challenges remain due to factors such as substantial fuel discounts tied to loyalty programs, the considerable but lower-margin prescription business, and the estimated $400-500 million EBIT losses from digital channels.
Guggenheim’s analysis suggests that Kroger’s accelerating operating momentum, stemming from the ESI network re-entry, the growth of its Media business, and the profitable expansion of KR Delivery, will support the stock’s recent multiple expansion. The firm’s multiple is currently at 7.6 times their projected 2025 EBITDA.
The slight adjustment in estimates post the 10-K filing reflects the new data points and reinforces Guggenheim’s positive outlook on Kroger shares, culminating in the raised price target.
In other recent news, The Kroger Co . announced its quarterly dividend of 32 cents per share, scheduled for payment on June 1, 2025, to shareholders on record as of May 15, 2025. This reflects the company’s commitment to returning capital to shareholders, with a noted 13.5% compounded annual growth rate in dividends since 2006. The company also appointed Ronald Sargent as interim CEO and Chairman, effective March 13, 2025, with an annual base salary of $4,350,000 and 60,515 shares of restricted stock. Meanwhile, Melius analysts downgraded Kroger’s stock from Hold to Sell, setting a price target of $58.00, citing increased competition from Walmart (NYSE:WMT). Kroger has launched the "Elite Ate" Snack Bracket, offering exclusive discounts on snacks during the college basketball season. This initiative is part of Kroger’s strategy to engage customers and enhance their shopping experience. Additionally, the company offers over $600 in weekly digital coupon savings through its website and app. These developments highlight Kroger’s strategic efforts in leadership transitions, competitive positioning, and customer engagement.
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