Kroger (KR) is a company on the radar of investors and analysts these days, primarily because it’s been on a tear of late. It’s clearly evident that KR’s commitment to reinventing itself is paying off in sales — and in raising the value of Kroger stock.
Last year KR completed its merger with supermarket chain Harris Teeter, a milestone in its focus on competing with the big boys in the health foods arena. Kroger stock is a winner for the long haul. Let’s look at the reasons:
Healthy Food Is Good for Kroger Stock
The practice of providing customers with healthy food options has moved past the trendy stage and is now something that’s expected not only from “health food” retailers but from run-of-the-mill supermarkets.
Kroger’s merger with Harris Teeter gives the company greater access to that fast-growing segment of the food retail industry. It’s actually expected that the health foods market will grow to $1 trillion globally by 2017.
Kroger Is Beating Competitors
It may surprise you to learn that Kroger is outpacing some of the biggest companies in the food retail industry. KR’s first-quarter sales numbers reveal the company outgrew competitors Walmart (WMT), Whole Foods (WFM) and Costco (COST).
In that first quarter, KR improved its comparable sales growth by 5.7%, a bit shy of the 6% that Kroger posted the previous quarter, but still enough to outpace its main competitor Walmart (1.1%), Whole Foods (3.6%) and Costco (5%).
Another aspect about Kroger’s recent history that should put smiles on investors’ faces is the fact that it’s riding a wave of sales success, enjoying its 46th consecutive quarter of comparable store sales growth.
Kroger Has Caught On to the Power of Technology
In the 21st century, companies can’t afford to lag when it comes to technological innovation such as shopping online. And it’s particularly important to make use of these new advances when trying to capture those coveted younger consumers.
To this end, last year KR purchased online health food retailer Vitacost. And here’s another way Kroger’s merger with Harris Teeter is paying off: KR will continue to capitalize on Harris Teeter’s online shopping capabilities while expanding the technology to its own stores.
Kroger Stock Is Increasing Its Dividend
I think every investor feels they’re getting a bit more value for their buck when a company pays a dividend. Kroger stock dividend yields 1.1%. And while that may not seem very impressive, KR spent $585 million in share repurchases in first quarter and lowered its debt level.
KR’s goal is to increase earnings about 10% a year, while increasing the Kroger stock dividend at the same time. According to analysts, this seems very doable.
Bottom Line
Kroger stock’s a buy because the company’s doing everything necessary to position itself for growth. In KR’s case, this includes continuing to find ways to outperform the competition and taking advantage of technological resources at its disposable.
KR is also in a great position to take advantage of the healthy foods revolution that has swept the U.S. Studies show people will pay more for better food.
And then there’s Kroger’s commitment to shareholders through dividends and share repurchases, another indication that Kroger stock is looking pretty good these days.
As of this writing, Will Emerson did not hold a position in any of the aforementioned securities.
