From Feb. 29 to March 30, Kroger (NYSE:KR) stock rose by less than 1%. That doesn’t sound great, but Kroger performed much better than the overall stock market. And this trend isn’t stopping anytime soon. In the weeks and months ahead, KR stock is likely to continue its outperformance, driven by three main trends.
The first main trend is that supermarket sales are likely to keep growing. As the novel coronavirus spreads, Americans, fearing shortages and more closures, are buying in tremendous amounts. They are stocking up on canned goods, toilet paper, sanitizing lotion, bread, milk and meat.
Supermarkets are extremely busy and are selling a great deal of merchandise.
Kroger is apparently no exception to that trend. The supermarket chain has hired 23,500 workers in recent weeks and plans to add another 20,000 soon.
Kroger Is Taking Serious Market Share
At least 50% of restaurants’ appeal (in the pre-coronavirus days) was their ambiance and the ability to escape the monotony of eating at home. Now that eating at restaurants is no longer an option, many more consumers are buying more of their food from supermarkets.
Obviously, almost every apparel store in the country is closed. Some investors may not know that Kroger sells clothing, but it actually does have a pretty significant apparel selection. Given these points, many shoppers in Kroger’s stores will end up picking out some needed clothing items along with their food.
And although other drug stores are still open, shoppers can also use Kroger’s pharmacies. Consequently, Kroger is well-positioned to take market share from large drug store chains, including CVS (NYSE:CVS), Walgreens Boots Alliance (NASDAQ:WBA) and Rite Aid (NYSE:RAD).
Investments in E-Commerce Will Boost Sales
As I noted in a previous column, published on March 2:
“Like Walmart in the past, Kroger has a relatively high market share and is investing tremendously in e-commerce. Also like Walmart five years ago, many investors view Kroger as a slow-growth or no-growth dinosaur, resulting in a low valuation for its stock.”
I continue to believe that, over time, Kroger’s investments in e-commerce and other technologies will enable it to follow in Walmart’s (NYSE:WMT) footsteps and take market share from its rivals.
Kroger’s e-commerce prowess could also help it during the current crisis, when many Americans would rather have their food delivered to them than go to a store.
The Bottom Line on KR Stock
Kroger’s sales appear to be booming, and it is probably taking share in multiple sectors. The company could even retain some of these share gains after the coronavirus crisis ends, as consumers get more used to buying clothes and drugs at Kroger’s stores.
Meanwhile, Kroger’s investments in technology should boost its results during and after the crisis. Given all of these points, investors should buy KR stock now.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks and Snap. You can reach him on StockTwits at @larryramer. As of this writing, he did not own any shares of the aforementioned companies.
