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Kroger’s Lessons Learned from Covid-19 Should Pay Long-Term Dividends

The grocer’s pandemic leadership role should help lift KR stock

Kroger (NYSE:KR) released a 17-page guide April 21 that provides businesses looking to reopen with a blueprint to do that. During the novel coronavirus pandemic, Kroger has demonstrated why doing good is good business. If you own KR stock, that ought to be music to your ears.

Kroger’s Lessons Learned from Covid-19 Should Pay Long-Term Dividends
Source: Jonathan Weiss / Shutterstock.com

Looking ahead, here’s why Kroger should profit from its Covid-19 experience.

What Doesn’t Kill You Makes You Stronger

I’m sure there are people out there who don’t feel sorry for grocery store chains like Kroger despite the fact its employees are on the frontline of the fight against the coronavirus. Just because Kroger’s been able to stay open the entire time this virus has been killing thousands of Americans, not to mention the world’s largest economy, does not mean it hasn’t sacrificed for the greater good.

Next to first responders and healthcare workers, very few in the world of business have provided as much of a societal benefit than the people who put food on our tables. It’s not fun going to the grocery store right now; imagine how the employees feel.

An extra $2 an hour is nice, but it can’t make up for the stress involved in serving people you know might be carrying the virus.

So, the fact Kroger has put together this guide to help businesses reopen using some of the policies it’s implemented and the things it’s learned during this crisis is a testament to the company’s commitment to all of its stakeholders, not just shareholders.

“As an essential business, we have led with our purpose to ‘Feed the Human Spirit’ and have taken extensive measures across our footprint to safeguard our associates, customers and supply chain. We are sharing what we’ve learned to help businesses begin to reopen safely and in sync with their respective state plans,” CEO Rodney McMullen stated in its press release for Sharing What We’ve Learned: A Blueprint for Businesses.

McMullen recognizes that cooperation among businesses in every industry is the only way American free enterprise will survive Covid-19. Further, the CEO believes Kroger’s values are what will get it through this crisis.

What doesn’t kill Kroger will make it stronger down the road.

Now is not the time to be selfish and inward thinking. Now is the time for leaders to step up. I believe history will show McMullen to have been a very effective leader during one of the most challenging periods in this country’s history.

If you own KR stock, you can be proud to acknowledge you do. Not every company can generate such sentiment.

Small Business Loans for the Rich

If Kroger needed funding during this crisis, the same values that have governed Kroger management throughout likely would have prevented them from skirting the Small Business Administration’s rules for obtaining loans under the Paycheck Protection Program. That’s unlike many bad apples that have dipped into funds intended for businesses with less than 500 employees.

If not for the efforts of some in the media to point out examples of these misdeeds, many substantial companies would have gotten away with murder.

It’s good the SBA has revised the certification guidance to ensure the second round of funding doesn’t follow the same fate. And while those larger companies such as Shake Shack (NYSE:SHAK) that did get money will be able to repay the money by May 7, you just know there are companies with zero values that will attempt to skirt them for a second time.

Meanwhile, small businesses continue to close permanently. Hopefully, some of these people who’ve been forced to close their doors will get hired at Kroger, if only as a temporary solution.

At the end of March, Kroger said it would hire an additional 20,000 people to meet the surge in demand. I hope a few of those temporary hires get full-time gigs. I’m sure the level of talent Kroger has seen apply for jobs is higher than it’s ever been.

The Bottom Line on KR Stock

Louis Navellier recently discussed why the future looks bright for Kroger. Navellier points out that Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) acquired more than half a billion of Kroger stock, good for 2.4% of the company’s stock.

“Kroger is in a great position today. With nearly 2,800 stores in the U.S., Kroger is the leading grocery store in 90% of its markets. It operates in 35 U.S. states under a variety of different names, including City Market, Harris Teeter and Ralphs,” Navellier stated April 21.

“Therefore, while Kroger is deftly handling today’s coronavirus crisis, investors should be heartened that the company is looking ahead to how shopping patterns and customer behavior will be impacted in the long term by the events of 2020.”

As I said earlier in the article, McMullen’s leadership is going to pay dividends beyond the coronavirus.

KR stock is a long-term buy.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2020/04/krogers-lessons-learned-from-covid-19-pay-off/.

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