KR: Boring Is Beautiful
I was speaking with Errol – a poker dealer at casino M8TRIX who likes to trade based on technical analysis – on Sunday about stocks as usual. Errol was focused on Abercrombie & Fitch (ANF) – one of the hottest stocks in the market – which reported earnings Tuesday afternoon. When I told him the only two stocks reporting earnings in the upcoming week that I had long positions in were Campbell Soup (CPB) and Kroger (KR) – the country’s largest owner of grocery stores – he looked at me like I was nuts. These are two of the most boring stocks out there but they are fundamentally sound and cheap. KR has been especially good to me since I started investing in it in June 2017 when Amazon acquired Whole Foods sending KR stock crashing below $20.
KR reported 4Q23 earnings earlier this morning. Comp growth has slowed and was only +0.9%. KR guided 2024 comps to +0.25% – +1.75%. That’s fine but not enough to really get the stock going. Full year 2023 EPS was $4.76 (including a 53rd week) and they guided 2024 to $4.30-$4.50. But KR is cheap at 11.5x forward EPS guidance with a 2.29% annual dividend. I don’t expect to get rich owning KR but I’m happy with 10% – 12% total annual gains. Despite the underwhelming numbers, KR has opened Thursday’s session +6%.
Disclosure: Top Gun is long shares of KR.