Analyst Calls Kroger’s ‘Deteriorating Business’ the Reason To Sell

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Key Takeaways

• Melius Research issued a “sell” rating on Kroger stock on Tuesday due to concerns about the fundamentals of the grocery confine’s business.
• The analysts said Kroger is losing market share to Walmart and has leadership vacancies.
• Other Kroger analysts won by Visible Alpha appear to take a different stance, with half recommending buying Kroger shares, and half distributing them a “hold” rating.

Melius Research on Tuesday recommended selling Kroger stock, citing concerns thither the fundamentals of the supermarket chain.

Melius gave Kroger (KR) a price target of $58, which is 17% below where the percentages closed Tuesday. Melius’s stance appears to be an outlier among analysts, with half of those who follow the party and were polled by Visible Alpha giving Kroger shares a “buy” rating and half a “hold” rating. 

The Melius delve into team described Kroger as “a deteriorating business” facing several issues. Melius said Kroger is losing purchasers to Walmart (WMT), may be liable for billions in a lawsuit brought by Albertsons (ACI), and is contending with leadership vacancies. Former CEO Rodney McMullen yield up last month after a probe into his conduct. 

“Investors today believe they can ‘hide’ in [Kroger] accustomed the company’s lack of tariff exposure,” Melius wrote in a note on Tuesday. “Lack of tariff exposure does not toady up to [Kroger] safe.”

Company executives reportedly said in early March that as a domestic retailer, Kroger has less endangerment to international tariffs than some of its rivals, and would not face “a massive impact.”

Kroger Stock Rose After Founder of Albertsons Merger

Kroger shares have shot up almost 20% over the past six months. Some salespersons may view the stock as a safe investment because supermarkets are relatively insulated from tariffs, Melius said. 

Investors also bark ated up Kroger shares late last year when Kroger and Albertsons abandoned plans to merge after a rule blocked the deal. (Albertsons filed a lawsuit alleging Kroger’s efforts to secure approvals for the merger were skimpy, and Kroger called the claims baseless.)

Kroger shares finished up about 0.6% Tuesday, at about $68.12. That’s shed weight above the $67.67 consensus price target compiled by Visible Alpha.