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09/12/2017

Kroger Stock Continues to Get Clock Cleaned; Naysayer on Amazon in WSJ

Kroger stock down almost 40% in 2017, mostly because of fear that it will become collateral damage in epic battle between Amazon and Wal-Mart.  Last week, it reported same store sales up 0.7% in latest qtr, beating expectations, and reaffirmed its guidance.  And yet stock dropped almost 10%, according to Wall St Jnl.  Why?  Because it “pulled its long term guidance” of 8-11% EPS growth, due to “dynamic operating environment” wrote Charley Grant in WSJ’s “Heard on the Street” column called “Investors Right to Fear Kroger’s Future.”  Kroger’s margins already deteriorating and its net profit margin just 1.3% in qtr, “which doesn’t leave much room for increased competition.”   This devastating decline in value is for #2 US retailer, a humongous co that does $115 bil in sales and is nation’s 2d largest employer, employing 443,000 people at various chains it owns like Ralph’s, Fred Meyer, Harris Teeter and Fry’s in different parts of US, in addition to Kroger stores.  Makes one wonder if other chains will have even tuffer time.

Amazon’s HQ, Hubris and Overspending Are “Watch Outs”   But contrarian column in today’s WSJ ain’t buying it, threat of Amazon we mean. “New Amazon Headquarters Should Alarm,” columnist sez. Thinks Amazon in long line of cos that overspend on “diversification, new industries, change of business model, massive hiring programs, unfettered CEO power, distracted management and high capital spending.” At top of list of watch outs “for many is the construction of a new headquarters. Hubris, meet Amazon.com.” He acknowledges that Amazon already tripled headcount to 382,400 employees, “spent billions on Hollywood productions, launched a hit gadget and ramped up its” R&D, seemingly “without a hitch.”  However, “lesson from the long term is that companies with high capital spending tend to underperform.”

Whole Foods Traffic Way Up After Price Cuts; “Price War of Unprecedented Proportions” Coming  Foot traffic at Whole Foods stores “spiked by more than 25% over two days last week,” when Amazon initiated price cuts on key items as soon as deal closed, wrote NY Post, citing Foursquare Labs.  But Whole Foods only dropped prices on 50 items out of 15,000 in store.  And Whole Foods prices still overall “in the highest stratosphere,” said consultant Burt Flickinger (who once spoke at Beer Insights Seminar). “Whole Foods dropped the prices on less than 1 percent of its offering,” but “competitors [like Target] have lowered prices in response,” he added. “We are entering a food price war of unprecedented proportions.”

Publishing Info

  • Year: 2017
  • Volume: 19
  • Issue #: 172
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