Kroger downgrades Bank of America as competition with Wal-Mart increases

The Kroger company was downgraded from neutral to buy at Bank of America with analysts citing intensifying competition with other large-scale grocers.

Bank of America reduced its price objective from $ 72 to $ 40.

Grocers have seen sales during the coronovirus epidemic as more customers, working, schooling and spending more time at home, making more of their own food.

Big box chains like Walmart Inc. WMT
+ 0.45%
And Target Corp TGT,
+ 0.53%
Have used increased attention to ask consumers to focus on services and customer service offerings that shoppers also want to stock their pantries during social distancing.

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For example, Walmart announced the upcoming launch of its membership program, Walmart +, which would offer unlimited delivery. And Target, which was already using its stores as fulfillment centers, spoke on customer response to its pickup service and other options.

Kroger KR,
For example, a British online grocery company, through a partnership with Ocado, has invested heavily in its digital offerings. It has announced the creation of its e-commerce lineup with the addition of 50,000 items from third party vendors.

Bank of America analysts quoted Robert Ohio as saying, “We believe that Kroger’s plan is to integrate this fall into third-party marketplace offerings that compete with Originline leaders Walmart and Target.” Kroger’s need to have a broad general business classification.

The Wall Street Journal story, published just before Kroger’s earnings, was announced, despite Kroger’s efforts and investments about its digital shortcomings, stating that groceries “have a grip” in e-commerce.

In a note published last week by Raymond James analysts, Walmart, Target and Inc. Highlighted the growing growth in online grocery during the coronovirus with AMZN.
Among the winners. Food & Beverage is a more than $ 800 billion business in the US, and Raymond James expects US online grocery penetration to reach nearly 6% this year, doubling last year to $ 50 billion in sales. Analysts say the forecast may be “conservative”.

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Analysts expect the online grocery to reach 10% by 2025.

“We believe traditional grocers have the most to lose, although many are increasingly investing in online grocery capabilities, including automation, and will note Instacart as a key technology partner for many traditional grocers,” Raymond James wrote.

According to BMO Capital Markets analysts led by Kelly Bania, the popularity of online pick-in-store online should also help.

BMO stated, “Kröger said that digital profit is improving based on growth, we believe in the pick-up business to a large extent, albeit with a ‘temporary’ removal of the pick-up fee,” BMO said. said.

BMO rates perform Kroger stock market with a target price of $ 34.

But Bank of America feels similar sales should reduce as more customers return to the restaurant. Kröger reported a 14.6% increase in similar sales without fuel in the most recent quarter, and forecast growth for the year exceeded 13%.

Analysts at UBS have focused their attention for the year when conditions are moderate.

“[W]E feels that in 2021, when Krager performs in a more generalized environment than in difficult comparisons, the focus will be much higher, ”wrote UBS analysts led by Michael Lasser.

Meanwhile, Kroger stock suffers as do other grocery retailers, including traditional ones such as Albertsons Cos. Inc. ACI.
Analysts said there was better quarterly earnings.

Kröger shares have lost 7.2% compared to the previous month, though they have jumped 13.3% for the year. S&P 500 Index SPX,
+ 1.27%
Up 4.7% for 2020.

“It could be that Kroger invested more in price than the others, or that it doesn’t capture growth like other players,” UBS said. “Regardless, we are confident that Kroger will continue to benefit from the tailwinds of the industry and will see strengthening at the end of the year.”

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UBS neutralizes Kroger stock with a $ 36 price target, up to $ 1.