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The most recent results from Kroger Co. indicate that Walmart Inc. and Target Corp. both withdraw from Kroger's basket items, gaining market share while Kroger invests to keep up.
Kroger
KR, -2.50%
Shares slid 2.5% again after falling nearly 10% on Thursday. The stock has sunk by nearly 14% for the week up to now.
The grocer has focused on the progress of his Restock Kroger plan in publishing results, including larger digital capabilities. Digital sales growth for the quarter was 50%.
Lily: Kroger sales are insufficient
In August, he announced a partnership with a robotics company, Nuro, to drive driverless delivery. And in May, it increased its stake in UKK's Ocado Group PLC and its licensed technology to run automated warehouses and make deliveries online.
However, these efforts collided with those of Walmart
WMT, -0.61%
and target
TGT -0.26%
, which have each stepped up their digital games to provide services such as curbside recycling and fast delivery. According to eMarketer data, the use of grocery applications will increase by almost 50% by 2018.
"Kroger's slowdown in sales over the past quarter contrasts sharply with improvements at Walmart and Target and the increase in the food retailing business by Nielsen," JP Morgan analysts wrote in a note. "We conclude that Kroger is probably struggling with market share."
Kroger recorded identical sales growth of 1.6% for the quarter, following a 1.9% growth in the first quarter.
J.P. Morgan believes that Kroger shares the neutrality with a price target of $ 28.
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Credit Suisse analysts also point to the outperformance of Walmart and Target's same-store sales compared to Kroger.
"We believe that the share gains reflect a number of efforts, including additional price investments, enhancements to their product mix, including private brands, and technology investments, including the growth of online shopping (Walmart in particular)."
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Analysts believe there is a market share "to be won" but are curious whether Kroger's investments will pay off.
"After a difficult quarter for Kroger, we will look to see if its initiatives materialize in 2H to help reduce the gap, especially thanks to recent price investments. [and] takes advantage of remodeling work, because the Q2 should be the peak of the disturbance, "says the note.
The Credit Suisse Target's rates outperform with a price target of $ 94 and Walmart neutral with a price target of $ 103.
BMO Capital Markets also raises questions about the second half of the year.
"In the longer term, we believe investors should consider whether digital initiatives, such as Ocado, will provide Kroger with a competitive edge in a fast-moving food distribution environment that seems to evolve into a two-hour delivery. Kelly Bania wrote.
Analysts wonder if Ocado is designed to offer fast delivery that is becoming the industry standard.
"While it is possible that it is offering the same day in some areas, we anticipate that these automated hangars of 300 to 350 square feet will be located in areas that make delivery of one hour difficult." and two hours for the majority of customers ". note says. "This seems less convenient, in our opinion, than the rapidly expanding offerings of Instacart, Amazon / Whole Foods and others."
Just this week, Amazon.com Inc.
AMZN, -1.00%
announced that the Prime Now grocery store, which can only last an hour, has expanded to 10 more cities.
BMO rates on the Kroger stock market.
Kroger shares are up 1.6% since the beginning of the year, while the S & P 500 index
SPX, + 0.02%
is up 8.6% over the period.
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