Melius Research has shifted its stance on Kroger, upgrading the stock from “Sell” to “Hold” with a raised price target of \$70. This change is rooted in Kroger’s recent operational improvements and renewed market positioning, especially in its pharmacy and digital operations.
🩺 Kroger is capitalizing on a wave of pharmacy closures from competitors, allowing it to absorb market share without the need for major investment. This new tailwind is offering a more stable earnings outlook in a typically low-margin sector.
💻 On the tech front, Kroger has steadily built out its digital and e-commerce channels, resulting in improved customer engagement and a more seamless omnichannel experience. These developments signal a company that is no longer playing catch-up but is instead innovating to compete.
📉 Another point in Kroger’s favor is its relatively low exposure to tariffs, which helps insulate its operating costs compared to peers that depend more heavily on imports.
💰 Dividend Snapshot:
– Annual Dividend: \$1.28 per share
– Dividend Yield: Approximately 1.84%
– Payout Ratio: 34.88%, indicating healthy coverage
– Dividend Growth: 10 consecutive years of increases, with a recent annual growth rate of 10.34%
The upgrade reflects confidence in Kroger’s adaptability and emerging strengths. While not yet a buy, the neutral rating acknowledges a business that is no longer deteriorating and may be setting the stage for long-term value creation.