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Shopping & Investing: Check Out Kroger & Target

Kroger Will Reward Patient Investors

Summary

  • Kroger’s comps are increasing at a decreasing rate.
  • Kroger’s focus on private label offerings makes it truly unique.
  • Kroger generates significant value for its shareholders which is why it could reward investors in the long-run.

By S. Hasan Abid

Kroger's growth is slowing but that is to be expected and the supermarket chain still remains a great company.

Kroger (NYSE:KR), the biggest player in the grocery store space, is developing a habit of beating analysts' earnings estimates and posting positive comp sales growth quarter after quarter. In Q1 2016, despite facing deflation headwinds, Kroger's same-store supermarket sales grew by a reasonably impressive 2.4%. Mr. Market, however, wasn't impressed.

Too often I've seen companies becoming a victim of their own success. Once you start posting comps close to 5%, you raise expectations and then delivering anything below say 3%, has a depressing effect on the stock price. This is exactly why Kroger's stock is languishing slightly below $35, exactly where it was way back in January 2015.

Recall, in Q1 2015 and Q1 2014, Kroger's comps sales growth clocked in at 5.7% and 4.6% respectively. When viewed against these numbers, 2.4% looks small. Does that necessarily mean Kroger's growth is slowing down? Technically, no company can keep growing forever and Kroger's growth is bound to slow down at some point. But as it stands, Kroger has ample room to keep expanding and investors shouldn't be excessively worried about Kroger's comps growth. Fundamentally, Kroger's business remains strong... CONTINUE READING



Weathering Storms Is Becoming A Habit For Target

Summary

  • Target’s new bathroom policy has led to a fall in the company’s public perception.
  • AFA has been leading the boycott against Target. This isn’t the first time the retailer has caused controversy.
  • Target was hit by a horrific credit card breach in 2013. The company managed to recover in a year.
  • I don’t think the recent boycott will affect Target’s prospects in the long-run.

By S. Hasan Abid

Ever since announcing its 'inclusive' transgender bathroom policy Target (NYSE:TGT) has yet again come under pressure. According to YouGov BrandIndex, Target's Buzz score, which is a proxy for brand perception, fell by nearly 50% in April 2016, suggesting Target's new rule didn't go down well with many conservative families. The rather infamous American Family Association ("AFA") has been leading the boycott against Target. As per the AFA, around 1.2 million people have signed a petition requesting people to stay away from Target.

Now this clearly is a thorny perception issue and I am not here to debate whether or not Target's bathroom policy is 'correct' from a moral or ethical point of view. That is, quite frankly, beyond the scope of an investment analysis. Nevertheless, it is worth taking a critical look at this issue and assessing how far it affects Target's outlook in the long-run... CONTINUE READING

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