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Can Kroger March Ahead in a Post-Pandemic World?

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The coronavirus pandemic may be taking a toll on many businesses in the country, but supermarket giant The Kroger Co. (KR - Free Report) is actively pursuing several initiatives to stay ahead in the game. The company may have banked on panic-buying earlier, but has set several plans in motion right now that should pay off in the long run.

Kroger Gains From Pandemic-Triggered Sales

To get a sense of investors’ optimism around Kroger, let’s take a look at its stock price performance since the beginning of this year. Shares of Kroger, which belongs to the Zacks Retail - Supermarkets industry, have gained 13.1% so far this year compared to the industry’s rise of 3.9%.

A major reason behind this optimism is increased sales. As the government imposed strict social distancing measures and restaurants around the country shut down, Americans took to buying their groceries and cooking at home. More people stocked up their pantries to the brim over fears of running out of food products and other essential items, which led to a significant rise in sales.

Of course, this trend has helped Kroger so far even for a while from now. This is because even as lockdowns are being lifted slowly by the states, people may want to stay indoors until there is some concrete development on vaccine or cure for coronavirus.  So, they are likely to continue cooking at home in the foreseeable future. This is good news for supermarkets and grocery outlets, as these could keep on witnessing increased sales as long as the trend prevails.

But it’s a different story with Kroger. The company’s many initiatives over the past two years are playing out rather well in the current scenario, and thus could be major cardholders ahead.

Major Technological Changes to Match the Likes of Amazon

First, the Cincinnati-based company’s measures for revamping its businesses came in the form of selling its convenience stores. In April 2018, Kroger sold its convenience store business (762 convenience stores, which comprised 66 franchise operations) to EG Group, a UK-based fuel stop and convenience store retailer.

Second, in May 2018, Kroger acquired the Chicago-based meal kit provider Home Chef. The deal helped the company secure a strong foothold in the retail food market.

Third, in July 2019, Kroger entered into a partnership with British online grocer Ocado Group Plc to automate its grocery warehouses in the United States. These robotic grocery warehouses offer tremendous flexibility to the supermarket giant, both in terms of operations and innovation. The company’s ambitious plans could put it well ahead in e-commerce operations and up competition against other players such as Amazon.com, Inc. (AMZN - Free Report) .

Kroger’s venture into automated warehouses has strong potential to boost the company, thanks to more consumers opting for online grocery shopping in the wake of the pandemic. Of course, one may expect this trend to carry on in a post-pandemic scenario, given the ease of contactless shopping.

Finally, Kroger’s decision to offer Plant-based meatmaker Impossible Foods’ burgers earlier this week across its 1700 stores in the country has tapped right into the demand for vegan alternatives for meat. The burgers will also be available on Kroger.com and for curbside pickup and delivery. This move is particularly of importance right now as meat plants have remained closed to stop the rapid spread of coronavirus among workers.

Kroger’s expected earnings growth rate for the current year is 12.3%.The Zacks Consensus Estimate for the company’s current-year earnings has moved 5.1% north in the past 60 days. Kroger carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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