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MARKETS LIVE BLOG:

STOCKS TRADE MIXED AFTER ISRAEL STRIKE-FUELLED TUMBLE

Shares of Netflix, the first of the megacap techs to report, slide in early trading

Kroger's (KR) Mergers & Tie-Ups Help Position Stock Better

Zacks Equity Research
Updated

Shares of The Kroger Co. KR are near a 52-week high of $31.45. The company touched $28.89 on Jun 29 before closing a bit lower at $28.45. Notably, this Zacks Rank #3 (Hold) stock has gained 22.2% in the past three months, outperforming the industry’s rise of 1.7% and the overall sector’s increase of 9.8%.

Kroger is trying all means to overcome competition in the grocery space, which is undergoing a fundamental change with technology playing a key role and focus shifting to online shopping. The company is pursuing acquisitions and partnerships to drive growth and provide customers with a hassle-free shopping experience.

It is introducing digital coupons, the facility of online order pick-up at stores and smart shopping lists. Further, the “Restock Kroger” program is also gaining traction.

 

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Let’s find out whether the company will be able scale a new 52 week-high anytime soon.

Strategic Partnerships & Acquisitions

The company’s recent tie-up with Nuro, the maker of driverless road vehicle to deliver groceries at customers’ door steps, will definitely prove to be game changer. Customers can place same-day delivery orders via Kroger's ClickList ordering system and Nuro's app.

Apart from this, the company’s deal with Ocado, an online grocery delivery company, along with the acquisition of Home Chef, a meal kit provider, is definitely strategic.

Kroger in partnership with Ocado is likely to develop three automated warehouse facilities this year and plan to take the count to 20 in the first three years. The alliance under discussion is part of the company’s “Restock Kroger” program. Further, Kroger is looking to expand its “Scan, Bag, Pay & Go and Self-CheckOut” program to nearly 400 locations in 2018.

"Restock Kroger" Program

Kroger commenced the “We Are Local” campaign; new restaurant concept, Kitchen 1883; and added two product lines under “Our Brands” — an apparel brand and a floral line, BLOOM HAUS. The company is also passing the benefit of cost containment to customers by lowering prices. Under the program, management offloaded convenience stores to focus on core operations and expects to generate $400 million in incremental operating margin by 2020 and more than $4 billion of free cash flow (or $6.5 billion before dividends) over the next three years.

The company plans to make an incremental investment of $500 million in associates — wages, training and development, customers and infrastructure — over the next three years. The company also hinted that the “Tax Cuts and Jobs Act” will allow it to channelize the surplus money into the program.

3 Retail Stocks Hogging the Limelight

Shoe Carnival, Inc. SCVL has a long-term earnings growth rate of 12% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores, Inc. BURL has a long-term earnings growth rate of 18.1% and carries a Zacks Rank #2 (Buy).

Fossil Group FOSL delivered an average positive earnings surprise of 54.1% in the trailing four quarters. The Zacks Rank #2 company has a long-term earnings growth rate of 5%.

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Fossil Group, Inc. (FOSL) : Free Stock Analysis Report
 
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Burlington Stores, Inc. (BURL) : Free Stock Analysis Report
 
The Kroger Co. (KR) : Free Stock Analysis Report
 
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