KROGER CO (KR): what the price assumes

In the published model solve dated 2026-Q2, anchored at $57.72, KROGER CO (KR) is priced for -0.6% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-27.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/KR

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Solve inputs: computed at a 6% cost of capital with 4% terminal growth over a 5-year stage (computed at the 6% minimum rate; the CAPM rate 5.1% sits below it).

How unusual the bet is: elevated (limited comparison data)

Valuation X-Ray

The price is justified by relative-multiple; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Relative Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.1%); the inversion above states its own rate.

Per-Model Detail (n=15)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Kroger runs the classic supermarket trade, razor-thin retail margins near 1% to 2%, but layers a higher-margin media, data, and pharmacy business on top that the 10-K credits with rising third-party media revenue, the part of the model that actually scales.
• The defining number is the share count: management is buying back stock fast enough to shrink shares roughly 3% to 4% a year, and a fresh $2 billion authorization in June 2026 continues it, so per-share value can grow even when total profit barely moves.
• Watch identical sales and the new CEO's cost agenda: Greg Foran's first full quarter delivered identical sales ex-fuel up 1.0% with FY2026 guidance reaffirmed, and the bet is whether his execution push widens thin margins.

Bull Case

Read Kroger as what it is at this stage: a mature, low-growth grocer that has quietly built a second engine inside the first. The supermarket itself earns almost nothing per dollar of sales, with company-wide operating margin around 1% to 2%, which is simply how grocery works. The interesting part is the business riding on top of the store traffic. The 10-K points to a growing stream of "third-party media revenue, data analytic services, specialty pharmacy and in-store health clinics", and credits recent movement in that line to rising third-party media revenue specifically. Selling advertising against a customer who is already in the aisle costs almost nothing to deliver, so each incremental media dollar carries far higher margin than a dollar of groceries. The grocery business buys the traffic; the media business monetizes it.

The digital build is the lever that makes the media engine bigger. Kroger frames its channels as serving "customers anything, anytime, and anywhere with zero compromise on selection, convenience, and price", and the more orders flow through its own apps and interfaces, the more first-party data it owns to sell against. That is the structural reason a grocer can earn a media margin a pure retailer cannot. The risk the company names honestly, that it must keep "reducing or offsetting the cost of fulfilling orders outside of our in-store channel", is the cost side of the same trade, and getting that fulfillment math right is what turns digital scale into profit rather than expense.

Capital allocation is where a slow grower can still reward a shareholder, and Kroger leans into it hard. The share count has been falling at roughly 3% to 4% a year, and in June 2026 the board added a $2 billion repurchase authorization targeted for completion by fiscal year end. When a company shrinks its share base by 3% to 4% annually, flat total profit becomes mid-single-digit per-share growth, and the dividend on top compounds the return. Against a grocery cohort that includes Albertsons and the distribution names Sysco and US Foods, Kroger's scale gives it the buying power to hold price while still funding the buyback, and that combination, low growth but real per-share compounding, is the bull case in one line.

Bear Case

The pressure that has the most leverage on this thesis is macro and competitive at once: Kroger sells food at a margin so thin that a small shift in price competition or consumer behavior swings the whole result. Company-wide operating margin sits around 1% to 2%, which means there is almost no cushion. A new CEO arriving and arguing publicly that Kroger has the right assets but is not operating at the standard required to lead the industry is, read plainly, an admission that execution has slipped, and execution is the only thing standing between a thin-margin grocer and a no-margin one. When Walmart and Amazon set the price floor, Kroger either matches and gives up margin or holds and gives up traffic. The 10-K's own competition language names the squeeze: rivals "may incorporate AI into their products, services and operations more successfully, which could impair our ability to compete effectively."

The second macro lever is the cost of the digital build that the bull case depends on. The same fulfillment business that feeds the media engine is, in the bear's reading, a structurally money-losing channel that has to be subsidized. The 10-K warns that if Kroger is "not successful in reducing or offsetting the cost of fulfilling orders outside of our in-store channel," its results could suffer, and that is the bear's point: online grocery picking, packing, and last-mile delivery is expensive, and the customer expects it for free. The media margin is real, but it is being spent fighting a fulfillment cost the company has not yet proven it can offset at scale.

The balance sheet limits how long the buyback can do the heavy lifting. Net debt sits near $14.2 billion against only about $3.3 billion of liquid assets, and because interest expense is not separately broken out in the latest filings, the coverage cushion cannot even be cleanly measured. Net debt is more than four times trailing operating profit, so the company is funding both the dividend and the repurchase out of a profit stream that is itself cyclically pressured. If identical sales slip toward the low end of guidance and margins do not improve, the buyback either slows or gets funded with more leverage, and the per-share compounding story that holds the price up loses its engine. The price already sits below where even a modest profit decline would warrant, so the market is not pricing optimism here; the bear case is that thin margins plus a heavy balance sheet leave little room for the execution turnaround to disappoint.

Valuation

The price is making a conservative bet, not an optimistic one. At today's level the market pays roughly 18 times Kroger's through-the-cycle operating income, a multiple low enough that the price sits below what even a 5% annual decline in operating profit would warrant. In plain terms, the market is already braced for the business to shrink modestly, which is the opposite of the durability premium a quality compounder usually carries. This uses Kroger's own mid-cycle margin near 2.1% rather than a depressed trough quarter, because grocery earnings move with the cycle and the trailing print understates the steady state.

The method families split the way they do for an asset-heavy, low-margin retailer. The asset-value and earnings-power lenses both read the price as expensive, landing well below it, because book value and a single year's capitalized earnings cannot capture a business whose worth is in recurring traffic and the media stream layered on it. The relative-multiple lens lands below the price, reflecting how cheaply Kroger trades against the grocery cohort, and the growth-oriented cash-flow methods land near the price. That pattern, cheap on peer multiples and reachable only by the forward methods, is a value read: the static lenses say the assets alone are worth less, and the price is paying a modest premium for the cash the business throws off.

Solvency is the constraint that bounds the upside. Net debt near $14.2 billion against about $3.3 billion of liquid assets is more than four times trailing operating profit, and the share count is falling 3% to 4% a year as the buyback runs. The valuation rests on that buyback continuing: a low multiple plus an aggressive repurchase is how a no-growth grocer manufactures per-share growth, and the new $2 billion authorization keeps it going. A street mean target in the low $70s sits above today's price; the gap is the street crediting the execution turnaround and continued buyback that the value-oriented methods here do not extend into the forecast.

Catalysts

The first-quarter fiscal 2026 print, reported in June, framed the year. Revenue reached $46.1 billion, up about 2.2%, with identical sales excluding fuel up 1.0%, operating profit of $1,407 million, and GAAP EPS of $1.46. The company reaffirmed full-year guidance of identical sales without fuel of 1.0% to 2.0% and operating profit of $5.0 billion to $5.2 billion, and the board approved an additional $2 billion repurchase authorization targeted for completion by fiscal year end. The setup is steady top line, reaffirmed targets, and a fresh buyback, which is exactly the slow-grower-plus-repurchase pattern the valuation rests on.

The leadership change is the catalyst that matters most for the next several quarters. Greg Foran used his first full earnings call as CEO to put cost control, price competitiveness, and store execution at the center of the agenda, arguing the company has the right assets but is not yet operating at the standard required to lead. A credible execution turnaround would widen the thin operating margin, which is the single highest-leverage lever on the stock; a stumble would do the opposite. The next identical-sales print is the scoreboard for whether the new operating discipline is landing.

The sell side is split and trimmed estimates after the quarter. The consensus rating sits at Buy to Hold depending on the panel, with a mean price target in the low $70s above today's price, and several analysts cut their forecasts following the Q1 report. The spread of views reflects the core tension: a cheap multiple and a real buyback on one side, thin margins and an unproven turnaround on the other.

Peer Cohorts (Per Segment, With Filing Citations)

Retail operations (reported)

• ACI (Albertsons Companies, Inc.)
• FY2025 10-K: …our share of retail food sales. An increasingly competitive industry and inflation and deflation in the prices of certain foods have made it difficult for food retailers to achieve positive identical sales growth on a consistent basis. We and our competitors have attempted to maintain or grow our respective share of…
• FY2025 10-K: ) These amounts are included in the computation of net pension and post-retirement (income) expense. For additional information, see Note 11 - Employee benefit plans and collective bargaining agreements. 96 Table of Contents NOTE 15 - SEGMENT INFORMATION The Company and its subsidiaries offer grocery products, general…
• SFM (Sprouts Farmers Market, Inc.)
• FY2025 10-K: …raw materials, fuel and other energy, high levels of unemployment and consumer debt, depressed home values, high tax rates, tariffs and other factors that affect consumer spending and confidence or buying habits. These factors, which are largely outside of our control, may materially adversely affect the demand for…
• FY2025 10-K: …stores were within 250 miles of a distribution center as of December 28, 2025. • Customer Engagement and Personalization. We believe we are elevating our national brand recognition and positioning by telling our unique brand story rooted in product innovation and differentiation. We are increasing our use of data…
• WMK (WEIS MARKETS, INC)
• FY2025 10-K: …performance of the segment. The following table presents the retail segment's revenue, significant segment expenses, and segment operating and net income for the years ended December 27, 2025, December 28, 2024, and December 30, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 (amounts in thousands) ​ ​ ​ 2025 ​ ​ ​…
• FY2025 10-K: ​ ​ ​ ​ ​ Note 8 Segment Reporting The Company manages the business activities on a consolidated basis and has one operating segment: retail. The Company derives all its revenue from sales within Pennsylvania and surrounding states. The Company's retail segment derives revenues from customers through the retail sale…
• USFD (US FOODS HOLDING CORP.)
• FY2025 10-K: …in hospitality volume, partially offset by a 3.5% decrease in chain volume. Organic broadline sales of private brands represented approximately 35% and 34% of net sales in fiscal years 2025 and 2024, respectively. Gross Profit Gross profit increased $330 million, or 5.1%, to $6,864 million in fiscal year 2025,…
• FY2025 10-K: …customers and, as a result, our customers may turn to other distributors. Furthermore, any changes to the pricing practices of our suppliers, including the reduction or elimination of promotional allowances, could result in a material adverse effect on our business, financial condition and results of operations. Our…
• SYY (Sysco Corporation)
• FY2025 10-K: …amounts in assets, operating methods, technology and management expertise in this segment. The breadth of its sales force, geographic reach of its distribution area and its purchasing power enable this segment to generate its relatively stronger results of operations. 33 The following table sets forth a summary of…
• FY2025 10-K: …systems, fleet, other equipment and technology; • acquisitions consistent with our growth strategy; • debt repayments; • cash dividends; and • share repurchases. Any remaining cash generated from operations may be invested in high-quality, short-term instruments. As a part of our ongoing strategic analysis, we…
• PFGC (Performance Food Group Company)
• FY2025 10-K: …that provide custom-cut and packed seafood to our customers and our other distribution centers. The Convenience segment operates two additional facilities as a third-party logistics provider dedicated solely to supporting the logistics and management requirements of one of our customers. These distribution facilities…
• FY2025 10-K: …including banking and finance. 19 Item 2. P roperties As of June 28, 2025, we operated 155 distribution centers across our three reportable segments. Of our 155 facilities, we owned 72 facilities and leased the remaining 83 facilities. Our Foodservice segment operated 89 distribution centers, our Convenience segment…
• UNFI (UNITED NATURAL FOODS, INC.)
• FY2025 10-K: …compete with retailers that maintain or develop self-distribution systems, as well as companies that offer services in digital advertising, fulfillment and delivery services, health and wellness and financial services. The primary competitive factors in the wholesale business include price, service level, product…
• FY2025 10-K: …There was no impact to the Company's consolidated results. (2) The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision maker. (3) Other segment items for each reportable segment include: • Natural and Conventional - other…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.