KROGER CO (KR): what the price requires
The current priced-in claim for KROGER CO (KR) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/KR
Headline
| Field | Value |
|---|---|
| Ticker | KR |
| Company | KROGER CO |
| Current price | $59.47/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin (mid-cycle) | 2.1% |
| Trailing margin (depressed year) | 1.0% |
| Multiple paid | 19x mid-cycle operating income |
The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.
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).
Reconcile: at the x-ray's 9.3% required return this reads ~14%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.22σ |
| cohort percentile (of 69 peers) | 49 |
| implied end-window share | 0% |
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.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 3.36x | 5 | expensive |
| Earnings | 2.66x | 4 | expensive |
| Relative | 0.75x | 3 | justifies |
| Growth | 1.27x | 3 | expensive |
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 7.2%); the inversion above states its own rate.
Per-Model Detail (n=15)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $46.66 | 1.27x | yes | FCF base $3.5B, growth 0% (input: historical growth), terminal g 0.5%, WACC 7.2%, 5yr projection |
| DCF Exit Multiple | Growth | $60.09 | 0.99x | yes | Exit EV/EBITDA: 9.5x / 11.5x / 13.5x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $60.73 | 0.98x | yes | P/E 26.9x (blended: static sector reference 22x + trailing (TTM) 38x), scenarios: 22.7x / 26.9x / 31.1x (bear / base = reference held flat / bull), EV/EBITDA 14x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $16.77 | 3.55x | yes | BV/sh $9.05, ROE (TTM) 17.1%, ke 9.3% |
| Two-Stage Excess Return | Asset | $22.53 | 2.64x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $38.80 | 1.53x | yes | Rev $147.6B, growth 0% (input: historical growth; tapered), Terminal P/S: 0.2x / 0.3x / 0.3x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $22.42 | 2.65x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $3.32B × (1−23%) / WACC 7.2% → EPV (no growth) |
| Residual Income | Asset | $22.63 | 2.63x | yes | BV $9.05 + 5yr PV of (ROE (TTM) 17.1% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $17.71 | 3.36x | yes | √(22.5 × EPS $1.54 × BVPS $9.05) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $79.50 | 0.75x | yes | EBITDA $5.22B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $24.93 | 2.39x | yes | FCF $3456.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $22.34 | 2.66x | yes | SBC-adj FCF $3.30B (FCF $3.46B − SBC $0.16B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $1.29 | 46.10x | yes | EPS $1.54 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | $4.50 | 13.22x | yes | BV $9.05 × (ROIC 3.6% / WACC 7.2%) |
| P/Sales Sector | Relative | $450.82 | 0.13x | yes | Revenue $147.64B × sector P/S 2.0x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $16.65 | 3.57x | yes | EPS $1.54 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $14.2b |
| Net debt / NOPAT (after-tax) | 5.90x |
| Net debt / operating income (pre-tax) | 4.56x |
| Share count CAGR (buyback) | -3.4% |
| Burning cash | no |
Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 2.1%); the trailing year was depressed.
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.)
- (no filing in the citation store)
- SFM (Sprouts Farmers Market, Inc.)
- (no filing in the citation store)
- WMK (WEIS MARKETS, INC)
- (no filing in the citation store)
- USFD (US FOODS HOLDING CORP.)
- (no filing in the citation store)
- SYY (Sysco Corporation)
- (no filing in the citation store)
- PFGC (Performance Food Group Company)
- (no filing in the citation store)
- UNFI (UNITED NATURAL FOODS, INC.)
- (no filing in the citation store)
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.
- 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.
Sources
Kroger Q1 2026 results, June 2026 · Kroger Q1 2026 results and earnings call, June 2026 · Kroger Q1 2026 earnings call, June 2026 · MarketBeat and S&P Global analyst consensus, June 2026 · Kroger Q1 2026 results and 2026 guidance, June 2026 · MarketBeat, S&P Global, and Benzinga analyst coverage, 2026