Kroger (KR) Gains as Hidden Value of Venture Concepts Highlighted
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Shares of Kroger (NYSE: KR) are solidly higher Tuesday (+2%) after Morgan Stanley analyst Vincent Sinisi highlighted hidden value in the company's forward-looking 'Venture Concepts'.
Sinisi said they think Kroger could ramp its Mariano's, Main & Vine, and Ruler Foods formats, unlocking incremental value of up to $12/share, or 40% of the current stock price.
Future growth in Food Retail will likely be driven by specialized concepts, the analyst said, and Kroger is taking an offensive approach.
Mariano's is an 'Urban Upscale' format with a focus on prepared / specialty foods. Main & Vine, offering fresh foods in a small-box format. Ruler Foods is Kroger's hard discount / deep value format.
"We believe KR has the customer knowledge, infrastructure, and capital in place to meaningfully scale these concepts," according to Sinisi.
The firm sees $4 of incremental value in a Bull Case where KR expands these concepts and $12 in an Extreme Bull Case where 'Venture Concepts' reach full scale potential.
The firm reiterated an Overweight rating and price target of $41 on KR.
Shares of Kroger closed at $29.05 yesterday.
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