Roth Capital upgrades Kroger to Buy, sees performance gap closing

Investing.com -- Roth Capital Partners upgraded Kroger to Buy from Neutral in a note on Wednesday, citing consistent performance improvements and a valuation that continues to trail competitors.

The firm also raised its price target for the stock to $75 from $66.

“Kroger, again, surpassed expectations, with strong ID sales and SG&A expense control/leverage,” Roth Capital wrote. “FY’25 returns to profit growth, and ID Sales have accelerated, narrowing the gap to leading competitors. Despite this, Kroger’s valuation (~7.6x EV/NTM EBITDA) has lagged peers.”

The analysts pointed to multiple performance drivers, including “strong alternative profit streams (~$1.5bn); margin accretive private brands; supply chain savings; and pharmacy gains.”

Same-store sales have rebounded steadily, improving from a trough of -0.8% in 2023 to +3.4% in 2Q25. Roth Capital expects ID sales ex-fuel to hold at 3.4% in both 3Q and 4Q, above consensus forecasts of around 3%.

The firm highlighted the resilience of the food-at-home channel, which benefits from consumer belt-tightening.

“In times of consumer stress, Food-at-Home enjoys a channel shift away from restaurants,” the note said. With CPI for food at home rising 2.7% year-on-year in August, the highest since August 2023, Roth Capital sees tailwinds for profitability.

Valuation remains a key theme. “Walmart gets credit for strong brick&mortar performance and digital ecosystem building, but investors have neglected the similar progress at Kroger,” Roth Capital wrote.

They note that Kroger’s e-commerce growth of 16% and alternative profit EBIT of $1.5 billion compare favorably with peers, yet its valuation premium to Target and Albertsons is modest.

While acknowledging threats from Walmart and Amazon, Roth Capital concluded that Kroger “deserves re-rating higher as performance continues.”

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