Kroger (KR) Stock Forecast & Price Target

Kroger is attractively valued with a current EV/EBITDA multiple of 6.2x our 2026E EBITDA, below its five-year historical average of ~7.1x. The company's gradual price repositioning and focus on volume improvement and EBIT margin expansion, along with its recent acquisition of Giant Eagle, offer potential for positive future results, leading us to maintain a BUY rating and price target of $71.

Kroger is facing several challenges in the near-term, including weak food volumes and intense competition in the grocery market, which are likely to impact the company's financial performance. Lowering estimates for the next two years due to a challenging macro backdrop, the analyst foresees a decline in EBIT by $95 million, or $125 million in the 2H, mostly due to lower food volumes and comps. Additionally, the potential for price investments and elevated fresh product spoilage could further impact brick & mortar EBIT. The analyst is also concerned about the company's ability to pass through price increases and potential healthcare/pension expense pressures, as well as increased competition from e-commerce and non-traditional food retailers. Despite this, the company is executing on a strategic turnaround plan that involves significant investments in direct e-commerce, procurement savings, and expense reduction. However, the impact of these efforts will take time to materialize, and the analyst expects a gradual margin re-set for the brick & mortar business. In light of these challenges, the analyst maintains a negative outlook on the stock and has lowered their price target to $71, based on a multiple of 6.9x the company's 2026E EBITDA, implying a potential upside of 28% from current levels