Kroger (KR) Stock Forecast & Price Target

Kroger's financial position reflects a resilient operating model, evidenced by a 4Q24 gross margin increase of 30 basis points year-over-year to 22.7%, despite a small contraction in operating margin. The company's strong performance in digital sales, which grew 11% year-over-year and includes an 18% increase in delivery sales, highlights its expanding market presence beyond traditional food retailing. Furthermore, Kroger's strategic investments in areas such as health and wellness, personal finance, and advertising/media are expected to enhance its long-term profit profile, with adjusted EPS projections for 2025 rising to $4.81.

The negative outlook on Kroger’s stock is supported by a downward revision of the 2025 EPS estimate from $5.06 to $4.79, indicating potential challenges in achieving higher profitability. Additionally, the company reported a deleveraging in its operating, general, and administrative expense ratio, which increased by 51 basis points to 19.3%, reflecting concerns over rising operating costs. Significant risks such as volatile commodity costs, weakened consumer confidence, rising interest rates, and fluctuating unemployment rates further complicate the company's financial stability and growth prospects.