Kroger (KR) competes closely against Wal-Mart (WMT) throughout the country, which could spell trouble as Wal-Mart expands its store base in existing markets, writes Jefferies analyst Scott Mushkin.
Wal-Mart, which rolled out its new growth strategy this week, is also looking to cut prices significantly in the next couple of years, which could pressure Kroger considerably, Mushkin notes.
“Indeed, Wal- Mart�s plans to accelerate store openings in 2012 (225 from about 145), with more emphasis on existing markets, and increase its price investments in the U.S., all suggest the potential for incremental margin and possibly comp pressure, given KR�s significant footprint overlap with WMT. We now anticipate that WMT could triple its competitive openings against KR next year to 90 (in 2010, the latest data available, we estimate that WMT opened about 25 in KR�s core territories).”
Mushkin cut his rating on Kroger to Hold from Buy.
No comments:
Post a Comment