The Impact of Inflation Talks on Kroger and Albertsons Stocks
On Thursday, markets faced a tumultuous day, as the S&P 500 and Nasdaq dropped over 2%. The decline stemmed from ongoing tariff discussions in the U.S., which raised concerns about the possibility of rising inflation.
In this climate, Kroger KR and Albertsons ACI have proven resilient, hovering near their 52-week highs. These stocks are increasingly viewed as defensive plays amidst recent market fluctuations.
Typically, during economic downturns, investors gravitate towards companies providing essential goods or services, making Kroger and Albertsons particularly attractive as two of the largest grocery retailers.
Year-to-Date Performance and Valuation
Over recent weeks, the broader market indices have continued to decline, with the tech-heavy Nasdaq experiencing a 6% drop year-to-date in 2025. In contrast, the S&P 500 has only decreased by 1%. Notably, Albertsons stock has surged 7% to $21 per share, while Kroger shares have risen by 5%, trading at $63.
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Given their essential nature, Kroger and Albertsons’ appealing valuations are garnering investor interest. Both companies are trading significantly below the ideal sales level of 2X, with Kroger at 0.3X and Albertsons at 0.15X. Additionally, Kroger’s forward earnings multiple stands at 13.1X while Albertsons is at 9X.
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Future Outlook for Kroger and Albertsons
Despite attractive valuations, both Kroger and Albertsons have seen a slowdown in growth. The anticipated merger aimed at mitigating this issue was ultimately denied in December, due to federal and state courts expressing concerns about reduced competition and potential price hikes for consumers.
Looking ahead, Kroger’s total sales are projected to decrease by 2% in fiscal 2025 but are expected to stabilize and grow by 1% in FY26, reaching an estimated $148.78 billion. Correspondingly, Kroger’s earnings are anticipated to decline 6% this year to $4.46 per share compared to $4.76 in 2024, with a rebound forecast of 7% for FY26, increasing EPS to $4.77.
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For Albertsons, sales are projected to grow by 1% in FY25, expanding 3% in FY26 to a total of $82.58 billion. While annual earnings may drop to $2.29 per share from $2.88 the previous year, FY26 is expected to stabilize, with a 2% increase to $2.34 projected.
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Comparison of Dividends
Both Kroger and Albertsons offer attractive dividend yields, despite their modest growth. Albertsons offers an annual dividend yield of 2.89%, while Kroger’s stands at 2.05%, both surpassing the S&P 500 average of 1.23%.
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Conclusion
Currently, Kroger and Albertsons hold a Zacks Rank #3 (Hold). Their stock could serve as a defensively safe option for investors amid macroeconomic concerns. However, it’s worth considering other stocks with essential operations and stronger growth potential for more effective hedging.
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The Kroger Co. (KR): Free Stock Analysis Report
Albertsons Companies, Inc. (ACI): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
