Wells Fargo Turns Neutral on Kroger (KR), Flags Spending and Growth Concerns

The Kroger Co. (NYSE:KR) is included among the 14 Best Affordable Dividend Stocks to Buy According to Analysts.

On February 25, Wells Fargo downgraded The Kroger Co. (NYSE:KR) to Equal Weight from Overweight. It also lowered its price target to $68 from $70. The firm said it is becoming more cautious and prefers to move to the sidelines for now. The analyst sees some potential under Kroger’s new leadership. Even so, the company will likely need to increase spending at a time when the grocery sector is already under pressure. Wells Fargo also expects near-term earnings risk, with core growth likely to remain muted. In its view, the current risk and reward balance does not justify a more positive stance.

CNBC reported on February 8 that Kroger appointed Greg Foran as its new CEO. He previously held senior roles at Walmart and most recently served as CEO of Air New Zealand. His appointment followed a year-long search after former CEO Rodney McMullen was removed in March after a board investigation into his personal conduct. Foran brings a strong operating background. While leading Walmart’s US business from 2014 to 2019, he helped improve store performance and delivered 20 straight quarters of comparable sales growth. Analysts see his experience as important, especially as Kroger faces slower consumer spending and increasing competition from Walmart.

Ronald Sargent, who stepped in as interim CEO, will remain chairman and support the leadership transition. The change comes during a difficult period for Kroger. The company recently failed in its $25 billion attempt to acquire Albertsons and continues to face broader challenges across the retail sector.

The Kroger Co. (NYSE:KR) operates supermarkets, multi-department stores, and fulfillment centers across the United States. It remains one of the country’s largest food and drug retailers.