Will Kroger Co (NYSE:KR) Survive the Intense Competition from Amazon?

November 13, 2017, 08:49 am ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

Kroger Co (NYSE:KR) has lost about 40% of its value year-to-date, much of this decline is attributed to the intensifying competition in the grocery retail industry. The biggest decline in the company’s stock price was occasioned by Amazon.com, Inc. (NASDAQ:AMZN) entering Kroger’s core grocery market.

Article Summary

Kroger has lost over 40% of its stock value in the past year.

The retailer is facing stiff competition from Amazon in its core retail segment.

The company has implemented several strategies in order to remain competitive.

Here’s the trading report on KR.

The company’s stock price has been on a steady decline from the beginning of this year due to concerns regarding its margins, its pricing power and the increasing competition. Ever since the company reported Q4 2016, earnings, which indicated that same-store sales had declined by 0.7%, its stock price started declining. This trend continued for most of fiscal 2017.

Amazon’s acquisition of Whole Foods Market, Inc. (NASDAQ:WFM) in August this year also triggered a massive decline in the company’s stock price due to concerns over increased competition. The concerns were compounded by Amazon’s announcement that it would slash prices of many grocery items, while at the same time providing massive discounts to its prime members on some of their purchases.

The concerns regarding whether Kroger shall survive Amazon’s onslaught are well founded given the impact that Amazon has had on other physical retailers such as Wal-Mart Stores Inc (NYSE:WMT) among others. Most physical retailers are witnessing declining foot traffic in malls as more people choose to shop online, which has led to declining same-store sales for most brick and mortar retailers.

However, Kroger has taken several steps to counter Amazon’s impact by launching the ‘Restock Kroger’ initiative, which aims at using digital technology and e-commerce channels to attract more customers to its core grocery products. This strategy allows the company to compete effectively with Amazon by giving its customers a shopping experience similar to that offered by Amazon.

The company has also hinted at a move to sell its convenience stores, which would reduce its overall operating costs, while at the same time increasing profits. Kroger also announced that it was planning on launching its own apparel brand in order to compete with Amazon in the clothing market.

The company’s future lies in the balance given the major headwinds its facing in terms of competition from other grocery retailers such as Aldi, Lidl, Target Corporation (NYSE:TGT) and Amazon.

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