Will the Kroger Co (NYSE:KR) Implosion Finally End?

Kroger Co (NYSE:KR) has experienced a steady decline in its stock price from the beginning of this year and has broken numerous resistance levels to currently trade at levels below $20. The company recently announced a dividend yield hike in order to attract more investors and boost its stock price, but investors are not yet convinced.

The company faces stiff competition from Amazon.com, Inc. (NASDAQ:AMZN), especially in the grocery segment, given that Amazon recently acquired Whole Foods Market and is in the process of slashing prices in order to attract more customers.

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The only viable solution for Kroger to stop its rapid decline is to assure investors that their interests are protected and for the company to diversify into other segments. Currently, investors are avoiding the retailer because they are not sure if the company’s management is committed to protecting their interests.

The company should also institute a turnaround strategy, which should outline the company’s diversification efforts into other related and profitable segments. For example, the company might be losing market share in the grocery segment to Amazon, but it can tap into the existing opportunity for operating in-store restaurants.

Kroger is currently running a share buyback program, but some analysts opine that the company should scrap this program and instead increase its dividend. The company’s current 2.45% dividend is not attractive to dividend investors, but the company can attract more investors by increasing its dividend yield.

Kroger was the second-largest player in the US grocery market in 2016 by controlling about 7.17% of the market with Wal-Mart Stores Inc (NYSE:WMT) being the largest player in this industry. However, Amazon’s acquisition of Whole Foods, which controlled 1.21% of the market, is likely to affects Kroger’s market share, but Kroger can still recover from its declining market share in the US grocery sector.

The company is performing quite well as evidenced by its second quarter earnings results where revenues beat expectations by $110 million to come in at $27.6 billion. The company is also not losing foot traffic in many of its stores, which is evidence of its strong position in the retail market.

The question remains whether Kroger is a good investment at its current depressed price and whether its future profitability is predictable.

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