Scott R. Grossman
Founder of Vindico Capital, Consumer-Sector Investor
Kroger's push toward lower everyday prices and private label will squeeze legacy food brands from both sides: pressure on wholesale prices and lost share. Its three-year plan targets about $5 billion in customer-value investment and $4 billion in annualized cost savings. Retailers control shelves and consumers; weaker brands, neglected in favor of buybacks and M&A, may surrender more of the profit pool. Kroger itself risks pain from price wars. x.com x.com x.com x.com x.comÂ
Kroger keeps quietly rewarding shareholders with dependable, defensive results, because everybody has to eat. In Q2 FY26 sales rose just 2% to $34.6B, but operating profit grew 12.5% to $971M as Kroger trimmed D&A and held costs flat. Net earnings rose 5%, while EPS jumped 15% to $1.05 because aggressive buybacks shrank the share count from 662M to 606M. x.comÂ
Kroger's $1.65B acquisition of Giant Eagle is a clean M&A catalyst with a named target and price. It points more to a steady rerating and strategic expansion than a high-beta surge, making Kroger the best clean but possibly less explosive name in the day's news. x.comÂ
US consumer staples look good here as a safe-haven play. x.comÂ
Costco and Walmart's valuations have diverged from most US food and beverage stocks. Most of the group trades near 20-year valuation lows, while these two have entered a mini-bubble. x.comÂ
Rising freight and oil costs threaten consumer staples margins, with plastic a significant input, while a weakening consumer adds trade-down risk. That makes chasing the recent bid for staples unattractive. x.comÂ
General Mills will struggle to raise prices or grow as GLP-1 drugs and inflation push shoppers toward store brands and away from cereals. It has two years of negative EPS growth and estimates, and its operating cash flow and margins should suffer in that environment. The company does produce cash and is cheap, as @calvinfroedge notes with $2-3B of annual operating cash flow and a shareholder yield above 10%. x.com x.comÂ
Walmart and Costco should gain as soaring diesel costs push consumers to trade down. Diesel is up 35% in 40 days and moves the trucks that stock every US shelf, and though America produces about as much oil as it uses, oil trades globally, so Europe's shortage hits US prices. Retailers must raise prices and lose volume or absorb costs and miss guidance. Discounters are big enough to absorb the shock and win trade-down shoppers; packaged food, staples and restaurants look best avoided. x.com … Show more
Procter & Gamble is highly likely to keep lagging the S&P 500 over the next 10 to 20 years, as it has this century. Store brands like Costco's Kirkland and Amazon's are no longer seen as inferior, which has changed its story, and few of its brands are must-haves besides Gillette. Elevated petroleum-based input costs for plastics and energy cast doubt on its safety-stock status. At $139, EV/EBIT is about 16 and forward P/E just under 20, so it suits only those wanting a bond proxy. x.comÂ
Ahold Delhaize's Food Lion, Chipotle and Amazon are the primary beneficiaries as consumers down-trade. Shoppers no longer want to pay for Netflix, Uber Eats, DoorDash, Uber rides, most restaurants, boutique grocery stores or the Amex Platinum membership fee. x.comÂ
Coca-Cola looks like a great funding short, since nothing makes it immune to the risks that battered its staples peers. GLP-1 drugs, store brands, new entrants and supply-chain inflation should hit it too, and non-sugar drinks only slow the U.S. decline, though international has held up better. About 2% revenue growth is thin support for 25x earnings while peers sit at 2008 valuations; it could fall to 15x unless the other staples rebound dramatically. x.com x.com x.com x.com x.com x.com x.com … Show more
