Citigroup (NYSE: C) maintained its “hold” rating for Kroger and re-iterated its cautious outlook for food retailers. The New-York based bank also set a new price target of $21.00 for Kroger.
Citi analyst says, “Deflation has been moderating and inflation is returning in some categories such as milk. However, we are concerned the grocers may have a difficult time passing through inflation in a very competitive environment and with continued high unemployment, leading to GM pressure. We reiterate our cautious outlook on the food retailers and Sell (3H) rating on SAFEWAY (NYSE: SWY).”
“KR’s Private Label (PL) penetration is 35% of units and management believes there is still room to grow PL over the long term. However, they would expect the growth rate to slow over the next year due to the rapid growth experienced in recent years. KR believes there is significant opportunity to increase PL penetration in HBA/OTC. This should benefit margins.”
