The Kroger Co. (KR) stands out as a compelling value play within the Retail-Supermarkets industry, trading at a forward 12-month price-to-earnings (P/E) ratio of 13.90, well below the industry average of 33.22 and the Retail-Wholesale sector average of 23.96. This undervaluation highlights its potential for investors seeking attractive entry points in the retail space. KR's Value Score of A supports its investment appeal.Kroger's stock is also trading at a discount compared with its peers, including Walmart ...

Industry Overview - The Zacks Retail – Supermarkets industry includes a variety of supermarket retailers offering a wide range of products, with food retail being a significant portion of their business [3] - The industry has transformed significantly, with e-commerce playing a crucial role, leading to enhanced pickup and delivery services and easy payment options [3] Key Trends - Supermarket retailers are investing heavily in omnichannel strategies to create a seamless shopping experience, integrating AI for personalized recommendations and inventory management [4] - Consistent consumer demand for grocery products and household items remains strong, making supermarkets resilient even during economic fluctuations [5] - Rising operational costs, including labor and technology investments, are squeezing profit margins, prompting supermarkets to innovate and refine their offerings [6] Performance Metrics - The Zacks Retail – Supermarkets industry has outperformed the S&P 500, with a growth of 60.7% over the past year compared to the S&P 500's 7.7% [9] - The industry currently has a Zacks Industry Rank of 78, placing it in the top 32% of over 250 Zacks industries, indicating positive near-term prospects [7][8] Valuation - The industry is trading at a forward 12-month price-to-earnings (P/E) ratio of 33.99X, significantly higher than the S&P 500's 20.43X and the sector's 22.89X [12] Company Highlights - Walmart Inc. is focusing on a diversified business model and robust omnichannel strategy, generating revenue through various channels and enhancing customer engagement [14] - The Zacks Consensus Estimate for Walmart's current fiscal year EPS is $2.60, with shares having rallied 61.1% in the past year [15] - The Kroger Co. emphasizes a customer-focused strategy and digital transformation, with initiatives boosting digital engagement and operational efficiency [18] - The Zacks Consensus Estimate for Kroger's current fiscal year EPS is $4.74, with shares increasing by 28.4% in the past year [19]

Core Viewpoint - Walmart and Kroger are positioned as reliable players in the retail industry, with Walmart being the largest global retailer and Kroger leading in traditional supermarkets in the U.S. [1][2] Walmart Overview - Walmart's business model is diversified, generating revenues from physical stores, digital platforms, advertising, and memberships, enhancing customer engagement and higher-margin revenue streams [6][7] - In Q4 of fiscal 2025, Walmart's global e-commerce sales increased by 16%, supported by strong store-fulfilled pickup and delivery services [7] - Nearly 60% of Walmart's U.S. sales come from groceries, highlighting its leadership in food retail, with Walmart International projected to reach $200 billion in gross merchandise value [8][9] - Walmart faces challenges such as cost pressures from tariffs and economic uncertainty, but its strategic adaptability and operational scale position it well for long-term success [10] Kroger Overview - Kroger focuses on customer-centric strategies, high-quality fresh food, and an expanding private-label portfolio, achieving a 2.4% increase in identical sales in Q4 of fiscal 2024 [11] - Digital sales surged by 11% in the fiscal fourth quarter, driven by initiatives like the Boost membership program and customer fulfillment centers [12] - Kroger generated $1.35 billion in operating profit from alternative profit streams in fiscal 2024, with Kroger Precision Marketing becoming a vital growth engine [13] - Despite facing high inflation and cautious consumer spending, Kroger's focus on groceries and digital presence positions it favorably [14] Earnings Estimates and Valuation - The Zacks Consensus Estimate for Walmart's fiscal 2026 EPS indicates a projected year-over-year increase of 3.6%, while Kroger's estimate points to growth of 6% for fiscal 2025 [15] - Kroger's stock trades at a forward P/E ratio of 14.96x, significantly lower than Walmart's 34.67x, indicating a more attractive valuation [16] - Kroger's stock has gained 25.5% over the past six months, outperforming Walmart's 10.9% drop, making it a compelling investment opportunity [18] Conclusion - Kroger emerges as a smarter buy for value-focused investors due to its lower valuation, stronger recent performance, and optimistic earnings growth outlook, while Walmart offers long-term stability but faces short-term challenges [19]