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Goldman Is Neutral On Supermarkets, Sees Low Growth And Challenging Market

Goldman Is Neutral On Supermarkets, Sees Low Growth And Challenging Market - Kroger Company The NYSE:KR, Whole Foods Market, Inc. NASDAQ:WFM

Goldman Sachs' Stephen Tanal commented on the challenging market forces supermarkets were facing in the United States. The analyst assumed coverage on food retailers with a Neutral coverage view and a 7 percent average upside over the next twelve months.

Intensifying Competition

"Grocery is a mature low-growth sector characterized by relentless competition that appears to be intensifying," stated Tanal. E-commerce challengers have gained traction while hard discounters, specialty players and even conventional grocers have been opening stores.

"Coupled this with the sector's thin margins, low barriers to entry, and consumers unwavering focus on price...where there are losers, there are winners," stated Tanal.

Winners and Losers

Tanal believes The Kroger Co KR 0.98% will continue to enjoy advantages of being a top-line competitor, while Whole Foods Market, Inc. WFM 0.75% will not.

In addition, Whole Foods, which operates in higher density areas than Kroger, is expected for face heightened competition in comparison to Kroger.

SUPERVALU INC. SVU 1.53% also faces challenges from an "intrusion of hard discounters," said the analyst.

According to TipRanks, Stephen Tanal is among the better analyst's covering the food retail sector having a 70 percent success rate and a +7.1 percent average return per recommendation.

At the time of writing, Kroger traded at $36.17, up 1.09 percent on the day.

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DateFirmActionFromTo
Jul 2016Goldman SachsUpgradesNeutralBuy
Jun 2016Hilliard LyonsUpgradesLong-term BuyBuy
Jun 2016Deutsche BankMaintainsBuy

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