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The Trouble With Kroger


Kroger has done nothing over the last year.

The company is well-run and made a good acquisition in Roundy's.

Fashions change, and grocers are out of favor.

The trouble with Kroger (NYSE:KR) is that there is no obvious trouble with it.

The company is doing well. Its quarterly report for the period ending in January showed sales up nearly 4% from a year earlier, to $26.165 billion. Profits were up nearly 8% from the previous January, at $559 million. The analysts are happy bunnies, with 17 of 25 having a "buy" rating on the stock. CEO Rodney McMullen is a Kroger lifer and well-respected in the industry.

Yet over the last year Kroger shares have gone almost nowhere, up just 2%. Since executing a 2:1 stock split in June they're actually down slightly.

The stock carries a Price/Earnings multiple of nearly 18 and, while the dividend is covered nearly six times by earnings, it's just 11 cents for a yield of 1.15%. That dividend may be due for a bump after the April earnings come out, on June 16, at which time the earnings whisper...