Kroger, Publix, and regional grocery chains face pricing problem

The DOJ expanded its beef price investigation to include major retailers: Kroger, Publix, Walmart, Albertsons, Aldi, Ahold Delhaize, Costco, and Amazon. The probe, initially focused on the 'Big Four' meatpackers, now scrutinizes retail-level price increases. The DOJ seeks information on recent beef price hikes, citing it as a critical concern for Americans.

UBS analyst Michael Lasser rated Kroger (KR) Hold with a $63 target. Barclays also maintained Hold with a $61 target. Kroger reported Q2 revenue of $46.12B and net profit of $903M, up from $45.12B and $866M last year.

Kroger issued $10.5 billion in bonds in August 2024 to finance its Albertsons acquisition. $4.8 billion of these bonds had a Special Mandatory Redemption clause at 101% of face value, meaning a $50 million premium if the deal failed. This clause protects bondholders if the acquisition is not completed.

Kroger (KR) fell to a 2-year low after announcing a $1.65B acquisition of Giant Eagle, with investors skeptical of immediate value. Constellation Energy (CEG) dropped to a 52-week low after Citi cut its price target. Shutterstock (SSTK) plunged 29% after its merger with Getty Images was terminated. All three stocks have seen significant declines this year.

The DOJ is investigating Walmart, Amazon, and six other major grocery retailers regarding beef prices, citing inflation as a key concern. The probe follows a prior antitrust investigation into meatpackers and Trump administration efforts to lower beef costs, including tariff adjustments and import policies. Retailers and the DOJ declined to comment. Beef prices are influenced by factors like reduced cattle supply and high production costs.

UBS kept its Neutral rating on Kroger (KR) with a $63 target, noting the stock is undervalued at $58.37. The firm expects near-term stagnation until Kroger provides a clearer transformation plan. Kroger's Q2 earnings are due soon, with Citi projecting 1.0% sales growth and $1.05 EPS. Recent developments include the acquisition of Giant Eagle and leadership changes.