Deflation Explains Why Kroger might be interested in Rite Aid

The danger here is that Kroger’s operating margins are very thin. The company reported a free cash flow of just $24 million; on revenues of $112.41 billion on July 31, 2016. That made for a profit margin of just 1.44%. To make matters worse Kroger has very little float it; had just $319 million in the bank on July 31, 2016, even though it reported generating $5.11 billion in cash from operations.

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Kroger has Far More Value than You Think

All this means that Kroger might be the best stock to buy take advantage of the paradigm shift that is transforming American retail.

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Can Sprouts Survive?

These figures indicate that Sprouts can run out of money at any time. That might mean it will have to start closing stores or simply sell the entire chain like Roundy’s and the Fresh Market did. Nor would it get that much for the entire operation, Ycharts reported that Sprouts had a Market capitalization of $3.072 billion and an enterprise value of $3.063 billion on September 19, 2016.

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Could Kroger become America’s Number One Grocer?

The nature of today’s grocery market gives Kroger a lot of room for low-cost growth. Deep discounting and intense competition are making it very hard for regional grocers to survive. News reports indicate that Kroger picked up Roundy’s and its $4.03 billion in revenue for just $800 million, because of losses the smaller chain faced.

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Falling Meat Prices could Boost Kroger’s Sales

It looks as if Kroger’s revenues will keep growing all through 2016. That growth will be propelled by a perfect storm of low beef prices and low gas prices, giving Kroger more ability to deep discount than ever before.

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Would Kroger Buy Supervalu?

One has to wonder, would Kroger buy it or simply buy some of the assets of all or some of the supermarket brands it owns? A Kroger play for Supervalu is a strong possibility simply because the company is extremely cheap right now. Expect to see something happen at Supervalu this year, possibly a Kroger acquisition.

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