Kroger (KR) is the next pandemic play for max gains

by AveenoFresh

Kroger is the second largest grocer in the store behind Walmart. Their earnings are on the 18th.

Let’s make some comparisons

SpartanNash (SPTN) is an American food distributor and grocery store. They already reported earnings and beat estimates by $0.20/share. It had a 23% run-up before earnings ($16s -> $20s).

Let’s also consider United Natural Foods (UNFI) which reports on the 10th and already prereported blockbuster earnings and pulled 2020 guidance because they’ve already met it and plan to issue an update when earnings comes out. In the last couple of weeks, they’ve also experienced a run-up ($17s -> $20s) despite most of the good news being priced in.

Why Kroger?

It’s similar to the above two companies with earnings not until next week. For those who follow my posts, I posted DD on UNFI last week. TBH I waited too long to get into UNFI watching it rise, waiting for a dip to buy in, and missing out on a lot of gains. So I’m posting this early and buying in as early as possible to get ahead of the game on this one. As mentioned, there was a price run up on both UNFI and SPTN this last month, so I’m buying now and early to capture this.

Their EPS estimate has a $0.88 consensus which I believe they’re likely to beat. When UNFI revises their guidance on June 10th, I think the entire supermarket segment will rise on sentiment from the UNFI guidance which will be a strong upward price catalyst for Kroger the week before their earnings. It will confirm that grocers should have continued strong results through 2020.

Recovery is slow and restaurants are just starting to reopen. Unemployment is still in the double digits and people have gotten used to eating at home and are also weary of spending extra cash on eating out.

Should be continued strong sales throughout the summer and revised upward guidance from Kroger when earnings come out. They are up 37% over the last year but have traded relatively flat through the pandemic (last 3 months). They were deemed essential and made to work a lot of hours to get food back out to the stores.

What I’m doing

So basically the trade on this is trading the news for the rest of the sector. The stock is about $4/share off their 52 week high, so the $35c 6/19 is the play due to it’s ample open interest and tight bid/ask spread.

tldr $35c 6/19

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.