Why did Kroger stock fall 12% in September? | Smart change: personal finance
As we’ve seen with so many other companies this quarter, inflation creates uncertainty. These issues seem unlikely to be resolved overnight, so investors view the future with skepticism. Kroger specifically mentioned a slight increase in customer volume as some consumers are sourcing in response to the increase in COVID-19 cases, which should really have a temporary impact for the grocer. If sales decline over the next few quarters while pricing issues persist, financial results will be at risk.
Kroger’s long-term outlook remains unchanged, but investors should reflect on the current challenges facing the stock, as well as its valuation. These supply chain issues should eventually be resolved, but that will take until 2022 at the earliest. It will also take some time for retailers and grocers to fully understand this year’s input price changes. Grocers are very competitive, so they need to know what higher input prices can be passed on to consumers. This makes the next few quarters uncertain for Kroger.
Its forward P / E ratio is 12.1, which is in the middle of its historical range and roughly comparable to its peer group. The stock’s enterprise value / EBITDA ratio is quite high at 8.67, and its 2.1% dividend yield looks pretty average compared to other dividend-paying stocks. Despite falling over 12% this month, Kroger stock hasn’t gotten insanely cheap. This stock is suitable for investors seeking more defensive positions in their portfolio or for long-term income investors. In any case, shareholders should not be shocked by the volatility associated with short-term inflationary pressures.