Ahead of Kroger's (KR) investor day, analysts at Barclays have published a research note offering advice to the grocer whose shares have dropped nearly 40% year-to-date.
"The next several years will be very rocky and unpredictable for all players in the food retailing space - yourself included - given how rapidly the world is changing," Barclays noted.
And while the firm believes Kroger will ultimately "emerge victorious" it will not come out unscathed as the sector goes through a transformation.
Barclays contends that Kroger's "industry-leading historical comps will remain elusive," its "sales driving initiatives will result in higher expenses" and that further pressure will be exerted onto its debt ratings and its profit and loss statements.
Also "with exits and closures increasing" Barclays believes Kroger will find itself having to acquire additional real estate, but argues that no conventional retailer should be exploring that option.
"The days of 8-11% EPS growth are long gone," Barclays noted while stating that full-year 2018 financial estimates and beyond remain too high. "Absent a transformational event - it will be almost impossible to change the narrative on your story for the next several years."
The firm recommends Kroger revise down both its comps and earnings estimates over the long-run, slash all CapEx related to unit growth, and contemplate a meaningful and "transformative" acquisition or partnership.
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