Goldman Sachs Downgrades Kroger To Neutral From Buy

Goldman Sachs is downgrading Kroger KR shares to Neutral from Buy. It resumed coverage of KR in December under its tactically attractive sector view as Goldman expected the cyclical tailwinds to trump secular headwinds and power accelerating EPS growth for traditional grocers.

KR's Q4 EPS beat provided evidence that the thesis is playing out as ID sales growth
accelerated on share gains, inflation was passed through to the consumer, OG&A leverage surpassed expectations, and management became more aggressive with buybacks.

While Goldman still expects cyclical tailwinds to trump secular headwinds facing
traditional grocers in the near-term, it sees limited upside on KR shares which are within 4.4% of the unchanged price target of $25. KR's 4Q results delivered the inflection point we were looking for in terms of sales and profitability.

KR closed Thursday at $23.94