Auxier Focus Fund on The Kroger Co.
Thesis
Kroger has been weak amid pressure on consumer spending from inflation, high interest rates and rising fuel costs, but Auxier sees a leadership and valuation opportunity. New CEO Greg Foran brings a strong operating record from Walmart US, where he oversaw twenty consecutive quarters of same-store sales growth. At Kroger he has moved aggressively on pricing while expanding private-label and organic offerings. The stock trades at roughly 12x earnings, a significant discount to Costco and Walmart, giving the fund a low-multiple turnaround setup.
“The stock trades at a mere 12 times earnings which is a significant discount to both Costco and Walmart.”
Key risks
- Elevated inflation, high interest rates and rising gas prices are pressuring consumer spending
- Execution risk around the new CEO’s turnaround initiatives