Is Kroger value for money? Preview of the week starting 16Jun25

Public Holidays

There are no public holidays in China, Singapore, or Hong Kong.

America is closed on 19 June 2025 for the Juneteenth holiday.

Economic Calendar (16Jun25)

Notable Highlights

• The most watched event in the coming week will be the Fed’s interest rate decision. The market is expecting the interest rate to remain. Any changes to this rate can bring some volatility to the market.

• A FOMC statement will be made alongside the economic projections. These are important bearings for the market.

• Core Retail Sales and Retail Sales updates will be released in the coming week. The forecast shows an increase in retail sales.

• The Philadelphia Fed Manufacturing Index has last reported a -4.0 figure, suggesting contraction in the manufacturing sector. The market is hopeful of a manufacturing resurgence in line with the current administration’s drive.

• Initial jobless claims will be announced. The previous was 248 K. This weekly report tracks the number of new unemployment claims, serving as a leading indicator of labour market health. The Federal Reserve uses this as one of the key macro data references as it balances inflation and employment in the economy.

• Crude Oil Inventories can be seen as forward indicators of market demand and consumption. This event tracks the weekly change in U.S. crude oil inventories, a key indicator of oil supply and demand that can impact oil prices and energy markets. If the trend of excess inventories continues, demand erosion can lead to reduced production & weakened consumer spending.

This week could see market volatility, particularly around Fed-related events and inflation data.

Earnings Calendar (16Jun25)

I am interested in the earnings of Jabil, Kroger, and Accenture.

Let us look at Kroger in detail.

The stock price has risen 32.9% from a year ago. The technical analysis has a “Strong Sell” recommendation. The analysts’ analysis has a “Buy” rating. With a target price of $70.69, there is an upside of 7.82%.

Let us review the performance of the business from the last 10 years:

• Gross Profit and Margin: Gross profit grew from $24.334 billion in 2016 to $33.403 billion in 2025, with the 10-year average gross margin at 22.2%, a reflection of stable profitability.

• Revenue has grown from $109.8B (2016) to $147.1B (2025).

• Operating profit has grown from $3.576B (2016) to $3.849B (2025).

• Earnings per share (EPS) have seen steady growth from $2.06 (2016) to $3.67 (2025).

• Competitive Advantage: The stable gross margin and ROIC highlight Kroger’s ability to maintain profitability in a competitive retail sector, supported by its scale and private-label offerings.

Overall Assessment (from Grok)

Over the period from 2019 to 2025, Kroger has demonstrated stable growth, with revenue increasing at a 3.1% CAGR and EPS at a 7.9% CAGR, driven by its strong presence in the U.S. grocery market. Operating profits have grown steadily, reflecting consistent profitability despite industry challenges. The company has consistently raised dividends, and its P/E ratio of 16.4 suggests a reasonable valuation. Modest FCF growth (2.5% CAGR) and a manageable debt profile (debt/equity 2.1) support its financial flexibility. Kroger’s competitive advantages include its extensive store network, omnichannel strategy (e.g., partnership with Ocado), and strong private-label brands, positioning it well in the consumer staples sector. However, limited revenue growth and margin pressure from inflation and competition suggest a need for continued innovation to sustain long-term growth.

The forecast of EPS and revenue is $1.45 and $45.28B, respectively.

Kroger can be a good consideration for the portfolio with an attractive P/E and healthy performance.

Market Outlook of S&P500 - 16Jun25

S&P 500 chart on 15Jun25

Technical observations:

• MACD - a top crossover is completed, and this suggests a downtrend is coming. Ranging sideways can be a possible scenario, too.

• Exponential Moving Averages (EMA) lines are showing an uptrend. However, the 3 lines are converging, and a trend reversal is coming.

• Both the 50 MA line and the 200 MA line are showing an uptrend. This speaks of a bullish outlook for both the short and long term.

• The CMF is positive at 0.18, indicating more buying pressure over the past 20 periods.

The daily interval is showing a “Strong Buy" for the S&P 500 index. 16 indicators are showing a “Buy” rating, and 4 indicators show a “Sell” rating.

Here are the recent candlestick patterns.

Outlook and Implications

• Short-Term Outlook: The S&P 500 appears to be in a short-term consolidation phase. The Morning Doji Star and Morning Star from May 25 supported the prior rally, but the current drop suggests a pause. The price could offer a potential buying opportunity if bullish momentum resumes. Watch for a new bullish pattern or increased volume to confirm a continuation.

• Long-Term Outlook: The broader trend remains bullish, with the S&P 500 maintaining key support levels and having established a new high. The recent pullback is likely a normal correction within a strong uptrend, with potential to retest 6,000 or push toward 6,100 if buying pressure returns.

• Actionable Insight: Traders should monitor for a bounce from current levels, providing a safe entry point for a move back toward 6,000. If the price breaks below the 200 MA with high volume, it could signal a deeper correction toward the 50 MA from the June 2 analysis. Check volume and MACD (which showed divergence on June 2) for confirmation of the next move.

The candlestick patterns suggest a bullish long-term trend with a short-term consolidation, indicating the S&P 500 may be taking a breather after its recent rally before potentially resuming its upward trajectory.

With the above technical analysis and candlestick patterns, I expect a potential downtrend in the coming days.

News and my thoughts from last week (16Jun25)

The US budget deficit hit $316 BILLION in May, the third-largest amount in history. In the first 8 months of the Fiscal Year 2025, the cumulative deficit stands at $1.365 TRILLION, the second-largest on record outside the pandemic - X user Global Markets Investor

Container rates from Asia to the U.S. West Coast surged as shippers pushed the peak season early to frontload goods ahead of potential tariff pauses in July and August, while ocean lines implemented general rate increases (GRIs) as of June 1. - X user FreightWaves

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Unrealised losses on investment securities for banks hit ~400 billion in Q1 2025. Banks have seen 14 straight quarters of unrealised losses. This matches the streak seen in 2006-2009, which started before the Financial Crisis. - X user Global Markets Investor

*U.S. TO CHARGE 55% TARIFF ON CHINESE GOODS, RETAINING 30% NEW TARIFFS PLUS 25% PRE-EXISTING -U.S. OFFICIAL *CHINESE TARIFF RATES EXPECTED TO BE 10% FOLLOWING GENEVA DEAL - U.S. OFFICIAL (investing)

More office space is set to be removed than added this year, shrinking the overall office footprint. Office vacancies soared to a record high and still hover right around there at 19%. 5% vacancy is considered healthy. - CNBC

The U.S. Treasury will sell a total of $119 billion in 3-, 10-year notes, and 30-year bonds. The latter will be closely watched for signs that bond investors are putting their foot down and rejecting countries with huge fiscal deficits and mountains of debt. - Reuters

“Mini Nuclear Breakthrough”: China Activates World’s First Compact Reactor to Deliver Clean Energy to Over Half a Million HomesPlant Set to Power Over Half a Million Homes in China - Sustainability Times

S&P downgrades Warner Bros bonds deeper into junk status - Business Times

Larry Fink, BlackRock's CEO, just issued a dire warning, saying that the US will drown in debt unless the country finds a way to stimulate and grow the economy. - DailyHODL

My Investing Muse (16Jun25)

Layoffs & Closure news

• VA signs a $726K agreement with OPM to help lay off 80,000+ employees. - House Veterans’ Affairs Democrats

• This is the prequel to market consumption and production demand. Supply chain is the blood of the economy. Without which, goods & services do not reach consumers and users. Layoffs in the supply chain precede layoffs in other sectors.

• US job postings continue to fall: Job postings on Indeed dropped to the lowest in 4 YEARS at the end of May. Moreover, new job postings hit near the lowest level since December 2020. Both metrics have declined for 3 consecutive years. US job gains were likely OVERSTATED by ~900,000 in 2024: US private payrolls rose 0.6% Y/Y in 2024, according to the BLS's QCEW data covering 97% of employers. This is HALF of 1.2% reported by the non-farm payrolls. - X user Global Markets Investor

• Citigroup confirms 3,500 tech job layoff in global IT restructuring - People Matters (IN)

• A MASSIVE 696,000 Americans lost jobs in May, the 2nd highest DECLINE since the 2020 CRISIS, according to the household survey. Remember, household survey counts employed individuals, meaning 1 person with 2 jobs = 1 job.

Layoffs and Hiring at Big Tech

The above are some news items about layoffs and closures. As tariffs negotiation drags on, the collateral to businesses (especially smaller ones) can compound.

OIL PRICE NEWS

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Drilling activity continues to hover at three-year lows as lower prices and market uncertainty prompt operators to cut back on their plans. - MRT

The Iranian Parliament says Iran is seriously looking at a possible closure of the Strait of Hormuz due to Israel's attacks. If this happens, this would be absolutely devastating for the United States and most of the world, as 24% of the world's oil passes through it. Disrupting oil shipping would likely trigger an immediate surge in oil prices, potentially over $100–150/barrel. This would increase U.S. gas prices, drive inflation, and hurt American consumers and businesses. - X user Ed Krassenstein

With the possible closure of the Straits of Hormuz, this will affect the supplies and supply chain of oil from the Middle East. This can be reflected in the surge of oil prices, supply chain costs and inflationary pressures.

Reshoring News

Reshoring has created about 2 million U.S. jobs over the past decade and a half, manufacturing accounts for 8% of the U.S. workforce. “Nearshoring,” where production is moved to closer or more friendly countries, is seen as a more likely result of tariffs, with Mexico, Vietnam, and India expected to be big beneficiaries. - Investopedia

To reshore, it requires remapping of the supply chain, procurement, maintenance program, suppliers, local partners, energy, skilled labour and more. It can be done, just need to secure these.

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The USD has now lost almost 10% of its value this year - BarChart

With this loss of USD’s value, how will this affect re-shoring, apart from US exports becoming more affordable?

Debts and Delinquency

The delinquency rate on US commercial mortgage-backed securities (CMBS) for offices SURGED to 10.3% in April, near the highest EVER. The multifamily delinquencies spiked 113bps in April, to 6.57%, the highest since 2015 - X user Global Markets Investor

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US consumer serious delinquencies (90+ days) are RISING: Credit card delinquencies hit 12.5%, the highest in 14 YEARS. Student loan delinquencies reached 8%, the highest in 5 years after relief expired. Auto loans delinquencies hit 5%, the second-highest in 15 YEARS. - X user Global Markets Investor

The delinquency in America can compound over time, affecting spending, production and employment.

My final thoughts

This is an interesting post from Ms Amanda:

The economy is breaking. And no one’s ready. - 100% of the 12 Fed districts reported lower labor demand, noting hiring pauses, reduced hours, and layoffs. - Severance? 8–12 weeks if you’re lucky... and that’s pre-tax. - Credit delinquencies at 12.31% - highest in over a decade. - Nearly 42% of homeowners applying to refinance got denied... - 600,000+ layoffs in 2025 so far. - Forecasted unemployment: 4.8% by year-end (Tombs) You’re looking at: - A 6-month job search - 2 months of cash - Soaring debt - Shrinking access to credit - Daily job data getting revised down every month - Don't forget wage garnishments from student loans about to hit. Wait ‘til the headlines catch up. - X user Amanda Goodall

People gravitate towards bad news. The series of bad news can weigh on the hearts of investors and consumers. There would be a point when sentiments overtake data. When bearish sentiments take over, positive data may not push back against the sentiments.

With the Middle East and Ukraine situation heating up, there are potential black swans that can impact the market. For non-US citizens, let us monitor our USD-denominated assets as the currency has devalued significantly in recent days.

Let us review our expenditures, income, and savings. Let us spend within our means, invest with what we can afford to lose, and avoid leverage. I am reviewing my holdings and plan to cut losses with businesses losing their competitive advantages. I would also consider hedging and adding some defensive positions.

Let us do our due diligence before we take up any positions. Let us have a successful week ahead.

@TigerStars

$S&P 500(.SPX)$

$Kroger(KR)$

$Cboe Volatility Index(VIX)$