The Kroger Co. (KR): Exploring And Exploiting Strategic Advantages

Although the significance of international business expansion is growing, Safeway (NYSE:SWY) recently sold off its Canadian operations to Sobeys in order to raise cash. The proceeds will be primarily used to pay off the company’s $2 billion outstanding debt. Safeway plans to utilize the residual proceeds of 3.8 billion to repurchase stock and invest in growth opportunities.

As the competition continues to stiffen, Kroger has taken firm steps to effectively reduce the price gap between the company’s products and the new competitors’ products.

Final thoughts

The synergistic benefits resulting from the acquisition of Harris Teeter Supermarkets Inc (NYSE:HTSI) are expected to materialize in the next few years. The Kroger Co. (NYSE:KR) has also announced it will maintain its dividend policy. In light of the aforementioned accretive value creation that this merger will provide, Kroger is an immediate buy candidate for many. The stock provides a regular income stream. This acquisition is further expected to raise share prices as the benefits are realized. Since the announcement of the deal, the share price has risen by 37%.

With the domestic business of Wal-Mart nearing saturation – it accounts for 75% of its operating income – the company may confront problems in increasing its income further. Exploring new markets could be a possible way for Wal-Mart to grow revenue. Until then, Wal-Mart can be a buy for investors looking for a regular income as the company expects to increase its dividend by 18% in 2013.

The article Kroger: Exploring And Exploiting Strategic Advantages originally appeared on Fool.com and is written by Awais Iqbal.

Awais Iqbal has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Awais is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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