Consider supermarket giant The Kroger Co. (NYSE:KR), for example. You might be inside one of its stores, thinking about investing in the companies that produce the items it sells (pudding, chicken, paper towels), without thinking of investing in the market itself. You might want to add The Kroger Co. (NYSE:KR) stock to your portfolio, though. Why? Well, check this out: Kroger stock has appreciated by more than 50% over the past year. It has gained, on average, about 14.4% annually over the past 30 years, enough to turn $10,000 into about $566,000.
Of course, that’s not enough to base an investment decision on, so let’s take a closer look at the Kroger company and Kroger stock.
Meet Kroger
The Kroger Co. (NYSE:KR) was launched in 1883, fully 130 years ago, when Barney Kroger put his life savings of $372 into a Cincinnati grocery store. The Kroger Co. (NYSE:KR) stores were the first to have their own bakeries, which reduced the cost of bread for shoppers. Kroger was also the first to sell meats along with groceries in the same building. The company still makes many of its own products — almost half of the 14,400 private-label products in its stores. These generate 26% of Kroger’s grocery sales and boost its profit margins, as name-brand products tend to be more expensive at the wholesale level, in part due to manufacturers investing in advertising.
Today The Kroger Co. (NYSE:KR) is one of the world’s biggest retailers, with more than 340,000 workers, more than 2,400 stores, and operations in 31 states. Its locations recently included 786 convenience stores, 328 jewelry stores, 1,169 supermarket fuel stations, and 37 food processing plants. (Adding fueling stations to many of its locations has helped drive more business.) Store names under Kroger’s roof include Kroger, City Market, Dillons, Jay C, Food 4 Less, Fred Meyer, Fry’s, King Soopers, QFC, Ralphs, and Smith’s. Kroger operates about 1,900 in-store pharmacies and its many floral shops make Kroger the world’s largest florist.
An attractive stock
You might not find Kroger’s net profit margin impressive, but even its recent 1.6% level can be productive, given enough volume. And with Kroger raking in more than $96 billion annually in revenue, that’s enough to generate about $1.5 billion in net income. Putting the value of all Kroger stock together yields a market capitalization close to $60 billion. That’s big, but not too big to keep it from growing.
A peek at some of the characteristics of The Kroger Co. (NYSE:KR) stock via the company’s financial statements reveals it posting solid growth (with management projecting more), but also being saddled with considerable debt. That debt has been falling in recent years, though, and Kroger is cranking out substantial free cash flow that can help it keep paying down debt.
