Strategy Sharpening, Savings Funding Investment

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Strategy Sharpening, Savings Funding Investment

PREV 1.55 1.13 1.14 5.20

highest EPS growth) as cost saves and investments ramp. *OperatingCons. Source:ProfitVisible(MM)Alpha

Strategy coming into focus. CEO Greg Foran's strategic direction is becoming clear, with an

emphasis on closing the price/value gap, simplifying promos, and instilling a faster, execution-

driven culture across the organization. Price/value investments are expected to be fully funded

by cost savings, with mgmt emphatic that saves are greater than investments, and "no shortage

of opportunity" across the business. That said, mgmt declined to size the magnitude of either

the cost opportunity or the price investment, deferring specifics to the Oct. 20 Investor Day.

Importantly, mgmt was explicit that the strategy is not about being the lowest-price retailer, rather,

it's about being more competitive. Notably, mgmt is speaking to pushing back hard on supplier price

increases, content to let competitors do the work of closing price gaps as KR holds pricing discipline

Opportunity ahead as KR puts strategy in motion. Q1 played out about as expected, FY guide held,

and the strategic direction is clear with initiatives already underway and tracking ahead of plan on

cost saves and eComm profitability. The lack of detail on the magnitude of price investments and

savings clouds NT visibility until the Oct. 20 Investor Update, but the setup of cost saves being

greater than investments, accelerating share, profitable eComm/media, and a culture shift toward

speed, supports our constructive view. We lower numbers to reflect ongoing consumer strain, but

reit BUY with a $74 PT based on ~13.5x our F'27 EPS estimate.

FY (Jan) 2025A 2026E 2027E 2028E Scott Marks * | Equity Analyst