QS Research · Michael Burry's Scion Capital analyst template · 2006
KROGER CO (KR)
As of 2026-11-09 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction low · base case +0% · downside -21% · upside +18%
Section 13's TTM EBITDA base is $5.31B (N14); I keep that base but, per the multiple rule, value all three cases at KR's own 10.4x EV/EBITDA today (N28), because no dated non-valuation catalyst justifies a different multiple. At 10.4x, $5.31B EBITDA less $15.14B net debt (N24) and 590.59M shares (N5) gives $67.87, about +0.3% versus $67.70 (N1), so the base is roughly today's price. The market may be too focused on the 0.2% Q2 identical sales and guidance cut (S5/S6) and not enough on the 6.0% FCF yield (N32), but P/E 37.1x (N31) and EV/EBIT 26.5x (N29) leave little cushion; a $4.5B EBITDA downside values at $53.61 (-20.8%) and $6.0B upside at $80.02 (+18.2%). With base +0.3%, downside -20.8% and upside +18.2%, neither long nor short rule is met: watch.
Key numbers
- Share price: $67.70
- Market cap: $39.98B
- Latest financial period: TTM to Aug 15, 2026
- Revenue (TTM): $149.33B
- EV / EBITDA (TTM): 10.4x
- P/E (TTM): 37.1x
- Price / book: 6.85x
The 15 boxes
- ✓ 1. Long-form business notes
Kroger is a U.S. supermarket, pharmacy and fuel retailer that earns revenue by selling consumer products in stores, fuel centers and online, and the latest 10-K increasingly highlights data-driven alternative profit, including retail media. Between the oldest on-file 10-K (as of Jan 30, 2021) and latest (as of Jan 31, 2026), the store base shrank slightly (2,742 to 2,697 supermarkets) while Pickup expanded (2,223 to 2,408) and Our Brands reached over $39B of 2025 sales with fewer private-label items and plants. Financial scale rose to $147.64B revenue in fiscal year ended 2026-01-31, but operating income fell to $1.89B and net income to common to $1.01B, while operating cash flow was $7.31B and buybacks $2.70B.
- ✓ 2. Competitive advantage
Kroger has scale (revenue $147.64B in FY2026, S28) but the filings claim no durable moat: the 10-K describes "intense and ever-increasing competition" from online, mass, club, discounter and dollar formats (S25/S26). The margin history says the same — operating income fell to $1.89B (about 1.3% of revenue) in FY2026 from $3.85B (about 2.6%) in FY2025 and a six-year peak of $4.13B (about 2.8%) in FY2023, on revenue that has been flat at $147–150B since FY2024. The claimed differentiator is not price but an 'ecosystem' of asset-light alternative profit streams and Our Brands, which the same document flags as possibly unsuccessful, and a new risk factor (S27) targets precisely the customer-relationship/brand-loyalty advantage with AI agentic shopping. The one hard, measurable advantage in the data is cash generation: operating cash flow $7.31B in FY2026 against capex $3.85B.
- ✓ 3. 10-Q takeaways
Kroger's Q2 2026 (quarter ended August 15, 2026) top line grew 2.0% to $34,621M only because supermarket fuel sales rose 25.6%; sales without fuel fell 0.5% and identical sales ex-fuel grew just 0.2% against 3.4% in Q2 2025, with the Inflation Reduction Act a 138 bp drag. Gross margin slipped to 22.4% from 22.5% while FIFO gross margin ex-fuel rose 13 bps and the LIFO charge fell to $39M from $62M; operating profit rose to $971M and adjusted EPS to $1.09 from $1.04, though adjusted net earnings fell 4.0%. Operating cash flow for the first two quarters of 2026 fell to $3,085M from $3,688M even as buybacks jumped to $1,069M in the quarter, and FY2026 identical-sales guidance was cut to 0.2%-0.8% with EPS $5.10-$5.30 reaffirmed.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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