Why The Kroger Co. Stock Gained 11% Last Month

MarketsMotley Fool

What happened

Shares of Kroger (NYSE: KR) were moving higher last month as the supermarket chain seemed to benefit from rumors that it could make an acquisition that would strengthen its position against new entrants like Amazon.com-Whole Foods and Lidl. As a result, the stock finished the month up 11%, according to data from S&P Global Market Intelligence.

Continue Reading Below

The chart below shows the stock moved up steadily over most of the month.

So what

Kroger's biggest gains came on Jan. 25 as the stock jumped on reports that the company had entered preliminary talks with Alibaba, in a partnership that would surely strengthen Kroger's e-commerce position. The news followed earlier rumblings that Kroger was considering making a bid for Boxed, a buy-in-bulk e-commerce business, or Overstock.com. The company also began rolling out its "Scan, Bag, and Go" program, which allows customers to scan items as they shop so they don't have to stop at a cashier or self-checkout.

All of those moves contributed to the sense that Kroger was strengthening its position against new competition, giving investors confidence that the company would continue growing.

Now what

After January ended, Kroger also completed the sale of its convenience-store business for $2.15 billion to the U.K.-based EG Group, giving it more ammunition to make a big acquisition. Management said the move would help it free up cash to invest in its core grocery business as the company focuses on improving its current store base with new technology rather than adding new stores through acquisitions, its historical strategy.

The stock has given up a few points in February with the recent market slide, but the company seems to be making the right moves to grow market share. We'll learn more when the company reports earnings a month from now.

10 stocks we like better than KrogerWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Kroger wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 5, 2018

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Kroger. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.

Continue Reading Below