WRKO>Audio & Video on Demand>>Paul LaMonica (CNNMoney, Kroger)

Paul LaMonica (CNNMoney, Kroger)

Dec 1, 2017|

Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

The financial exchanges alive every day on FaceBook and YouTube this is the financial exchange radio network. Joining us now from CNN money is Paul Monica ball joints every Friday typically Paul thanks for coming on. Thank you very much and I. Yep all I wanna dig in to Kroger and a bit but can we start first just with the action that we're seeing in markets I mean this it seems like a pretty odd decent flight to safety at this point. It does appear that way I think that clearly. This is aim market that we will swing pretty wildly on any news coming out of Washington that would do. Signal trouble for the drug administration and I think we're obviously. Getting a big dose of that today whether or not this whole planet are urging guests saying watch out at 3 o'clock it could get ugly now it remains BC that. You know this is not going away anytime soon and you know the markets it is ignored politics for much of the year but. They might not be able to if things really started deteriorating. Yup we're not there yet but it. If we have feel people calling for impeachment or something like that you know when I was what happened this market. Boy at any action in the market in particular that stands out to you at the moment. I mean it looks like a pretty broad. Now lost you know we are. Off of the lows but if it does really look like from what I'm seeing a lot and ran it up. In any in a lot of brought in your risk on sectors industrials are tech on. Mean really taking it on the chin and aspects down. Our percentage basis much more that doubt yes it does point. Absolutely now let's let's go over to Kroger will talk about something a little bit more born. Her restores and you know Kroger obviously. You know one of the biggest names in the country in groceries the stock has struggled for the last couple years now. You've got via Amazon coming in and buying a whole foods what what's the path for Kroger at this point. It looks like Kroger recognizes. That. Competition from Amazon is going to be intense and some awful good it's an almost immediately. Started lowering prices. Wal-Mart is a very tough competitor you've got albeit will be 82 European giants in beating American shores. Really started making customers as well so. They crew realized that they have been competitive. With price in the X started to do that they have done. You know more private label offerings they have cut prices part of that just because of what's going on commodity market there's been food deflation. And that's been problem for them back to their credit they've really stepped it up in digital and there. Online revenues more than doubled in the last quarter yet small base right now that. They have a service where you can order online Abbott delivered to all for you could even go to the stores after ordering on line. And then people just come out and you know put the course street that you ordered in the car which for many people pretending. Are they reading that delivery service themselves or they outsourcing and using someone else's technology for all right right and I can. What what's the potential bear case for the and I mean obviously it's it's a very difficult business right now with Amazon. Intruding in their Wal-Mart still the biggest grocer in the country so. It's it's a competitive landscape what what's the bearish case. I think that their case really is that you'd do have. He's checked into competitors in Amazon and Wal-Mart that clearly can probably afford more war. To keep prices low in order to gain market share and not necessarily out of their profits. And that it would for a company like Kroger yes so that I think is going to be a potential problem for the. Looking at where they go from here is that is that continued spending in the continued investment there making is going to be predominately on the online side. Think they're going to be investing more online they're going to be doing whatever they can and to keep prices down and not sacrifice profit margins too much but I think the other thing. That really is important is private label that is something. That a lot. People to liking. Engender a bit of land spoilt if you are able to go to a Kroger and buy these proprietary. Private label products they usually are at a discount. Brand name once sort it saying I think. If Kroger and other companies really step up their private label game. Back to be a bad sign for. Some of the gate playing in consumer. Food companies and we've already seen cables to been combat aircraft aren't a lot of them at all because of concerns. About slowing sales and what's happening in the commodity price side to them as well. Is is there anyone else who potentially you know looks accrue over the same way Amazon did at whole foods and says hey we want to buy them. I wouldn't really rule it out obviously but I wouldn't expect a deal necessarily you know Wal-Mart doesn't really need to. I someone to increased presence and tears we doubt that target given the problems that it's been having. We're gonna do anything at him when you really look on the app. Author be yeah companies that are out there we Albertson's Jones safe way they can trying to go public I don't think that they would be. Really looking to acquire Kroger that will be a gigantic deal mean it's possible that I'll be your ED. Would want in May be increased there US presence with an acquisition that they've been doing pretty good job. Just organically coming in opening up stores so I would be very surprised if Kroger would be an acquisition target but he can never. Of course. Or goodwill Paul thank you very much for the time and have a great weekend. Paul Monica from CNN money talking about Kroger with a ticker K all war you know I I was looking utes you're talking about blue apron. In the first hour yup and some of them that stocks trade at three dollars and seventeen cents and would people pay for that the IPO ten bucks the idea was ten and they were targeting a fifteen dollar per share offering including get that so. They are off 80% from where they wanted to IPO in 70% from where they did the CEO just stepped down CEO step down the CFOs can be stepping in as the new CEO and the CEOs becoming chairman of the board he staying on witches good. But. With the CFO steps in. That means the stockholders take no company and maybe they just. They want better and that they want a numbers guy in there yep it's what what's interesting yeah this is a company that is not profitable is also cast won't negative at this point. And so one of the questions that I have is. You know if it looks like Tesla it's a company that's going to need to raise cash down the road. And can't borrow money. And insert my biggest question with them is you know what are the terms they have to go out and raise that cash actors. Their stock is now a third of what it used to be would dare customer list have any value. Think you would accompany and try to think who would find this. Attractive from and acquisitions standpoint is that the company on in theory is worth 600 million dollars assert its worst 600 million dollars Baird you know twelve trailing twelve month sales around 800 million. So you sit there and say OK if it gets a little cheaper mean if it got down around two bucks a share someone would buy it but like I mean that's 80% discount from where they were. I I editing because that's they the the finger hurts their value of the customer list is that your race. It is that nobody is so. Hey you know customer lists in the old days customers ST stats and I am not sure in this instance are gonna happen in theory if there's anyone who could make use of it it would be Amazon. Just as if there's if there's one thing that Amazon does well you know they make the customer state but but don't you think the Amazon would already have those customers. They get if your blue apron customers they're pretty good Chancery of the names on account. Yet probably a lot of overlap would be a penalty and overlapped they would they bought whole foods the overlap was from late 80% of something.