Investors often adjust their portfolios relative to the economic environment. In robust expanding economies, investors opt for risk-on growth stocks, while inflationary, uncertain, and recessionary economic climates call for stable risk-off investments.
Kroger Co (NYSE:KR). is a rare best-of-breed stock that can adapt and thrive in all economic climates. It operates in the consumer staples sector, competing with other grocery operators like Walmart (NYSE:WMT) Inc., Target Co., and Albertsons (NYSE:ACI) Co.
Let’s take a closer look at how Kroger acts as its own hedge in turbulent markets.
Consumers Need Groceries Regardless of Market Climate
People need groceries regardless. Kroger operates over 2,700 stores in 35 states and Washington, D.C. under many banners, including Ralphs, Dillons, Smith’s, Fry’s, Fred Meyer, Harris Teeter, and its namesake, Kroger.
In their fourth quarter 2024 results, Kroger reported an earnings per share (EPS) of $1.14, beating estimates by 3 cents. Revenues fell 7.4% YoY to $34.31 billion vs $34.57 billion. Backing out fuel and Kroger Specialty Pharma, which was sold to Elevance Health Inc., the company would have grown sales by 2.4%. Its gross margin rose 40 bps to 22.7%.
For its full year 2024, Kroger posted $3.67 EPS and an operating profit of $3.8 billion on total revenue of $147 billion. It increased associate wages to more than $19 per hour and over $25 per hour when factoring in benefits.
Gross margin rose 250 bps to 22.3%, a 38% increase over the last seven years. The company also commenced a $5 billion accelerated repurchase program to be completed under its $7.5 billion share repurchase authorization program. In Q4, the company purchased 65.6 million shares.
Private Label "Our Brands" Helps Kroger Thrive in Any Economic Climate
During periods of inflation, as food costs soar, Kroger continues to thrive through margin expansion. Since food is a necessity, consumers still need to purchase products. To help soften the blow to the wallet, Kroger enables consumers to trade down by growing its portfolio of private label products under its “Our Brands” segment. This segment provides wider margins up to 5%.
During recessionary economic periods, Kroger also continues to thrive as consumers pull back on takeout and restaurants and eat at home more. In fact, Kroger sees an uptick in revenue because more consumers will try to save money by making meals at home.
Our Brands Segment Is Kroger’s Hedge Against Inflation and Recessions
Kroger’s portfolio of over 16,000 private label products falls under its Our Brands umbrella. Our Brands generated $30 billion or 20% of total revenue for 2024. Even within Our Brands, there are different tiers catering to consumers’ budgets and preferences:
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Value/Entry tier brands include Kroger, the flagship private label brand, Big K beverages, and Heritage Farm produce.
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Mid-tier/Premium tier brands include Simple Truth organic and natural foods, Private Selection premium, gourmet, and specialty products with higher quality ingredients at a higher price point.
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Specific brands that focus on particular categories include Comfort baby care products, Pet Pride pet food, Bloom Haus floral products, and Home Sense household products.
Our Brands products carry an additional 6% to 8% higher gross margin than national name brands.
Kroger’s Golden Cross: The Proof Is in the Stock Price
The market has spoken. Kroger’s stock reached a new 52-week high in April 2025, while benchmark indexes like the S&P 500 and Nasdaq-100 are both negative for the year. Kroger’s stock price action is a testament to its elasticity and resilience in every market climate.
It has maintained its bullish Golden Cross since it triggered over a year ago on February 9, 2024, in contrast to the double Death Crosses for the benchmark indexes.
Warren Buffett has been a fan for years as Berkshire Hathaway (NYSE:BRKa) Co. owns 50 million shares or 6.9% of the company.
Kroger is best-of-breed in the grocery business, evidenced by its 16x annual inventory turnaround, compared to Walmart x 9.2x, Target at 6.2x, and Dollar General (NYSE:DG) Co. at 4.2x.