Jefferies Sees Grocer Struggles Persisting, Says Too Early To Call It A Turnaround

Grocers across the board in Q1 have performed poorly in lieu of dampening inflation, self-cannibalization, competitor store openings and competition on prices.

Jefferies says Kroger (NYSE: KR) and Sprouts Farmers Markets (NASDAQ: SFM) remain appealing, but suggests a lower entry point would be ideal for entry. Whole Foods (NYSE: WFM) turnaround remains too early to call says analyst Mark Wiltamuth. He also believes investors will not give Natural Grocers (NYSE: NVGC) their due respect for robust store growth.

Deflating meat prices and slower growth in inflation is hampering Kroger upside. Whole Foods is being forced to reduce prices as the company combats the negative impact the outpace in strong growth relative to demand for organic/natural grocers.

Natural Grocers remains undervalued given its growth profile, but Jefferies says "disappointing Q2 results and a full year guide down" has pushed the company's growth story under the rug for now.

Wiltamuth keeps Hold ratings on Krogers, Sprouts, and Whole Foods. Natural Grocers remains a Buy.