MW Buy this stock as food inflation, demand for fresh produce looks set to last, analyst says

By Steve Gelsi

Albertsons's stock is J.P. Morgan's top pick among food retailers, as the grocery chain moves past the failed buyout by Kroger

Albertsons's stock rose as J.P. Morgan listed it as its top pick among food retailers, citing persistent food inflation and how it no longer has the pending Kroger merger as a distraction.

Albertsons Companies Inc.'s stock gained ground Wednesday after J.P. Morgan deemed the company its top pick among food retailers, as inflation and worries about the economy look set to last and keep people eating more at home.

Analyst Thomas Palmer said the Albertsons (ACI) should benefit as it is now free to refocus on improving its business, after spending two years in "limbo" amid a failed acquisition by Kroger Co. $(KR)$. That deal, which was abandoned in December, faced regulatory scrutiny.

"With food inflation persisting and customers gravitating towards higher-margin areas (fresh produce and private-label items), Albertsons stands to benefit from the stability of food-at-home consumption during economic uncertainty," J.P. Morgan analyst Thomas Palmer said in a research note.

The stock rose around 1% in afternoon trading, and has now gained roughly 3% amid a four-day win streak that started after it closed last Thursday at an eight-month low.

Palmer assumed coverage of Albertsons's stock with an overweight rating and a $27 price target, which implies about 37% upside from current levels.

The price target means Palmer is tied with Wells Fargo's Edward Kelly as the most bullish of the 21 analysts surveyed by FactSet who cover Albertsons' stock.

Palmer believes Albertsons is the best of the food-retailer bunch, as the stock remains discounted to its peers in terms of price relative to earnings per share.

One of the reasons for the discount could be that investors got used to seeing Albertsons struggle while the buyout deal with Kroger was pending.

From Oct. 14, 2022, when Albertsons said it agreed to be acquired by Kroger, to Dec. 11, 2024, when the deal was terminated, the stock had dropped 30.4%, while the Consumer Staples Select Sector SPDR ETF XLP had gained 21.4% over the same time and the S&P 500 index SPX had soared 69.8%.

"We believe [Albertsons] has the potential to boost sales and earnings growth, particularly as it moves past the distractions of the [Kroger] acquisition," Palmer wrote.

Palmer is neutral on Kroger, and his $75 price target on the company's shares implies just 4.6% upside.

In general, he believes food retailers should continue to win out as the trend toward at-home dining looks set to continue. Palmer noted that the latest government data on personal-consumption expenditures showed that food-at-home spending has increased 3.2% from a year ago, greater than the overall PCE growth of 2.6%.

"Food retailers should benefit from the continued inflationary environment (which should help boost same-store sales growth and aid operating leverage) and also the migration toward better-for-you categories and departments," which tend to have higher profit margins, Palmer wrote.

-Steve Gelsi

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August 20, 2025 15:14 ET (19:14 GMT)

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