The crazy part about this that no one is talking about for some reason (that I can’t understand other than underappreciating how low margin physical grocery stores are as a business) is that the $KR online business has EBIT margins of ~41% https://twitter.com/_inpractise/status/1381341674794852353

$KR management has said in the start of the $OCDO partnership in 2018 that they plan on opening 20 fulfillment centers over the next 3 years, assuming 2019 numbers with sales of $41.7 million per store that’s $6.9 billion in EBIT, more than double current EBT.

Also keep in mind that in order to match their current store footprint in sales with their fulfillment centers, they would only need to build ~138 fulfillment centers which is not as much as it seems and would deliver $55 billion in incremental EBIT for $KR

Given that they have a clear competitive advantage in this space that is practically impossible to replicate as long as the $OCDO partnership is intact, the option of online delivery for $KR is being ridiculously undervalued.

Now this isn’t to say that $KR will completely replace their current footprint with fulfillment centers in 10 or even 20 years, but if the physical stores grow at current rates and they can open at least 30 FCs (not unreasonable) that’s well over $10 billion incremental EBIT...

which makes $KR an easy 10+ bagger with a nice yielding dividend that’s growing very fast and upside accretion from the large buyback program until the FCs achieve mature profitability and current FCF conversion that’s ~$15B that should be valued at at least 25X IMO, which is...

$367 billion in EV for $KR by 2030 conservatively, which doesn’t include their 5% stake in $OCDO which could be worth more than the current market cap by then and also doesn’t include buyback accretion or the spawning of other business lines from management.

All things considered, the idea that $KR management has been doing a bad job in capital allocation and has been doing bad deals is just nonsense as they’ve widened their moat significantly, continue to expand ROICs, and made high IRR investments all with little to no capital.

With that being said, $KR management over the past 5 years has turned the business into a faster growing wide moat cash cow while taking no risks and has been incredibly shareholder friendly to the point where even Morningstar had to credit them with an Exemplary rating.

Furthermore, where larger peers such as $AMZN have failed to gain a competitive advantage in online groceries profitably (mind you it’s the best corporate culture of all of the spawners in the world) $KR has managed to do so while putting up a fraction of the capital.

Another point in this thread that I hadn’t considered is that $KR has a highly effective and profitable CPG marketing business line that will grow even larger with lots of pricing power and hit revenues similar to $AMZN ad business with very high margins as the online business...