) to equal-weight from overweight.
Analyst Meredith Adler says despite a steady improvement in the economy recently, she now believes earnings for most supermarkets will remain pressured for years. She says this is a result of continued expansion by alternative channels, a painfully slow rationalization leading to tough conventional competition, and relentlessly rising operating costs.
Adler cut the target to $16.50. She cut the $1.34 fiscal 2006 (Jan) earnings per share estimate to $1.26. Adler says Kroger remains the best-positioned chain, but it needs to make a multi-year price investment as expenses keep rising, which creates a poor earnings per share outlook.