Loop Capital Markets analyst Andrew Wolf reiterated a Hold rating on Kroger Co (NYSE: KR), with a price target of $32. The analysts sees annual earnings of just under $122 million and an EPS of $2.22 are estimated for fiscal 2017.

The analyst believes Wal-Mart Stores Inc (NYSE: WMT) “has the most meaningful competitive effect on the supermarket industry,” and elaborated in a note on how its gains will lower that of competitors.

“Wal-Mart is taking share back from grocers at an accelerating rate,” said Wolf. First-quarter same-store sales grew 2 percent, a three-year best. Wal-Mart U.S. grocery sales also outperformed U.S. grocers by 2.9 percent. In 2016's Q4, outperformance was 1.6 percent.

The last time Wal-Mart outperformed supermarkets was 2009–2010, making the last two quarters a major inflection point.

Kroger Is Looking Better Than The Industry

Kroger is currently trading below all members of Loop Capital’s food merchandisers group except for SUPERVALU INC. (NYSE: SVU) on comparative forward P/E and EV/forward EBITDA multiples.

Wolf noted that while Kroger’s same-store sales have slowed, an inflection point is expected for Q1 from down (0.7 percent) to flat.

Kroger is also pursuing a “click and collect” e-commerce strategy like Wal-Mart, which the analyst believes will be a growing aspect of grocery shopping in the future.

These trends will likely help Kroger stay above the industry average as Wal-Mart puts on pressure.

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