Why Costco Stock Dropped Today
Key Points
Kroger is cutting prices on groceries, hoping to compete better with Costco.
Kroger was also named America's 27th most popular company.
But Costco is No. 5.
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Costco Wholesale (NASDAQ: COST) stock stumbled on Thursday, falling 2.6% through noon ET on some news from grocery rival The Kroger Co. (NYSE: KR).
In an interview with Bloomberg published today, new Kroger CEO Greg Foran announced plans to implement "big price cuts" to better compete with rivals, including Costco (but also Walmart (NASDAQ: WMT), Amazon.com (NASDAQ: AMZN), Trader Joe's, and Aldi) on price.
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Image source: Costco.
No devil in these details
Should this worry Costco, the prospect of Kroger launching a retail price war against it? Maybe... if there were more details about precisely what Kroger is up to. But in the instant case, the details seem exceedingly vague.
True, according to the Bloomberg report, Kroger plans to cut prices "across product categories," with "thousands" of products dropping in price. Kroger's CEO will encourage his store employees to work faster and be friendlier, and he'll accelerate new store openings, adding 70 to 80 new stores in 2027. But for the most part, this plan appears to comprise primarily glowing generalities -- and nothing that poses a serious threat to Costco's business model.
Kroger's great -- but Costco's better
Granted, there was also this new Axios poll that came out yesterday -- one Kroger was quick to highlight in a press release -- describing Kroger as "one of America's most visible and trusted companies." Were that the whole story, it might worry Costco a bit.
But here's the thing: The same Axios poll that Kroger cited, naming Kroger the #27 most trusted company... ranked Costco #5.
Call me an optimist, but I think Costco is doing just fine.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, and Walmart. The Motley Fool recommends Kroger. The Motley Fool has a disclosure policy.
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