R5 double downgrades Kroger to Sell on deteriorating supermarket fundamentals

R5 Capital analyst Scott Mushkin double downgraded Kroger (KR) to Sell from Buy with a $37 price target given that the firm’s research indicates that supermarket industry fundamentals have "deteriorated rapidly" and it fears the "industry could face a very unwelcome climate of rising unemployment, slowing inflation, volume pressures and increased promotional activities" in the next couple of quarters. R5 views Kroger as "particularly vulnerable" given that it competes more than any supermarket against Walmart (WMT) and other discounters, prompting the firm’s recommendation that investors with a shorter time horizon of six to nine months sell the stock. However, the firm still believes that the longer-term story around the acquisition of Albertsons (ACI) remains intact, which it says "suggests an equity value over $50 is possible post the close."