Shares for the Cincinnati-based chain were down 5 percent after the bank announced its lower rating.
The German investment bank warns on higher costs as Kroger expands its e-commerce program. Analyst Paul Trussell also forecasts an earnings headwind from its commitment to keep competitive on pricing, especially with Amazon.
“To be clear, we are on board with the majority of steps that management has outlined as part of its Restock Kroger plan, and we believe that Kroger may be one of the winners in food retail over the long term,” Trussell wrote.
“However, in a period of rapid change in the grocery sector, it will likely be quite challenging to grow profits while playing from a position of weakness.”
In the same breath, Deutsche Bank announced it’s upgrading shares of Kroger competitor Walmart to a "Buy" with one of the higher share price targets out there at $113. Analysts believe the company is now in position to accelerate market share gains in the grocery sector while expanding its return on investment.
But while Deutsche Bank may be cautious about Kroger, others aren’t there yet.
In August, Zacks Investment Research upgraded Kroger shares to "Buy" from "Hold" and set a $35 price objective on the stock. Then in September, Credit Suisse Group set a $33 price objective and gave the stock a "Hold" rating, followed by Morgan Stanley, which reduced its price objective from $28 to $27 and set a "Hold" rating.
In September, Kroger issued its last quarterly earnings report. The company reported revenue of $27.87 billion for the quarter, compared to analysts’ expectations of $27.95 billion. The firm’s quarterly revenue was up 1 percent on a year-over-year basis.
What’s more, Kroger has been making upgrades to its delivery services over the last year. In August, it announced plans to begin testing driverless delivery cars and earlier this month, it revealed its partnership with Walgreens to test grocery pickup at its drugstores.
