GAS AND GROCERIES GOIN UP ALIBABA BONDS GIVE EM A BUMP

🛒 Kroger — Grocery King Making Smart Moves

What happened

• In Q2 2025, Kroger beat expectations: adjusted EPS came in at $1.04/share, above what many analysts thought (~$0.99).

• Its “identical sales” (same stores excluding fuel) rose 3.4% year-over-year, exceeding forecasts.

• E-commerce surged: digital sales jumped ~16% YoY. Grocery, fresh, pharmacy doing well.

• Because of that performance, Kroger raised its outlook:

  
  

  • Full-year identical sales growth now expected between 2.7%-3.4% (up from 2.25-3.25%) 

  
  

  • Adjusted EPS guidance lower end raised to $4.70/share from ~$4.60.

Why investors care

• Grocery chains are often seen as defensive plays: people need food & basics even if things get rocky.

• Strong digital growth and improving margins help show Kroger isn’t just surviving inflation + supply chain cost problems — it’s adapting.

• Raising guidance signals management is confident the strength will continue, not just a one-off quarter.

What might be the risks

• Margin pressure: Grocery retail tends to have thin margins, especially when inflation is high. Cost of goods, labor, fuel, etc., can hurt profits.

• Competition: Walmart, Amazon, discount grocers all pushing. Also pressure from tariffs, input costs, etc.

• Consumer behavior could shift if inflation, interest rates, or employment worsen.

🤖 Alibaba — Big Moves in AI / Cloud + Capital Raising

Key developments

• Convertible zero-coupon notes: Alibaba is raising about US$3.2 billion through a convertible note offering (zero-coupon) to boost its cloud infrastructure, data centers, tech upgrades, and global e-commerce presence.

• The notes mature in September 2032. The conversion premium (the extra value to convert into shares) is significant (≈ 31.25% premium over the current U.S.-listed share price).

• Analysts are bullish: Jefferies recently raised its price target on BABA from $165 to $178 while keeping a Buy rating, citing strong cloud growth and the AI push.

Why it matters

• The move shows Alibaba is putting serious money into its cloud infrastructure and AI capabilities. That’s not just hype: it’s heavy investment.

• Convertible notes are a way to raise capital without immediate interest payments (since zero-coupon), but they can dilute existing shareholders when converted. However, the conversion premium helps mitigate some of that fear.

• Analysts’ upgraded targets suggest market believes Alibaba can deliver more upside, especially as cloud & AI become more central in tech competition.

Risks / things to watch

• China regulatory environment: tech & AI are areas closely watched by Beijing. Changes in regulation, competition, or even government priorities could impact Alibaba more than some Western peers.

• Profitability vs. growth: Heavy investments cost money; returns are often delayed. Cash flow could be weak in the short term.

• Global macro issues: trade, currency, supply chain, etc., could add friction.

⚙️ What Fundamental & Technical Ratios Could Be Helpful (What to Look For)

• P/E ratio (Price/Earnings)

• PEG ratio (P/E divided by growth rate) to understand whether stock is overvalued relative to how fast growth might come

• Debt-to-Equity ratio (especially for Alibaba, since debt + convertibles impact capital structure)

• Free Cash Flow (FCF) and margins (gross, operating, net)

• Revenue growth in core segments: for Kroger, e-commerce, fresh, pharmacy; for Alibaba, cloud / AI / international commerce

• Conversion terms for the convertible notes (premium, dilution risk)

• Support & resistance levels in the stock charts to see where price may struggle or bounce

💡 What to Expect Going Forward

• If inflation keeps cooling or stabilizing and consumer demand holds, Kroger could continue to perform well — especially if it keeps executing on cost control and digital edge.

• For Alibaba, if cloud & AI investments start paying off, maybe via more enterprise contracts, better infrastructure, then the stock has room to run — though the risk of short-term swings is high.

• Market reaction will also depend on global economic factors: trade, China’s policy environment, interest rates, and supply chain/cost pressures.

🛒Inflation Up Thanks To Groceries & Gas⛽️

1. Inflation’s creeping back up

   
   

   • Consumer Price Index (CPI) rose about 0.4% month-over-month in August.

   • Year-over-year inflation ~ 2.9%, the highest since January.

   • Core inflation (excluding food & energy) sits around 3.1% YoY.

   
   

2. Groceries, gas, shelter hurting budgets

   
   

   • Food / groceries saw steeper price gains (monthly grocery prices up, etc.).

   • Gas prices rebounded ~1.9% from July to August.

   • Housing / shelter also contributing a lot to inflation.

   
   

3. Labor market & other weak signals

   
   

   • Jobless claims increased: weekly applications for unemployment ~ 263,000, highest in almost 4 years.

   • Nonfarm payrolls data revised down heavily in prior reports (‐911,000 over a span) — labor market weaker than previously thought.

   
   

4. Fed & rate cut bets

   
   

   • Despite inflation being above their 2% target (CPI, core), many investors still believe the Fed will cut rates soon.

   • These expectations are supported by the cooling seen in some PPI/wholesale prices, weak job growth signals, etc.

   
   

5. Concern of “stagflation” vibe

   
   

   • Rising prices + slower/weak labor = people worry that inflation + economic slowness may co-exist.

     
     

🔍 What It All Means, In Plain English

• If you’re paying for groceries, gas, or rent, you’re probably feeling the pinch — things are more expensive than a few months ago in those areas.

• Even though inflation is above what the Fed ideally wants, the Fed might still cut rates because other parts of the economy (jobs especially) are showing cracks.

• “Core inflation” staying high means prices beyond just energy/gas/food are also going up — that makes inflation stickier, which is annoying.

• People are talking about stagflation because when costs go up but wages don’t keep up (or jobs are weakening), life feels squeezed.

⚠ What To Watch Closely

• Upcoming inflation reports (CPI, core CPI) — if they stay high or rise, that could make the Fed more cautious / delay rate cuts.

• Job numbers: what nonfarm payrolls show, weekly unemployment, revisions to past numbers. If those are weak, rate cuts look more likely.

• Federal Reserve statements (Powell & others) — will they acknowledge increasing inflation or emphasize the risk of letting inflation “run hot”? Their tone matters.

• Gas and grocery supply / input costs — e.g. supply chain issues, tariffs, labor costs — because those tend to show up quickly in things consumers buy daily.