Research firm Stephens started coverage of grocery store chain Kroger (KR) with an Underweight rating, its equivalent of a sell rating. The firm initiated coverage of Kroger's competitor Sprouts Farmers Market (SFM) with a neutral equivalent and also began coverage of a retailer and supplier to the space, United Natural Foods (UNFI).

KROGER: The company has "one of the best management team in...food retail," and its operations are "best-in-class," wrote Stephens analyst Ben Bienvenu. However, its status as a price competitive conventional grocer will weigh on its financial results in the near-term, the analyst stated. Increasing price competition and higher labor costs could also hurt its results, Bienvenu believes. He placed a $20 price target on the shares.

UNITED NATURAL: The increasingly widespread availability of natural and organic food at "numerous grocery channels" will weigh on United Natural Foods' results, warned Bienvenu. Whole Foods' (WFM) struggles will also hurt United Natural's results, he stated, adding that Amazon's (AMZN) purchase of Whole Foods increases the risk facing United. He set a $40 price target on the shares. SPROUTS: The chain's products and "price position" are among the best in the market, Bienvenu stated. However, the stock's valuation reflects the company's strengths as well as a possible takeover, contends the analyst, who set a $25 price target on the name.

PRICE ACTION: In morning trading, Kroger rose fractionally to $23.50, United Natural was down fractionally at $36, and Sprouts gained 0.5% to about $24 per share.