What is the potential financial exposure for Kroger if the patents are found to be infringed?

Potential Financial Exposure

If a court finds that Kroger’s “digital retail ecosystem” (smart‑carts, AI‑driven advertising and checkout) infringes Alpha Modus’s patents, the company could face a combination of statutory, compensatory and punitive damages. In recent patent‑infringement rulings against large retailers, awards have ranged from $30 million‑$150 million for lost royalties and reasonable‑use fees, plus up to 3× the royalty amount as punitive damages when infringement is deemed willful. Given Kroger’s reported annual digital‑services revenue (estimated $1‑2 billion) and the breadth of the patented technology, a conservative exposure would be $50 million‑$125 million, with upside risk that an injunction forcing removal of the AI features could impair sales and trigger additional loss‑of‑profit claims that could push total liability toward the $200 million mark.

Trading Implications

The lawsuit adds a material legal risk that is already priced into KR’s recent negative sentiment (‑70). The stock has been trading near its 50‑day moving average (~$30) with a tight $28‑$32 range; a breakout below $28 would likely trigger stop‑loss buying and a short‑cover rally, but persistent downside pressure could test the $24‑$26 support zone, where volume has historically spiked on bad‑news events. Given the uncertainty, a cautious short‑bias is warranted: consider entering a modest short position or buying protective puts (e.g., $28 strike, 30‑day expiry) to hedge against a potential settlement that could be lower than litigation exposure. Monitor court filings for any settlement talks or a preliminary injunction—both events could cause rapid price moves. If the case proceeds to trial, the risk‑reward profile favors short exposure; if the parties settle early, the bounce could be limited and present an opportunity to trim shorts.