Kroger Co. invested $71 million in new stores and remodels in 2013. Next year's total could go even higher.
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CINCINNATI -- The Kroger Co. is projecting up to $120 million in new store construction and remodeling projects in its Cincinnati-Dayton operating division next year. That would be a hefty increase over its average spending levels in the previous five years.
The robust pipeline is a sign that the downtown Cincinnati–based company feels confident about growing its top-ranked market share in Cincinnati. Kroger’s 40 percent share is double that of its next nearest competitor, Walmart Stores Inc., at 19 percent, according to an April report prepared for WCPO by Chain Store Guide .
Kroger spokeswoman Rachael Betzler said the company invested $71 million in three new stores, four remodeling projects and four fuel centers in 2013. That’s a 31 percent increase over the $54 million in annual capital spending in the five years ending in 2012. Kroger has given final approval for two new projects with $25 million in capital spending for 2014.
But other projects in the pipeline could boost that total to more than $120 million.
“Some projects can take years to be approved based on the city or township. Others, not so long. So, the timing varies by project,” Betzler said. “We are constantly reviewing our stores and gathering customer feedback on how to make our customers shopping experience better. Investing in our stores each year is a way to do that.”
The list of stores remodeled in 2013 includes Hartwell, Hillsboro, Queen City Centre and Greenville, near Dayton. New stores were built in Amelia, Independence and Austin Landing, south of Dayton. A Florence Marketplace store is scheduled to open early next year, while the Kroger on Mt. Zion Road is slated for renovation in 2014.
As WCPO reported Monday , Kroger is considering building a new Marketplace store on a 35-acre site in Union. Residents are gearing up to fight the new development, fearing noise and traffic problems. The Union store is not on the list of approved projects for 2014.
Also not on the list is University Plaza in Corryville, where a developer is trying to demolish and rebuild a Kroger store serving the Uptown neighborhoods near the University of Cincinnati. A Kroger Marketplace store at Oakley Station, which has been touted to be the largest store in the area at 145,000 square feet, is in the pipeline but also not yet approved.
"Our numbers have to make good business sense and the company's capital investment is made on a project by project basis," Betzler said.
Industry In Growth Mode
The Ohio Grocers Association says the industry is in a growth mode in Ohio, with retailers like Lucky’s Market adding stores in Columbus and Fresh Encounter growing in the Northwestern part of the state.
“There’s been expansion just in the industry in general,” said Joe Ewig, director of government relations for the Columbus-based trade group. “You have it from the bigger chains, but in the smaller stores as well.”
Retail properties in Greater Cincinnati have steadily improved their vacancy rates in the last year and grocery-anchored retail centers are one reason for the improvement, said Loren DeFilippo, senior regional director at real estate research firm, Xceligent Inc.
Retail properties in the Tri-State had a 9.6 percent vacancy rate at the end September, compared to 10.5 percent a year ago. Neighborhood retail centers were 14.5 percent vacant, but accounted for about a fourth of the retail space filled during the period.
Kroger was the most active retailer in the region during the third quarter, filling its 133,000-square-foot Amelia Marketplace store and signing a 26,000-square-foot expansion in Delhi. It also vacated 115,000 square feet of retail space at the Amelia Shopping Center and 1783 Ohio Pike, Xceligent data shows.
One expert says Kroger is pursuing a “market saturation strategy” in Cincinnati, where customer loyalty and store improvements have proven to win and retain customers.
“Kroger is going to intensify their competitive environment,” said Thom Blischok, chief retail strategist for Booz & Co.’s San Francisco-based retail consulting practice.
“It’s a pretty good play,” Blischok said. “It will cause their business to grow.”
'Way Ahead Today Of Where We Though We'd Be'
Kroger has been expanding its capital budgets nationwide, even as it prepares to digest the $2.5 billion acquisition of the Harris Teeter grocery chain in Charlotte. The company announced a year ago that it would grow capital spending by $200 million a year.
In an October 30 conference call with Wall Street analysts, Kroger Senior Vice President Michael Ellis said Kroger is “way ahead today of where we thought we’d be a year ago.”
He didn’t detail Kroger’s spending plans in Cincinnati but said the company tends to “generate a higher return on assets in markets where we
have a higher market share. So the fill-in strategy, it's well under way in several markets today, and we've added even more to our capital plans for the future to continue the fill-in strategy.”
In Dallas recently, Kroger announced a two-year investment of $150 million and plans to hire 1,700 new employees.
In Cincinnati, Kroger held job fairs seeking 1,200 new associates to fill positions throughout the Tri-State. It currently has about 12,000 Greater Cincinnati workers and 78 stores.