Kroger Co. shifts strategy, looks to sell convenience store business

Answering the Amazon threat with new strategy
Posted at 10:04 AM, Oct 11, 2017
and last updated 2017-10-11 14:01:14-04

CINCINNATI -- The Kroger Co. is contemplating the sale of its 784-store chain of convenience stores and pursuing a broader initiative to boost annual profits by $400 million in the next three years.

The Restock Kroger initiative, debuted at an investor conference Wednesday, is an attempt to “redefine the food and grocery customer experience” using customer data analysis, new technologies and brand-building techniques.

The company also plans to continue what it calls “smart pricing” strategies to keep low-cost competitors from stealing customers.

"We understand that today's marketplace is shifting rapidly,” Kroger CEO Rodney McMullen said in a news release. "Kroger's success has always depended on our ability to proactively address changes by focusing relentlessly on our customers. We have the scale, the data, physical assets and human connection to win.”

Investors seem impressed by the moves. Kroger shares were up nearly 4 percent to $21.35 in pre-market trading.

Many of the elements of Restock Kroger have long been part of the company’s existing strategy. Kroger reaffirmed but did not increase its sales and profit outlook for 2017.

But the prospect of a convenience store sale is new. Kroger hired Goldman Sachs & Co. to explore strategic alternatives for the chain of 784 stores in 18 states. They generated 2016 revenue of $4 billion and sold 1.2 billion gallons of fuel, operating in 18 states under various names, including KwikShop, Tom Thum and Turkey Hill Minit Markets.

“Our convenience stores are strong, successful and growing with the potential to grow even more,” said Kroger Chief Financial Officer Mike Schlotman. “We want to look at all options to ensure this part of the business is meeting its full potential. Considering the current premium multiples for convenience stores, we feel it is our obligation as a management team to undertake this review.”