FILE PHOTO: An isle of a Ralphs grocery store, which is owned by Kroger Co, is pictured ahead of company results in Altadena, California U.S., December 1, 2016. REUTERS/Mario Anzuoni
October 11, 2017
By Lisa Baertlein and Sruthi Ramakrishnan
(Reuters) – Kroger Co <KR.N> said on Wednesday it is exploring the sale of its nearly 800 convenience stores as the No. 1 U.S. supermarket operator strengthens its online business in a market share war that has intensified since Amazon.com Inc’s <AMZN.O> purchase of Whole Foods.
Kroger shares jumped as much as 7.3 percent early in the session and was up 3.4 percent at $21.23 in afternoon trading.
“This is the result of a review of assets that are potentially of more value outside of the company than as part of Kroger,” the company said before its investor meeting in New York. It hired Goldman Sachs to assist with that effort. (http://bit.ly/2g173qv)
Kroger has 784 KwikShop, Tom Thumb, QuickStop and other convenience stores that generate $4 billion in annual sales.
Its nearly 2,800 U.S. supermarkets have been lowering prices and exploring new ways to sell food as it battles rivals such as Wal-Mart Stores Inc <WMT.N>, discounters Lidl and Aldi, and the newly merged Amazon-Whole Foods.
Kroger also reiterated its 2017 net earnings forecast of $1.74 to $1.79 per diluted share. It expects 2018 identical supermarket sales to be stronger than in 2017, when it saw little impact from the recent major hurricanes.
Cincinnati, Ohio-based Kroger said on Wednesday “it doesn’t see anything in the environment that would cause 2018 earnings per diluted share to be below $1.80.”
Kroger shares, which hit a 2017 high of $36.44 before the Amazon-Whole Foods announcement in June, have since tumbled roughly 40 percent. Investors are worried the online retail behemoth’s increased interest in grocery sales could upend the business as it did with books and electronics.
Kroger, for years a leader in using customer data to tailor store offerings and advertising, is responding by testing delivery via Uber, courier service Shyp and its own drivers through 200 stores by year end.
It is investing in digital sales through ClickList – an online ordering and curbside pickup service – which are growing strongly and adding incremental transactions, executives said. The service is expected to be in more than 1,000 stores by the end of the year.
Kroger does not have a major presence in high-density cities such as Manhattan and Boston, where online grocery delivery is most popular.
“In the markets we operate in, customers want to engage with us in multiple ways,” Chief Executive Officer Rodney McMullen said.
(Reporting by Sruthi Ramakrishnan in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Savio D’Souza and Jeffrey Benkoe)