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Kroger shops for options for its convenience store ops
Posted on Thursday, 12 October 2017 08:31
As e-commerce titan Amazon continues to turn the screws on competition by making further inroads into the US food and grocery sector, Kroger has decided to look into options for its USD 1.40 billion-revenue convenience store arm.
The Ohioan supermarket chain is feeling the pressure to up its game in the growing and fragmented market as hard discounters expand into the category while traditional rivals intensify their own fighting strategies.
Its end-game is to move faster on rolling out digital options focused on data – behaviour, influence, motivations, as well as analytical space planning, among others – to redefine the way it operates.
The question of where the convenience store business lies within this restock Kroger strategy has fallen into the lap of Goldman Sachs after a review of assets indicated it may have more value outside the company.
Strategic options on the table for the division, which, when excluding fuel, generated USD 1.40 billion in total inside sales last year, include a potential sale.
It comprises 84 stores – of which 68 are franchises – located across 18 states and operating under banners such as Turkey Hill Minit Markets, Loaf ‘N Jug, KwikShop, Tom Thumb and QuickStop.
Neither the supermarket fuel centres, which helped push up the overall division’s 2016 sales to USD 4.00 billion, nor Turkey Hill Dairy are included in this review.
CFRA analyst Joseph Agnese said in a client note cited by Reuters a strategic review of this business could lead onto possible evaluations of other non-core operations.
Meanwhile, sources told the Financial Times that Kroger’s sale of its convenience arm would raise cash to finance the purchase of new assets to help compete against Amazon.
The company said in its financial guidance for 2017 it expects capital investments, excluding mergers, acquisitions and purchases of leased facilities, of between USD 3.00 billion and USD 3.30 billion.
© Zephus Ltd