It looks like Kroger might be unloading its $1.4 billion convenience store business — an announcement that has filled the retail industry with glee and has sent the grocery store chain’s shares a-soaring. The news came via a statement issued at the company’s investor conference.
Currently, Kroger is evaluating and developing a strategic alternative for the 784 convenience stores it operates in 18 states. The company further revealed that it will be working with Goldman Sachs as the grocery store chain considers its options.
The convenience store vertical generated $1.4 billion in revenue for the brand last year and sold about $1.2 billion in fuel. Brands covered under the Kroger imprimatur include Turkey Hill Minit Markets, Tom Thumb and Quik Stop.
“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.”
On top of that news, Kroger laid out its plan of attack in the increasingly competitve and cut-throat grocery retail space. Investors got a look at the “Restock Kroger” branding ploy on Wednesday, directing its strategic focus to food products and the digital experience for the customer.
“People are increasingly becoming more foodie,” said CEO Rodney McMullen. “We will partner with our customers for their meals. And it will be anytime, anything, anywhere they want it.”
But, of course, lots of brands want to fill that need for customers. Amazon most recently with its big Whole Foods Market acquisition. Kroger has been hit hard by the emerging competition, and its stock price has suffered for it, down 28 percent so far in 2017.
Growth, for this year anyway, will likely continue to be slow: 0.5 percent to 1 percent growth in identical supermarket sales. Slight growth in 2018 seems likely, however, with projections that earnings per share will not dip below $1.80.
But Kroger is committed to the comeback, with ideas like its “Scan, Bag, Go” pilot program, which will allow customers to bag their products as they shop and scan a code before they exit, improving the digital experience.
CEO Rodney McMullen and Kroger will also continue delivery of personalized recommendations to customers, as well as its sensor network and machine learning networks to further build it out its customer science expertise in offers and coupons.
The company now sees 96 percent of every sale that goes through stores, according to Chief Digital Officer Yael Cosset.
“Fundamentally, we believe we have one of the best data assets,” he said. “Ultimately, this drives loyalty to Kroger.”