Despite rumors that the two were merging – and shares for both companies surging on Friday as a result – a source said there’s “no truth” that Target and Kroger are in talks to unite.
A report in Fast Company cited several people who said that the two retailers were discussing a merger deal.
The companies allegedly first started talking last summer about a partnership that would not only boost Target’s lagging grocery business, but also give Kroger customers access to more merchandise and eCommerce.
The talks have been ongoing as Target and Kroger try to decide whether a merger is the best move. Last year, the two retailers’ combined annual revenue was $195 billion.
Neither Target nor Kroger commented on the report.
A merger would help Target compete with Amazon, which acquired Whole Foods Market for $13.7 billion last year.
“Target customers would have access – in Target stores and out of Target stores – to best-in-class grocery,” said digital supply chain consultant Brittain Ladd.
After the Amazon deal, Walmart began expanding its grocery offerings, and several grocers responded by setting up their own partnerships. For example, Kroger, Albertson’s, Publix and Stop & Shop owner Ahold Delhaize joined forces with Instacart to give their businesses a digital presence and provide on-demand delivery.
BJ’s Wholesale Club also announced a partnership with Instacart earlier this month to offer same-day delivery from all of its brick-and-mortar stores by the end of April.
In the meantime, Target hired a former Kroger exec, Jeff Burt, to head its grocery department, and redesigned the grocery departments in its locations as part of a bigger remodeling strategy. But analysts say there is still much work to be done.
“We believe Target has much further to go before the grocery business is fully fixed,” GlobalData retail managing director Neil Saunders said, according to CNBC.
For now, Target is focusing on its private-label brands for apparel and home goods before setting its sights on food, which will be a costlier market to expand.