Is the Kroger Company in position for an acquisition in 2017?

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Is the Kroger Company in position for an acquisition in 2017?

Post by Knight »

Cincinnati Business Courier reports the Kroger Company could be in position to acquire Ahold Delhaize's United States operations. Ahold Delhaize's United States operations consist of Food Lion; Giant-Landover, Maryland; Giant-Carlilse, Pennsylvania/Martin's; Hannaford; and Stop & Shop.) In that footprint, the Kroger Company has Kroger and Harris Teeter.

If the Kroger Company acquired Ahold Delhaize's United States operations, I could see Food Lion being divested or many of its stores shuttered.

The Kroger Company could have another acquisition in mind. Seeking to infill in northern Georgia, western North Carolina, upstate South Carolina, and eastern Tennessee, the Kroger Company could find Ingle's Markets, Incorporated, an acquisition target. Ingle's Markets, Incorporated, is a well operated company; is actively building new and additional stores; and has food, pharmacy, fuel, and Starbucks in its stores similar to Kroger and Harris Teeter stores.
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by pseudo3d »

Knight wrote:Cincinnati Business Courier reports the Kroger Company could be in position to acquire Ahold Delhaize's United States operations. Ahold Delhaize's United States operations consist of Food Lion; Giant-Landover, Maryland; Giant-Carlilse, Pennsylvania/Martin's; Hannaford; and Stop & Shop.) In that footprint, the Kroger Company has Kroger and Harris Teeter.
The merger of Ahold and Delhaize sure hasn't been for the US company's benefit, I could've told you that last year and I think I did. However, the idea is still a bit farfetched. Ahold Delhaize owns about 2,000 stores, which is a little less than Kroger's 2,800 stores, and about half of which (Ahold Delhaize's, not Kroger's) are Food Lion stores, which don't quite fit in with the rest of the Ahold chain (or Kroger, for that matter) and would require divestments. The last thing Kroger (or anyone, really) needs is an acquisition that damages the underpinnings of the company. Albertsons choked on ASC and that nearly killed the company, and their indigestion with Safeway is not promising.
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by Knight »

Ahold Delhaize's United States operation would be valuable for Giant-Landover, Maryland; Giant-Carlilse, Pennsylvania/Martin's; Hannaford; and Stop & Shop to further expand in the mid-Atlantic and the northeastern United States. Food Lion is a liability because of its extra high prices, lack of food and pharmacy departments, current challenges against Kroger and Harris Teeter in trade areas, and better supermarket participants in trade areas.

The Kroger Company could acquire Ingle's Markets, Incorporated, to increase store count and be steps ahead of Publix (Atlanta and Charlotte divisions) infilling in Kroger's Atlanta, Mid-Atlantic, Nashville, and Harris Teeter divisions.
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by storewanderer »

I think they could pull off both acquisitions. I am just not sure Kroger is in a good position lately. Their stock is depressed, I feel like they are lagging behind previous years efforts they had made in improving mix and quality, new store growth on the immediate west coast is almost null while Albertsons has been steadily adding stores, and the grocery business at large is in lousy shape. This may be a good time for them to pick some chains up in distress, but I think they need to be careful.

Also there are still no Mariano's or Harris Teeter ideas making their way into the rest of Kroger. Kroger's prepared foods program specifically in Smiths and Frys is absolute crap, and even at Fred Meyer and Ralphs is just barely passable. I don't know what the hold up is on bringing proven, quality prepared foods programs into the rest of the chain.
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by Knight »

Kroger's 2016 Fact Book is out.

Its Operating Divisions (page 14) lists the 22 supermarket divisions. Divisions with higher store counts seem to be doing good. Divisions with lower store counts should increase store count or reorganize into regions of larger divisions.
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by jamcool »

They could buy Instacart. Or go major into the convenience store business by buying Couche-Tard/Circle K, where there are some questions about the family that runs it.
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by Knight »

Acquiring Instacart would be a blow for Publix. Publix recently announced a partnership with Instacart to provide delivery service for all stores by 2020.

Kroger acquiring Circle K is doable taking into consideration Kroger's convenience store operations.
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by pseudo3d »

Knight wrote: Kroger acquiring Circle K is doable taking into consideration Kroger's convenience store operations.
No, it's really not. First off, Alimentation is in the process of negotiating CST Brands, a multi-billion dollar deal. But let's think about this, Fred Meyer when Kroger bought it was $13B, a little less than its annual sales in the late 1990s. But that may be overpricing it...CST Brands' revenue was almost the same number in 2013 but Alimentation is buying it for a third of that, $4.4 billion. So let's say that after CST Brands is acquired, and divested, Alimentation adds $8 billion to its $34B right now, so $42 billion (ballpark number). If Kroger wants to even that consider that (and of course, even more divested stores would be needed in a market that's already in flux in some markets, what with Circle K's recent acquisitions and the Stripes/7-Eleven deal), they would need to cough up at about $28B, and that's money Kroger doesn't really have, not unless they want to keep a growth trajectory for their U.S. stores.

It makes acquiring Delhaize/Ahold much easier in comparison.

Of course, if Kroger acquired Ahold but not Delhaize (despite being under the same corporate umbrella, the subsidaries remain separate in the states), that would mean they won't get Hannaford, which is Delhaize's. Even if they DID get Ahold, it would consist of Stop & Shop (422 stores), Giant-PA (200 stores), and Giant-MD (170 stores), adding nearly 800 stores to the chain, about the level of Fred Meyer store count-wise. And while Fred Meyer seemed to have helped Kroger, I can't say the same for Ahold...last thing we want is Ahold poisoning Kroger (and similarly, Safeway poisoned Albertsons). Last thing Kroger needs is for their stores to really deteriorate and give competitors a chance to take over their market share.
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by Knight »

Ahold Delhaize should get rid of the poison before Kroger catches it. That poison is Food Lion.

Hannaford ended 2016 with 189 stores.
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by pseudo3d »

Knight wrote:Ahold Delhaize should get rid of the poison before Kroger catches it. That poison is Food Lion.

Hannaford ended 2016 with 189 stores.
The U.S. subsidiaries of Ahold and Delhaize did not merge, even though their parent company is Ahold Delhaize. It isn't a package deal by default.

And I was referring to the problems within Ahold...from what I heard, Stop & Shop and the Giant stores have their own set of operational problems. Those operational problems in a chain that big could negatively affect Kroger, and that's the worst case scenario for Kroger. In the imaginary scenario, Kroger buys Ahold and has to deal with integrating the 800 stores with its existing network. The operational problems begin affecting other divisions, and chain operations begin to suffer, causing people to seek other competitors.

If this is paired with Albertsons getting better (keep in mind this scenario is based after Albertsons' early 2000s problems and Kroger's 2000s success), then Albertsons can eat Kroger's lunch and pick off the weaker stores. If they bet the farm on Ahold and things get worse, then they have to sell off divisions. They select Harris Teeter as a store they can sell, it was never well integrated with Kroger anyway (and according to the Fact Book is not #1 or #2 in its market), and that gets sold to Albertsons (which they originally wanted), which promises to build it into a decent East Coast brand. Kroger keeps the rest of its divisions, but many of the secondary markets disappear and it never becomes the strong competitor it once was. It may not end up splitting apart, but they end up letting Albertsons close the gap on the store count and revenue. Meanwhile, Kroger still is a publicly traded company, and the stock isn't worth it once was.

That is what could happen if Kroger takes on an acquisition it can't handle.
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