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

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

Post by J-Man »

This article from CNBC suggests that Kroger should try to outbid Amazon for Whole Foods.
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by architect »

storewanderer wrote:I do not think Kroger will be making a play for 800 Ahold Stores.

Food Lion needs to be spun off into an independent entity and allowed to go swim alone. I think bringing back a Food Lion private label and the current crop of store remodels is setting a foundation for this. They will cut it loose at the right time.

Kroger is having its own operational problems right now. All you have to do is look at their financials. The purchase of Roundys appears to be running into trouble, Pick N Save announced more closures this month. Kroger's own stores are missing numerous growth opportunities out on the west coast and Kroger's perimeter programs are becoming stale due to lack of innovation and a lack of quality. Kroger is also walking a real fine line with how it is handling private label. Discontinuing name brand or Kroger brand items to make way for (higher priced) "Simple Truth" items in categories like laundry soap or household cleaners or liquid hand soap is a really questionable move in my mind.

As far as the convenience stores go, I think the more likely scenario would be Kroger selling its c-stores off to someone else. Kroger's c-stores are having major operational problems in my observation. The Quik Stops here in Nevada have become quite dirty and sloppy, prices have been increased substantially in-store, specials are not as good, Kroger brand items have been mostly discontinued (supposedly due to a supplier change this is temporary) except on a few key items, and there has been no new store growth at Quik Stop in quite a while. Back in Wichita, KS I went into some of the Kroger Kwik Shops and also found them to be very dirty and poorly maintained, even newer and modern looking locations. I tried to find unsweetened brewed Turkey Hill Iced Tea from the fountain area at about 4 Kwik Shops and every time they were out of it (they had 4 other sweet brewed flavors available, however). I finally asked at one and was told the supplier was out of unsweetened iced tea bags so they haven't had it "in a while." That was never a problem at Quik Trip who has no problem keeping about 12 sweet or unsweet brewed iced teas available at most given times.
I second much of this analysis.

Although I anticipate some fallout and market shifts within the grocery industry both later this year and into 2018, I actually wouldn't be surprised to see things somewhat quiet on the Kroger front. The only chains I could see Kroger making a run for could be smaller regionals such as Ingles or Brookshires which would increase stores count while also pushing Kroger into areas which are in close proximity to or slightly overlap existing operations. Regardless of long term prospects, the acquisition of Ahold's stores or another large reputation with a questionable reputation could send investors scrambling. Between integrating Roundy's and rolling out initiatives such as ClickList, Kroger has enough on their hands already, especially with their stock price being as depressed as it is.

On the other hand, I expect that we will see some sporadic news from Albertsons over the next year or so. In many markets, Albertsons is still running multiple banners with one clearly more successful than the other. I expect that we will see groundwork for banner consolidations taking place in certain markets. If conditions continue to deteriorate, it would not surprise me to also see the Houston-area stores closed/sold, and a move potential made with the three Florida Safeways.
cathandler wrote:How is United working out for Albertsons? I got the impression that they have pretty much left it to run semi-autonomously. Would the rest of Albertsons benefit from learning from anything United is doing?
United is certainly being run more autonomously than the rest of Albertsons' empire, but cuts at the store level are still beginning to take hold, which is particularly noticeable with Market Street. Market Street is gradually moving from an image of a "Central Market that also carries mainstream groceries" to a "stereotypical grocer with a more extensive prepared foods selection". Pricing and selection were noticeably going downhill during my last few visits. Increasingly, there is very little setting them apart if you are not coming for the prepared foods. The sad thing is, there is so much that Albertsons could take from United's management style, but yet they are seemingly just allowing the purchase to go to waste.
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by storewanderer »

Kroger needs to get more aggressive at expanding in markets where they are in 2nd or 3rd place (that would be most of the west coast) and taking share from weaker regionals, Wal Mart, and Albertsons/Safeway who are all ripe for the picking. Expansion should be organic and it should be a combination of Marketplace Stores as well as standard 55k square foot stores.

Instead Kroger is too comfortable. They keep pushing and building out markets where they are a solid #1 which is fine. They certainly need to be on their toes in the top markets in order to retain their top position. I am just not sure it should be their only focus... which is how it seems.
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by jamcool »

I wouldn't be surprised if Kroger consolidates some of its store brands...like in Colorado with King Soopers and City Market (their TV ads are co-branded as is some of the in-store material). It may be time for the "King" to takeover the "City". The same with Dillon's and Gerbes.
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by Knight »

architect wrote: I second much of this analysis.

Although I anticipate some fallout and market shifts within the grocery industry both later this year and into 2018, I actually wouldn't be surprised to see things somewhat quiet on the Kroger front. The only chains I could see Kroger making a run for could be smaller regionals such as Ingles or Brookshires which would increase stores count while also pushing Kroger into areas which are in close proximity to or slightly overlap existing operations. Regardless of long term prospects, the acquisition of Ahold's stores or another large reputation with a questionable reputation could send investors scrambling. Between integrating Roundy's and rolling out initiatives such as ClickList, Kroger has enough on their hands already, especially with their stock price being as depressed as it is.
Kroger acquiring Ingle's would help boost store count and infill in northern Georgia, western North Carolina, upstate South Carolina, and eastern Tennessee. Ingle's will fill a void where Harris Teeter and Kroger lack initiative to expand.
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by CalItalian »

J-Man wrote:This article from CNBC suggests that Kroger should try to outbid Amazon for Whole Foods.
This wouldn't work well in Southern California. Lots of divestitures would be needed. Ralphs in many cases are just down the street or within blocks from many Whole Foods locations (West Los Angeles on National Blvd., Westwood Village near UCLA, Hillcrest San Diego, El Segundo-Manhattan Beach (Whole Foods in between each of those Ralphs Fresh Fare locations), Venice, West Hollywood, Downtown Los Angeles - just to name a few). Ralphs Fresh Fare locations, which most of those are, entertain much more business than Whole Foods locations do.
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by klkla »

CalItalian wrote:Ralphs Fresh Fare locations, which most of those are, entertain much more business than Whole Foods locations do.
FWIW Whole Food's average sales per store is much higher than Ralphs. There are some situations where newer larger Ralphs stores compete with older small Whole Foods and in those cases Ralphs probably has higher sales. But in the cases where Whole Foods has a larger store and decent parking they kill Ralphs.
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by storewanderer »

I don't think Kroger should try to outbid Amazon for Whole Foods. It would not be a wise use of their capital. Plus, Kroger has been very successful at either taking share from Whole Foods or keeping their existing customers from deviating fully to Whole Foods by adding more Organics, through the very deep Simple Truth brand (which at this point has a lot more depth than Whole Foods 365 brand has).
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by CalItalian »

klkla wrote:
CalItalian wrote:Ralphs Fresh Fare locations, which most of those are, entertain much more business than Whole Foods locations do.
FWIW Whole Food's average sales per store is much higher than Ralphs. There are some situations where newer larger Ralphs stores compete with older small Whole Foods and in those cases Ralphs probably has higher sales. But in the cases where Whole Foods has a larger store and decent parking they kill Ralphs.
Not a chance in West Los Angeles. Ralphs Fresh Fare in Westwood Village vs. Whole Foods Westwood Village, Ralphs has 75% of the business (it is the top Ralphs in sales and a top 10 Kroger chainwide). BOTH have parking garages. One of my best friends is the store manager of a Ralphs in West Los Angeles which has a Whole Foods just a few blocks away. Their (Ralphs) business is twice that of Whole Foods. There are NO Whole Foods stores in West Los Angeles that are larger than a Ralphs store. NONE.
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Re: Is the Kroger Company in position for an acquisition in 2017?

Post by CalItalian »

storewanderer wrote:I don't think Kroger should try to outbid Amazon for Whole Foods. It would not be a wise use of their capital. Plus, Kroger has been very successful at either taking share from Whole Foods or keeping their existing customers from deviating fully to Whole Foods by adding more Organics, through the very deep Simple Truth brand (which at this point has a lot more depth than Whole Foods 365 brand has).
The one thing I have found is those who really love shopping at Whole Foods really hate 365.
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