Kroger and Albertsons Plan to Sell 413 Stores, Kroger Gains Supply Chain Efficiencies
Kroger and Albertsons agreed to sell 413 stores and additional assets for about $1.9, in connection with their proposed merger. Meanwhile, Kroger said it achieved meaningful operational efficiencies in the supply chain in the second quarter of 2023.
Kroger and Albertsons Sale Details
The agreement with C&S Wholesale Grocers, LLC includes the sale of stores — including the Mariano's, QFC, and Carrs brand names — eight distribution centers, two offices and five private label brands (Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals, and Waterfront Bistro) across 17 states and Washington, D.C.
According to Kroger, the divestiture plan marks a key next step toward the completion of the proposed merger by extending a well-capitalized competitor into new geographies. The plan aims to ensure no stores will close as a result of the merger and that all frontline associates will remain employed.
The merger remains on track to close in early 2024, subject to regulatory clearance and other closing conditions. Prior to closing, Kroger may, in connection with securing FTC and other governmental clearance, require C&S to purchase up to an additional 237 stores in certain geographies. If additional stores are added to the transaction, C&S will pay to Kroger additional cash consideration based upon an agreed upon formula.
Supply Chain Efficiencies
In Kroger’s Q2 2023 the retailer achieved “meaningful operational efficiencies” in its supply chain through improved transport capacity utilization and increased productivity in its warehouses and across its network, Gary Millerchip, Kroger’s SVP and CFO told analysts in its recent earnings call.
“Supply chain efficiency is one of many components of our strategy to expand margin over time while continuing to invest in greater value for our customers,” said Millerchip.
The grocer will continue to invest in its supply chain, he noted, as the company sees significant opportunities to further lower costs, while improving product freshness by eliminating waste.
He later added that Kroger continues to invest significantly in the supply chain because the team is doing a great job identifying ways in which Kroger believes it can continue to drive efficiency in its supply chain strategy by leveraging data more effectively, technology, and continuing to optimize routes and the capacity it’s utilizing on those routes.
Organized Retail Crime
Millerchip also revealed that shrink increased during quarter, “primarily due to rising theft and organized retail crime.”
This comes after Dick’s Sporting Goods revealed last month that shrink represented a third of its merchandise margin decline and blamed organized retail crime.
“We are implementing initiatives to mitigate the financial impact including increased security and new technology solutions, but would expect shrink trends will continue to be a challenge for the remainder of the year,” Millerchip observed.