In the most dramatic aspect of the new strategy, Kroger said it intends to explore strategic alternatives for its convenience-store network, including a potential sale.
The decision is the result of a review of “assets that are potentially of more value outside of the company than as part of Kroger,” the company said.
Kroger has hired Goldman Sachs & Co. to identify, review and evaluate the options.
"Our convenience-store management and associates are an important part of our success,” said Mike Schlotman, executive vice president and CFO of Kroger. “We value what they do and thank them for what they will continue to do as we conduct this evaluation.”
"Our convenience stores are strong, successful and growing with the potential to grow even more," Schlotman said. "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."
Kroger owns 2,793 supermarkets, about 1,425 with fuel centers, under a variety of banners in 35 states and the District of Columbia. It operates five convenience-store divisions with a total of 784 convenience stores (726 with fuel) in 18 states: 129 Kwik Shop c-stores in Iowa, Kansas and Nebraska; 170 Loaf ‘N Jug c-stores in Colorado, Montana, North Dakota, Nebraska, New Mexico, South Dakota and Wyoming; 101 Quik Stop c-stores in California and Nevada; 117 Tom Thumb c-stores in Alabama, Florida, Mississippi and Tennessee; and 267 Turkey Hill Minit Markets in Indiana, Ohio and Pennsylvania.
It also has 2,258 pharmacies, 307 fine jewelry stores, 222 retail health clinics and 38 food production plants including Turkey Hill Dairy. The supermarket fuel centers and Turkey Hill Dairy are not included in the review. Kroger's convenience-store division ranked No. 10 on CSP's 2017 Top 202 list of the largest c-store chains in the United States.
Kroger's c-store business generated revenue of $1.4 billion and sold 1.2 billion gallons of fuel in 2016. The business unit has delivered 62 consecutive quarters of identical-store sales growth, said the company. In 2016, the c-stores accounted for 4% of Kroger’s total sales.
Possible suitors to acquire the c-stores include 7-Eleven Inc., Irving, Texas; Alimentation Couche-Tard Inc., Laval, Quebec.; Casey’s General Stores Inc., Ankeny, Iowa; and Marathon Petroleum Corp., Findlay, Ohio.