CINCINNATI—The nation's largest grocery operator by revenue is exploring a sale of its convenience store business. The Kroger Co. said Wednesday it had hired Goldman Sachs to identify, review and evaluate options for its 784 C-store properties, which operate under five different banners in 18 states.
“Our convenience stores are strong, successful and growing with the potential to grow even more,” says CFO Mike Schlotman. “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's convenience store business generated revenue of $4 billion and sold 1.2 billion gallons of fuel in 2016, with fuel sales accounting for more than half the revenue. It operates under the Turkey Hill Minit Markets, Loaf 'N Jug, KwikShop, Tom Thumb and Quik Stop banners, and has generated 62 consecutive quarters of same-store sales growth. The business includes 68 franchise operations.
The decision to explore the possibility of a sale is “the result of a review of assets that are potentially of more value outside of the company,” according to a statement Kroger issued Wednesday in advance of its investor meeting. Not cited among the initiatives the company is taking as part of its “Restock Kroger” program are any plans to expand the company's brick-and-mortar footprint.
Instead, Kroger will look to bolster its Web presence in the face of increasing competition from Amazon, while also investing in technology and infrastructure upgrades for its physical stores. These include building its Internet of Things sensor network, video analytics and machine learning networks, which will be complemented with robotics and artificial intelligence “to transform the customer experience.”
E-commerce isn't the only competitive threat faced by traditional supermarket chains, though; there are also Wal-Mart as well as discount grocers such as Aldi and Lidl, the latter having opened its first US stores this past spring. With that in mind, the company has lowered prices, and said Wednesday that it would “continue investing to avoid losing customers because of price.”
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
