The US’s largest standalone supermarket said on Wednesday it has hired Goldman Sachs to explore strategic options, including a potential sale of its 784 convenience stores located across 18 states.
The move comes four months after Amazon acquired upmarket grocer Whole Foods Market for $13.7bn, a deal that threatens to disrupt bricks-and-mortar grocers and could spark a flurry of deals to consolidate traditional players in the sector.
Since Amazon has pushed further into the $800bn US food and grocery market, bankers have been working closely with their traditional clients to help them come up with an adequate tech-centric response to the threat from Mr Bezos’s ecommerce giant.
Kroger is also eyeing new assets to help it compete with Amazon, according to two people with knowledge of its strategy. Selling its convenience stores would help it raise cash to finance a deal.
Walmart and Google in August announced a partnership to sell the grocer’s products through the internet company’s online shop, a strategy that aims to jointly curtail the rise of a common enemy: Amazon. Meanwhile, Albertsons, another grocer which itself considered buying Whole Foods, recently acquired online recipe kit delivery company Plated, as it seeks to attract younger customers.
“Considering the current premium multiples for convenience stores, we feel it is our obligation as a management team to undertake this review,” Kroger said at an investor conference. The supermarket group last year generated $4bn in sales from its convenience stores.
Shares in the Cincinnati-based company jumped more than 5 per cent on the news.
Supermarkets, and Kroger in particular, have seen their stock slide since June 16, when Amazon announced its deal for Whole Foods. Kroger has shed more than a third of its market value over the past three months.
Rodney McMullen, Kroger chief executive, addressed the tough climate for grocers as he spoke to investors on Wednesday. “It’s important for you to understand we are facing reality. Disruption and competition will only continue. It’s here. We know it,” he said, adding that “we have allowed others to gain market share more than we would be happy with”.
The money raised from a sale would help fund digital plans and further price cuts. Kroger says it has poured $4bn into price cuts since 2000.
Kroger, which operates 2,800 stores across the US, on Tuesday reiterated guidance for the rest of the fiscal year for sales growth of between 0.5 per cent and 1 per cent, excluding fuel. The company said it expects supermarket sales to be “stronger” in 2018 but did not provide details.