Market Overview

Kroger Dumps Convenience Store Business For $2.15B

Kroger Dumps Convenience Store Business For $2.15B

Kroger Co (NYSE: KR) announced Monday it has sold its convenience store assets to British company EG Group for $2.15 billion. The deal is part of Kroger’s “Restock Kroger” initiative to improve its customer service and product offerings by utilizing more data and technology.

“As part of our regular review of assets, it has become clear that our strong convenience store business unit will better meet its full potential outside of our business,” Kroger CFO Mike Schlotman said in a statement.

Kroger informed shareholders it was exploring alternative strategies for its convenience stores back in October. The assets include 66 franchise operations in 18 U.S. states. Brands include Turkey Hill, Loaf ‘N Jug, Kwik Shop, Tom Thumb and Quik Stop. In 2016, Kroger’s convenience store segment generated $4 billion in revenue.

Kroger said it would use proceeds from the sale to buy back shares of Kroger stock and pay down debt.

Kroger stock has struggled in the past year as pricing pressures and new competition from, Inc (NASDAQ: AMZN) weighed on margins. Kroger investors are hoping the asset sale will help streamline the business as Kroger focuses on taking on Walmart Inc (NYSE: WMT) and Whole Foods.

In late January, the New York Post reported Kroger and Chinese e-commerce leader Alibaba Group Holding Ltd (NYSE: BABA) have been exploring a potential partnership, but a source familiar with the matter told Benzinga the scope of the meetings was limited only to Alibaba’s potential expansion of its Alipay payment platform to U.S. Kroger stores.

Related Links:

Kroger and EG Group Announce Definitive Agreement for Purchase of Kroger's Convenience Store Business

Kroger, Alibaba Have Talked About Alipay, But Not Much Else

Disclosure: the author is long BABA.

Photo from Wikimedia. 

Posted-In: EG GroupNews Asset Sales Best of Benzinga


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