Cincinnati-based Kroger may sell off its convenience store business amid changes in the grocery market, the company said in a statement.
The Kroger Co. said its convenience store business is growing, but is “potentially of more value outside of the company than as part of Kroger.” The company intends to “explore strategic alternatives for its convenience store business, including a potential sale,” the company said.
“Our convenience stores are strong, successful and growing with the potential to grow even more,” said Michael Schlotman, the company’s executive vice president and chief financial officer. “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,” Schlotman’s statement said.
Kroger’s convenience store business includes 784 convenience stores located across 18 states, with 68 franchise operations, the company said in the statement. The stores operate under the names Turkey Hill Minit Markets, Loaf ‘N Jug, KwikShop, Tom Thumb and QuickStop.
Kroger’s supermarket fuel centers and Turkey Hill Dairy are not included in the review.
The convenience stores employ 11,000 people. As major local grocer, Kroger employs more than 8,100 associates in the Miami Valley.
Kroger said its convenience store business generated revenue of $1.4 billion in 2016, a figure that only reflects inside sales. Including fuel, Kroger’s convenience store business generated $4 billion in total sales last year, according to the statement.
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Kroger announced the review Wednesday. The news was welcomed by investors, according to Bloomberg, as shares shot up 7.3 percent before closing up 1.2 percent at $20.78. Bloomberg said the company's stock had been down 41 percent in 2017 through Tuesday. Kroger shares closed the week Friday at $21.30.
Bloomberg additionally noted “Kroger shares were temporarily halted on Wednesday morning after the company issued a confusing sales figure for the convenience-store business.”
Kroger hired Goldman Sachs & Co. to “identify, review and evaluate the options,” the company said.
A host of potential suitors could express interest in the Kroger convenience store brands.
7-Eleven Inc., a Japanese-American company based in Texas, and Iowa-based Casey's General Stores Inc. are among the U.S. companies that could seek Kroger's brands, Bloomberg and Canada's The Globe and Mail reported.
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Quebec-based Alimentation Couche-Tard Inc. could be an international buyer, the outlets reported.
“While Couche-Tard is determined to grow in the U.S. and extend its long track record of successful acquisition activity, we expect the company to remain disciplined with respect to price,” Irene Nattel of RBC Capital Markets wrote, The Globe and Mail reported.
The Globe and Mail reported Couche-Tard is still integrating its $3.4-billion acquisition in June of Texas-based CST Brands.
In the U.S., Canadian and international markets, Couche-Tard operates under the Circle K brand.
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