The 784 convenience stores operated by Kroger generate annual revenue of $4 billion, including fuel sales, and have delivered 62 consecutive quarters of same-store sales growth, but the supermarket retailer may be putting up a “For Sale” sign.
Kroger announced on Oct. 11 that it had hired Goldman Sachs to identify, review and evaluate options for its c-stores, which operate in 18 states under banners including Turkey Hill Minit Markets, Loaf ‘N Jug, KwikShop, Tom Thumb and QuickStop.
“Our convenience stores are strong, successful and growing with the potential to grow even more,” said Mike Schlotman, EVP and CFO of Kroger in a statement. “Considering the current premium multiples for convenience stores, we feel it is our obligation as a management team to undertake this review.”
Kroger also announced its intention to sharpen its focus on its core supermarket business with its “Restock Kroger” plan, which includes redefining the food and grocery customer experience through:
• Data and Personalization: The retailer already delivers 3 billion+ personalized recommendations to customers each year;
• Digital: Providing not only functional information but also “inspiration and personalized discovery through recipes and product content,” according to a statement;
• Space Optimization: Leveraging customer science to make space planning decisions to disrupt shelves, optimize assortments and improve in-stocks;
• Growing Private Label: Continuing to build on its own brands’ sales growth, which increased from $15 billion in 2011 to $20.5 billion in 2017; and
• Transforming Stores’ Front End: Redesigning to maximize stores for self-checkout and expanding the 20-store Scan, Bag, Go pilot to 400 stores in 2018.
The time may be ripe for Kroger to sell off its convenience store business. The vertical as a whole is on a growth trajectory: the IHL Group study titled Debunking The Retail Apocalypse identified it as one of the three fastest-growing segments, along with off-price retailers and groceries. Additionally, a study from Koupon Media indicated that 61% of all shopping trips are motivated by immediate needs.
There has been significant consolidation in the c-store sector in recent months, however, which may dull potential purchasers’ appetites for buying a chain the size of Kroger’s. In April 2017, 7-Eleven bought more than 1,100 convenience stores from Sunoco for $3.3 billion, bringing its North American store footprint close to 10,000 locations. In July the Canadian parent company of Circle K stores paid $4.4 billion for CST Brands, adding 1,300 stores to its North American footprint for a total of 8,000 locations.