Kroger Sticks to Existing Markets, Looks For Buys

CINCINNATI-Supermarket owner Kroger Co. is keeping its store expansion in existing markets and is looking at making more small-portfolio store acquisitions, management said during its first-quarter conference call. The announcement follows a deal that closed last week when Kroger acquired 20 Michigan Farmer Jack stores form the Great Atlantic and Pacific Tea Co.

Kroger sees more opportunities for more small portfolio buys than large ones, says David Dillon, the company’s chairman and chief executive officer, though he stressed that Kroger would look at big buys very carefully. “We continue to see lots of acquisition opportunities , but very few of them that hit the criteria we are after,” he says.

Organic-store growth will come from more existing markets than new ones. “We have plenty of opportunities in our existing markets,” says Rodney McMullen, Kroger’s chief financial officer. “There’s no reason to take the risk of going into new markets.”

During the quarter, which ended May 26, Kroger opened 19 new stores, renovated 71 and closed 24, bringing its total number of units to 2,458. During the current period, executives predict that the company will experience 2% square-footage growth.

Kroger’s first-quarter, same-store sales 5.2% year over year and 6% including fuel sales, while total sales were up 6.75, to $20.7 billion. Net earnings came in at $336.6 million, up from $306.4 million during the same year-ago period. Management predicts that same-store sales will rise between 3.5% and 5% for the year.