Kroger said Wednesday that it was considering a sale of its convenience stores amid fierce competition in the grocery business. Its shares jumped 5% in early trading after the news.
“We want to look at all options to ensure this part of the business is meeting its full potential,” said Mike Schlotman, Kroger’s CFO, in a premarket announcement. “Considering the current premium multiples for convenience stores, we feel it is our obligation as a management team to undertake this review.”
Kroger’s shares have dropped 12% since mid-June when Amazon stunned the grocery industry with its acquisition of Whole Foods. The company reported an 8% drop in second-quarter profits after aggressive cost cuts aimed at overcoming competition from Walmart and other retailers.
Kroger said Wednesday it was unveiling a plan to revamp its stores, including bigger investments in ecommerce and more cost cuts.
The 784 convenience stores under consideration for a sale earned $1.4 billion in revenues last year. Kroger’s supermarket fuel centers and its Turkey Hill Dairy brand are not under review. Kroger also operates pharmacies, jewelry stores and health clinics.
Last week, Warren Buffett’s Berkshire Hathaway said it agreed to acquire 38.6% of Pilot Travel Centers, the owner of the Pilot Flying J truck-stop chain.