Kroger will close 60 stores nationwide while struggling with leadership turmoil and a failed $24.6 billion merger with Albertsons amid pressure to improve its bottom line.
Key Takeaways
- Kroger plans to close 60 underperforming stores by the end of next year, representing about 5% of its locations
- The closures come after the ouster of CEO Rodney McMullen following a personal conduct probe and a blocked merger with Albertsons
- All affected employees will be offered positions at other Kroger locations
- The company took a $100 million impairment charge but expects long-term financial benefits
- Kroger will reinvest savings into enhancing customer experience while maintaining its full-year financial guidance
Strategic Store Closures Amid Corporate Upheaval
Grocery giant Kroger has announced plans to shutter 60 underperforming stores across the United States over the next 18 months. The decision comes at a turbulent time for the Cincinnati-based retailer, which recently experienced a leadership shakeup with the resignation of CEO Rodney McMullen following an investigation into his personal conduct. According to reports, McMullen forfeited $11.2 million in unvested stock and options when he stepped down. This corporate restructuring follows the company’s failed $24.6 billion merger with Albertsons, which was blocked by a federal judge over antitrust concerns.
Interim CEO Ron Sargent explained the rationale behind the closures during a recent earnings call, emphasizing the need for operational efficiency. The company conducted a thorough review of its retail footprint and identified locations that weren’t contributing meaningfully to future growth targets. The closures, which represent approximately 5% of Kroger’s stores, are expected to be completed by the end of next year, with the company taking a $100 million impairment charge related to these actions in the first quarter of 2025.
Financial Impact and Customer Strategy
Despite the significant upfront costs associated with the closures, Kroger expects the move to ultimately strengthen its financial position. First-quarter sales for the grocery chain were $45.1 billion, slightly down from $45.3 billion during the same period last year. However, when excluding fuel, sales actually increased by 3.2% due to strategic price cuts and promotions designed to attract cost-conscious consumers. This indicates that while overall revenue has dipped slightly, the company’s core grocery business remains relatively strong in a challenging economic environment.
“Unfortunately, today, not all of our stores are delivering the sustainable results we need,” Sargent said on Friday. “To position our company for future success, this morning, we announce plans to close approximately 60 stores over the next 18 months,” said Ron Sargent, Interim CEO.
The retail giant, which employs nearly 410,000 associates nationwide, has assured that all workers at closing locations will be offered positions at other Kroger stores. This move demonstrates the company’s commitment to its workforce while streamlining operations. Kroger has explicitly stated that savings from the closures will be reinvested into enhancing the customer experience, with leadership emphasizing that these changes will not affect the company’s full-year financial guidance. This strategic reallocation of resources reflects Kroger’s prioritization of remaining competitive in markets where it has stronger performance.
Adapting to Changing Consumer Behaviors
Kroger is capitalizing on the trend of Americans eating more meals at home, a behavior pattern that has persisted even after pandemic restrictions eased. The company has increased its sales forecast based on this continued shift in consumer habits. Private-label products have been a particular bright spot, with sales growing faster than national brands for seven consecutive quarters. This trend toward store brands reflects both consumer price sensitivity during inflationary times and Kroger’s success in developing quality alternatives to more expensive name-brand products.
“Kroger is committed to reinvesting these savings back into the customer experience, and as a result, this will not impact full-year guidance,” said Kroger.
Looking ahead, Kroger plans to launch 80 new high-protein products to meet growing consumer demand in this category. This product development initiative demonstrates the company’s commitment to innovation despite the challenges of store closures and leadership changes. By focusing resources on stores with stronger performance metrics and investing in product categories showing growth, Kroger aims to strengthen its market position against competitors like Walmart and Amazon, which have aggressively expanded their grocery operations in recent years.
