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Kroger in $2.1 billion mega-deal

BY Marianne Wilson

The Kroger Co. has sold its convenience store business.

The supermarket giant has entered into an agreement to sell its 762 convenience stores to EG Group, a privately-held convenience store retailer based in the United Kingdom for $2.15 billion. The deal is expected to close transaction during the first quarter of Kroger’s fiscal year.

As part of the agreement, EG Group will establish its North American headquarters in Cincinnati. The company will continue to operate the acquired stores under their established banner names.

Kroger announced in October 2017 its intention to explore strategic alternatives for its convenience store business, including a potential sale. The business generated revenue of $4 billion in 2016.

“As part of our regular review of assets, it has become clear that our strong convenience store business unit will better meet its full potential outside of our business,” said Mike Schlotman, Kroger’s executive VP and CFO. “One of the most important considerations in our decision-making process was continued operations to ensure minimal disruption to our associates. We are very pleased the EG Group plans to establish their North American headquarters in Cincinnati.”

Kroger’s convenience store business operates in 18 states and includes 66 franchise operations. The stores operate under the following banners: Turkey Hill, Loaf ‘N Jug, Kwik Shop, Tom Thumb and Quik Stop.

The EG Group has more than 2,600 sites across the U.K., France, The Netherlands, Belgium, Luxembourg and Italy. Mohsin Issa, EG Group founder and co-CEO, said the company’s entry into the U.S. market presents a “fantastic opportunity to deliver a successful retail offer to consumers across the various states.”

“We have had much success across Europe and we firmly believe the Kroger assets present a fantastic foundation to overlay our retail experience and know-how in the U.S.,” he said. “We have had much success across Europe and we firmly believe the Kroger assets present a fantastic foundation to overlay our retail experience and know-how in the U.S. We are committed to investing in the Kroger network, partnering with leading retail brands and working with the exceptional management team and associates transferring across to deliver a comprehensive retail offer.”

Kroger plans to use net proceeds from the sale to repurchase shares and to lower its net total debt to adjusted EBITDA ratio.

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Bloomberg: Walmart could be eyeing operations in Israel

BY CSA Staff

A discount giant may be evaluating a new territory.

Israel’s Prime Minister Benjamin Netanyahu has been wooing Walmart, in hopes that the company will operate in the country, according to Bloomberg.

According to Netanyahu’s economic adviser, Avi Simhon, the Prime Minister and John Furner, president and chief executive officer of Sam’s Club, discussed the idea of Walmart’s opening a retail branch and investing in Israeli technologies.

The retailer’s low-cost reputation coincides with the Israeli government’s efforts to lower the cost of living, according to the report.

To read more, click here.

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Analysis: Bon-Ton always running up a down escalator

Although the failure of large chains is an exceptional event, Bon-Ton’s fall into bankruptcy comes as little surprise.

For years, Bon-Ton has struggled to get customers into its stores and to persuade them to buy. This is partly an issue of location. Many of Bon- Ton’s stores were in areas where the availability of branded fashions and homewares was traditionally poor.

However, while this once made them a focal point and a destination for local shoppers, the internet has done much to change this dynamic and has made the stores less relevant, and arguably less necessary, than they once were.

This is one of the reasons why Bon-Ton has tried to improve its assortment and build a stronger omnichannel proposition. To be fair, there were some signs that these programs were delivering, with initiatives like ‘buy online, pick up in store’ helping to generate some customer traffic and interest.

However, this progress was never enough to transform a struggling business, and the meager sales gains they delivered were wholly insufficient to turn around Bon-Ton’s fortunes.

The harsh reality is that while Bon-Ton’s management put in great effort to make the business sustainable, they were always running up a down escalator.

With a massive debt load and a business that was far from being profitable at an operational level, Bon-Ton’s financials were tipped firmly in the wrong direction. Ultimately, the only sensible option was to file for Chapter 11.

Even with breathing space, the future of Bon-Ton is uncertain. In our view, there are many stores and locations which are in terminal decline and where closure is the only sensible option.

A scaled down business may have a chance of survival. However, the Bon-Ton brand — and all of the associated names under which it operates — are far from healthy. They are undifferentiated, unclear and have become increasingly irrelevant to consumers. Even if the debt load was cut and unprofitable divisions culled, Bon-Ton would still be running up a down escalator to survive.

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