Kroger to open 110 stores, debut three new formats focused on fresh and e-commerce

Kroger (KR) plans to invest $5 billion by 2029 to lower prices, aiming to compete with Walmart (WMT) and Costco (COST). The company expects to achieve $4 billion in annualized cost savings by 2029, with half from cost of goods. Kroger also announced cuts to about a third of its corporate roles. The stock saw volatility post-announcement, closing at $64.13 on October 21. Analysts have adjusted price targets, with Deutsche Bank at $70, Guggenheim at $68, UBS at $66, and Wells Fargo at $60.

Kroger ex-CEO Rodney McMullen testified that he doubted the $24B Kroger-Albertsons merger's chances due to FTC opposition. Albertsons sued Kroger for a $600M breakup fee and $8B in damages, alleging insufficient antitrust efforts. Kroger claims it invested $1B in the merger but faced regulatory hurdles. A bench trial is underway, with a ruling expected in months.

Kroger announced a plan to achieve $4 billion in annual savings through direct sourcing, reduced indirect spending, expanding its Capability Center, and leveraging technology and AI. The company aims to increase direct sourcing to over 10% and cut corporate jobs by 3,000. These changes are part of a broader strategy outlined during its Investor Day.

Kroger Co. aims to grow its private label business, which generates $40 billion in sales, with targets of $5 billion for its Private Selection brand and expansion of its Smart Way value line. The company plans to invest in premium and value segments, including global flavors and protein products, to meet diverse consumer needs. According to Kroger, its Simple Truth brand is the largest natural and organic brand in the U.S.

Kroger's ex-CEO testified that the company did what was required to secure regulatory approval for its $24.6B merger with Albertsons, which was blocked for antitrust reasons. Albertsons seeks $9.3B in damages, claiming Kroger breached the merger agreement. Kroger says it spent over $1B pursuing the deal. The trial will determine responsibility for the merger's failure.

Kroger plans a $5B investment by 2029 to lower prices and enhance customer value, aiming for 3% comparable sales growth. The company will cut costs through technology and streamline promotions. Kroger also plans to expand fresh food offerings and prepared meal options, opening 110 new stores. The strategy follows weak sales growth and aims to address rising food prices and changing consumer behavior.