To secure regulatory approval for its planned $25-billion acquisition of Albertsons, Kroger announced on Friday that it would sell more than 400 of its grocery stores to C&S Wholesale Grocers.
The deal would bring Kroger about $1.9 billion in cash. Kroger said it might also need to divest up to 237 additional stores in some regions, depending on the regulators’ decision. The company expects to close the transaction with Albertsons by early 2024.
Kroger’s stock rose as much as 6% after the announcement, despite reporting a $1.4-billion charge in the second quarter related to a settlement of an opioid case, and lowering its sales outlook for the rest of the year. Albertsons’ shares also gained 3%.
CEO Rodney McMullen said on a call with analysts that C&S was an experienced buyer of grocery stores, having been approved by the Federal Trade Commission in previous mergers.
Kroger, based in Cincinnati, Ohio, also said it faced a challenging consumer environment due to persistent inflation.
The company’s same-store sales in the quarter ended Aug. 12 fell short of analysts’ estimates, and the company projected that its annual identical sales, excluding fuel, would be at the lower end of its guidance.
The company posted a loss of $180 million in the quarter, compared to a profit of $731 million a year ago, reflecting the impact of the opioid charge.
However, excluding that charge, the company earned 96 cents per share, beating LSEG estimates of 91 cents per share.