Kroger, the supermarket giant, has announced a major change in its operations strategy in the United States. The company has confirmed that it plans to close 60 of its stores over the next 18 months, which represents 2% of its 2,731 locations. Although the exact locations of the closures haven't been disclosed, this decision will have a significant impact on the Cincinnati-based retail chain.
The chain has reported a loss of $100 million due to the deterioration of these unprofitable stores. However, Kroger has indicated that it expects to obtain a "modest financial benefit" from these adjustments. Despite all the cuts, the company has also emphasized that it plans to reinvest the savings in improving the customer experience and continuing its expansion in other areas.
Kroger has a strategy in mind
Kroger, which operates in 35 states, has stated that the affected stores will be those with poor performance in terms of profitability. In a conference with analysts, interim CEO Ron Sargent explained that these closures aren't specific to one region and will affect different markets nationwide. "These closures are a necessary part of our reinvestment process," Sargent said.
In addition to the cuts, Kroger remains committed to long-term growth. The chain has reaffirmed its intention to spend between $3.6 billion and $3.8 billion in capital expenditures this year. This money will be allocated to building new stores and expanding existing ones, which shows the company's focus on modernization.
Regarding the affected workers, Kroger has assured that it will offer relocations to all employees from the stores that close. The company has committed to ensuring that there won't be mass layoffs, as vacancies in other locations will be available. Despite the cuts in some stores, Kroger remains a major employer in the country, with more than 409,000 workers.
What Kroger's future will look like
With the resignation of former CEO Rodney McMullen at the beginning of March due to an internal ethics investigation, Kroger is in a transitional stage. The company has hired a search firm to find a new CEO, which could influence the company's strategic decisions. Meanwhile, Kroger continues to bet on the future with plans to open new stores, such as the two locations in northern Kentucky.
Despite the closures and adjustments, Kroger has reported solid earnings in its first fiscal quarter. The company reached sales of $45.1 billion, with a profit of $866 million. However, its profit experienced a drop of 8.6%, which reflects the challenges the company faces in a competitive market.
Kroger continues working to improve its profitability through greater operational efficiency. Despite current challenges, the company has raised its sales forecast for the year, highlighting potential growth in existing stores.
This restructuring process reflects Kroger's response to a challenging economic environment and its focus on improving profitability. The company is committed to reinvesting in the customer experience, and although store closures may cause concern, the plan appears aimed at ensuring success for the future.