This much was clear when Kroger Co. executives discussed the grocery conglomerate’s financial results Thursday: Harris Teeter is part of a much bigger family now.
Cincinnati-based Kroger’s executives touched on their recent acquisition of Charlotte’s homegrown grocer during a conference call about the grocery conglomerate’s financial results on Thursday, but they didn’t go into detail. And analysts spent much of their time asking executives about Kroger’s next possible acquisition: a rumored bid for part of Safeway, the No. 2 supermarket chain nationwide. Later in the day, private equity fund Cerberus Capital Management announced that it plans to acquire Safeway.
As for Harris Teeter, executives said they’re still looking at the chain’s store operations.
“The merger ultimately closed Jan. 28, so it’s only been a handful of weeks since we’ve actually been able to roll up our sleeves and have the conversations you want to have when you integrate a company,” Kroger CEO Rodney McMullen told analysts about the Harris Teeter deal. “Any surprise we’ve seen has been a positive, not a negative, surprise.”
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Kroger is the nation’s largest grocer, with more than 2,640 stores and annual revenues of more than $98 billion. The company said Thursday it won’t break Harris Teeter’s results out separately. That’s the same policy the grocer has for its dozen or so other brands, which include its own Kroger name as well as stores such as Fred Meyer, Fry’s, Dillons, King Soopers, QFC and Ralph’s.
The combination with Harris Teeter closed too late in the fiscal year for the Matthews-based company’s sales to be included in Kroger’s reported results, Kroger said.
Kroger closed its $2.5 billion acquisition of Harris Teeter about six weeks ago. The company has said Harris Teeter will continue operating under its own name and maintain its local offices. At the same time, Kroger plans to combine its purchasing with Harris Teeter to get better prices and centralize some behind-the-scenes functions in order to achieve annual cost savings of $40 million to $50 million.
Increased competition was one of the reasons Harris Teeter – the Charlotte region’s No. 1 grocer by market share – decided to sell. Harris Teeter faces a growing number of challengers in its core market of North Carolina, including Florida-based Publix, Wal-Mart’s Neighborhood Market grocery stores and Whole Foods.
Kroger beat analysts’ expectations for the fourth quarter. The company posted profits of $422 million, down 8.7 percent from the same quarter a year ago. Kroger attributed the drop to an additional week in the fourth quarter last year.
Sales at stores open a year or more, considered a key measure of a retailer’s health because it excludes new and closing stores, were up 3.6 percent.
The company said it plans to spend up to $3 billion on capital expenditures such as new stores in fiscal 2014, potentially including new Harris Teeter stores.
“They continue to have some attractive opportunities,” McMullen said of Harris Teeter’s possible expansion. “They were growing their company.”