CINCINNATI -- Kroger Co.'s stock took a tumble last week.
A 25% drop in the chain's stock price last Monday followed news that Robert G. Miller, Kroger vice chairman and chief operating officer, and the top two executives at Kroger's Fred Meyer, Inc., division, had resigned to take top-level positions at Rite Aid Corp., Camp Hill, Pa., plus the news Kroger's fourth-quarter earnings results might not be quite as strong as Wall Street had anticipated.
Kroger stock recovered slightly over the next few days, moving up to close at TK late last week. Tuesday's trading, during which 28 million Kroger shares changed hands, was the largest trading day in the chain's stock in at least a year, observers said.
A kroger spokeman told SN the company attributed the stock decline to the combination of the earnings projections and the resignations. "We expect earnings in the fourth quarter to be in the range of 37 to 40 cents per share, a range that represents a solid increase. However, most Wall Street analysts have been expecting us to earn 40 cents per share," he said.
"In addition, the departure of highly visible executives probably created some uncertainty among investors."
The spokesman told SN the company was surprised by the timing of Miller's resignation.
In contrast to the direction of Kroger's stock, Rite Aid's stock rose 40% the day the new management team was announced, and held relatively steady during the week to close at TK at midweek.
The new Rite Aid management team includes:
Miller, 55, as chairman and chief executive officer. Miller had been CEO at Portland, Ore.-based Fred Meyer from 1991 until its merger with Kroger in May, after which he held the titles of Kroger vice chairman and chief operating officer.
Mary Sammons, 53, as president and chief operating officer. Sammons was formerly CEO of Fred Meyer Stores.
David Jessick, 46, as chief administrative officer. Jessick had been executive vice president of finance and investor relations at Fred Meyer since 1996 and, before that, spent 17 years with Thrifty Pay Less Drug Stores, achieving the post of executive vice president and CFO at the time it was sold to Rite Aid in 1996.
John Standley, 36, as chief financial officer. Standley, who had been senior vice president and CFO of Fred Meyer prior to the Kroger merger, was executive vice president and chief financial officer of Fleming Cos., Oklahoma City.
Miller succeeds Martin L. Grass, the son of Rite Aid's founder, who resigned as chairman and chief executive officer in mid-October. Since Grass's resignation, Leonard I. Green, the drug chain's largest shareholder, had served as chairman and Timothy J. Noonan, Rite Aid's president and chief operating officer since 1995, had been interim CEO. Noonan, a 30-year Rite Aid veteran, said he will remain with the company and work closely with the new management during a transition period.
In other developments last week:
Fred Meyer, Inc., said Kenneth Thrasher, 50, will succeed Sammons as president and CEO of the Kroger subsidiary. Thrasher, formerly Fred Meyer's executive vice president of administration, has been senior vice president of Kroger since May, with a focus on facilitating the merger.
Fleming said two executives will assume the responsibilities of CFO until a successor to Standley is named: Kevin Twomey, who was named senior vice president, finance, and controller; and John Thompson, promoted to senior vice president, business development, finance.
Rite Aid has been plagued the last few months by questions about top management's abilities and investigations of its record-keeping methods.
Miller said the new Rite Aid management team plans to drive traffic through a targeted marketing program while committing itself to "the strictest financial discipline and controls."
Gary Giblen, New York-based managing director of Bank of America Securities, San Francisco, told SN Miller faced comparable challenges when he joined Fred Meyer in 1991 after a 30-year career with Albertson's. "There were some sales issues there, and the company had outgrown its systems. And although he came in as a general turnaround executive, he was most effective in expanding sales and galvanizing corrective actions on the systems side."
John Wlodek, an analyst with Imperial Capital, Beverly Hills, Calif., said Rite Aid's new management team faces many uncertainties, "but they are taking over a company with $13 billion or $14 billion in sales and a good base of stores, most of which are less than three years old.
"What Rite Aid has needed is a management team that can operate the stores in an ethical and efficient manner, and it has that now. Ultimately management needs to ride herd on the business and move it back to profitability.
"With the new team, Rite Aid has, overnight, eliminated the black hole created by prior management, and this represents a tremendous shot in the arm."