CINCINNATI -- Analysts said last week's decision by Kroger Co. here to combine its retail divisions headquartered in Livonia, Mich., and Columbus, Ohio, and operate the new division from Columbus does not mean the retailer is reducing its commitment to its Detroit-area stores.
As an important sign of Kroger's determination to grow in that market, the company also announced it would spend more than $185 million over the next three years to build, expand and remodel stores in Michigan, analysts noted.
Chuck Cerankosky, equity analyst, McDonald Investments, Cleveland, told SN, "This should not be viewed as a retreat from Detroit. This is using systems to better manage an entire organization."
He said while Kroger is centralizing certain functions, it still maintains a strong and growing presence in the greater Detroit market.
Observed Jason Whitmer, research analyst, Midwest Research, Cleveland, "Kroger wants to make sure people, both within their own corporate structure and in the investment community, know that they're not neglecting Michigan. What we've seen is them having a pretty decent success against Farmer Jack," the Detroit-based subsidiary of A&P, Montvale, N.J.
Whitmer noted that Kroger's consolidation of divisions is a continuation of their targeted savings on the operational side, which he said was a source of funding for promotions.
Cerankosky added that improved technology is what makes the combining of the divisions practical. "Kroger's long-term investment in information systems allows them to do a number of functions in administration, accounting, purchasing and marketing centrally," he said. "Still, they want to make sure the stores in Detroit are operated with a definite local flavor, and the same for Columbus."
Kroger also named Jon Flora, previously president of the Michigan division, to lead the combined divisions, and promoted M. Marnette Perry, president of the Columbus division, to group vice president, perishables merchandising and procurement.