Kroger Co. plans to enter at least one new market in the near future, CFO J. Michael Schlotman told an investor conference Wednesday in New York, though he declined to pinpoint the market.
“We are going down the path of picking one new market to enter organically,” he told the UBS Global Consumer Conference. “We’ve been engaged in that process since October, and we’ve essentially [decided] where we’re going to go, though it will be awhile before we go public” — both for competitive reasons, he noted, and because “the cost of land always seems to go up if they know we’re looking.”
Kroger also plans to continue to expand in fill-in markets, he said, and it is open to the possibility of acquiring stores that may be divested — apparently referring to a potential result of the Albertsons-Safeway combination, though he did not refer to those companies by name.
“We’ve been happy picking up assets [when stores] become available in markets where we currently operate, and those have been very beneficial for us,” Schlotman said. “But it would be complete conjecture until they start the [Federal Trade Commission] review process and figure out what they may have to dispose of.
“They must still have conversations with the FTC before they decide what assets would become available, and if there are attractive assets in markets where we operate and they fit nicely with our footprint, we’ve long said that those kinds of deals have been great for us.
“But we’ll wait to see what that chapter says when it get written.”
Asked whether Kroger will expand Harris Teeter’s operating trade area north or south, Schlotman replied, “They’re already up into the Baltimore, Delaware and Washington, D.C., areas, and as those areas get more built up — and they will, because there is still plenty of opportunity there — a decision will be made on whether to take that nameplate further north or further south, since they already have one store in Florida.
“But we’re a long way from that decision on whether they go south or north,” Schlotman said.
He said Kroger expects to learn a lot about operating smaller-format stores from Harris Teeter, which operates urban formats of 15,000 square feet to 20,000 square feet in downtown Charlotte, N.C., and the Washington, D.C., Beltway. “We expect to learn a lot from them on that kind of format because frankly it’s not been a strength of ours, and Harris Teeter is doing pretty darn well with those stores."
Schlotman also said Kroger’s larger-format stores are likely to find their way into the Harris Teeter operation. “They’re intrigued by our Marketplace format, and they’ve been to Portland [Oregon] to understand the Fred Meyer logic and how they buy for those stores, so I would expect at some point there will be Harris Teeter Marketplace stores just like there are King Soopers Marketplace stores or Fry’s Marketplace stores.”
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