Kroger kicked off its biggest rally in two years after saying it might sell its convenience-store business, a $1.4 billion operation that spans 18 states.
The company began exploring strategic options for the business after a review found that it might have more value outside of Kroger, according to a regulatory filing on Wednesday. The Cincinnati-based supermarket giant hired Goldman Sachs to help handle the process.
“Considering the current premium multiples for convenience stores, we feel it is our obligation as a management team to undertake this review,” Chief Financial Officer Mike Schlotman said in the filing.
Kroger is evaluating operations at a time when Amazon is pushing into the supermarket business. The outlook for groceries, already a low-margin business, has been further complicated by the recent arrival from Europe of low-cost competitors Aldi and Lidl.
Canada’s Alimentation Couche-Tard Inc., meanwhile, has been snapping up convenience stores across North America. The company agreed last year to buy the gas-station chain CST Brands for almost $4 billion, its biggest deal yet. That transaction brought Couche-Tard thousands of locations in the southeastern US, Texas and New York, as well as eastern Canada.
Investors applauded the idea of Kroger’s convenience-store sale, sending the shares up as much as 5.8% to $21.73 on Wednesday. That was the biggest intraday gain since September 2015. The stock had been down 41% this year through Tuesday’s close.
Kroger operates 784 convenience stores, employing about 11,000 people under the banners Turkey Hill Minit Markets, Loaf ‘N Jug, KwikShop, Tom Thumb and QuickStop. The majority of locations also offer gas, and the business sold a total of 1.2 billion gallons of fuel last year.