Kroger (KR) is now at a crossroads: As CEO Rodney McMullen announced his resignation, same-store sale growth lagged behind competition, and its proposed merger with Albertsons fell through.
On Monday before market open, the company announced McMullen would be stepping down immediately “following a Board investigation of his personal conduct that, while unrelated to the business, was inconsistent with Kroger’s Policy on Business Ethics.” Kroger family member and industry veteran Ron Sargent was named interim chairman and CEO.
Analysts called the announcement surprising.
“We thought Kroger would shake up leadership, following the failed merger with Albertson’s, but obviously this is not how we envisioned this playing out,” CFRA analyst Arun Sundaram told Yahoo Finance. “Despite how things ended for Rodney McMullen, now is a good time to see new leadership at Kroger.”
The grocer is set to report its fiscal fourth quarter and full-year 2024 report on Thursday before market open.
This is one of many C-suite changeups in recent history.
Last month, the company announced PepsiCo (PEP) executive David Kennerley would join the company on March 10 and officially succeed interim CFO Todd Foley on April 3. Foley took the interim position after Gary Millerchip left for Costco last February.
Its chief merchandising officer, Stuart Aitken, who was a former leading internal candidate per Joe Feldman of Telsey Advisory Group, also stepped down at the end of last year to become CEO of Circana.
As of 12:19:54 PM EST. Market Open.
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Shares of the company dropped nearly 2% on Monday.
Morningstar analyst Noah Rohr told Yahoo Finance over the phone that investors were considering how these “new faces” would play out for the company and updated guidance.
Kroger now expects full-year same-store sales, without fuel, to be at the high end of its guidance range. In the previous quarter, the company shared the expected range of 1.2% to 1.5%.
The company also said adjusted earnings would be slightly above the high end of its guidance range. The previously shared range was $4.35 to $4.45.
Rohr, who said shares are “slightly overvalued” with a fair price target of $59, noted the updated guidance likely “assuaged some investor concerns” around the “uncertainty with the C-suite.”
He expects long-term same-store sales growth guidance of 2% to 2.5%.
Sundaram said 2025 will be a “stronger” year compared to 2024 and is estimating the same range for sales growth.
“Food inflation has picked up a little bit. That’s typically good for same-store sales growth … too much inflation is bad, but too little inflation is also bad,” he said.
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