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Kroger Moves Ahead on Fill-In Strategy

NEW YORK — Kroger Co. has accelerated its efforts to identify markets it can fill in with additional stores, executives said at the company’s investor conference here on Wednesday.

The markets where the company has deployed a fill-in strategy “do show good returns, and as long as we can keep doing that, we can continue,” said Mike Ellis, the Kroger senior vice president who is slated to succeed Rodney McMullen as president and chief operating officer at year-end.

The acquisition of Matthews, N.C.-based Harris Teeter Supermarkets, Kroger executives said, only increases the opportunities to fill in markets because of the number of new territories where that chain operates.


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“What we are ahead of schedule on is understanding the markets where we want to [fill in with additional stores],” Michael Schlotman, chief financial officer, pointed out.

However, he explained, that doesn’t necessarily mean new stores are opening at a faster pace in those markets yet, nor does it signal that any additional acquisitions are being considered.

Kroger has not incorporated its convenience-store operations, nor its discount formats such as Ruler Foods, into its market fill-in strategy at this point, Kroger executives explained, in response to an analyst’s question.

Further elaborating on acquisitions, David Dillon, chairman and chief executive officer, said Kroger’s stance on acquisitions “really hasn’t changed for the last eight to 10 years.”

“The criteria is still the same — we want a well-run organization that connect well with customers,” he said.

Read more: New Kroger CEO Enters Era of M&A

He also noted that Harris Teeter would have been a prime acquisition target for Kroger Co. even if the chain was not geographically adjacent to Kroger’s current operations. Harris Teeter has strong management, a reputable brand name in its markets and an established logistics infrastructure, qualities that would have made it a viable merger candidate no matter where it operated, Dillon said.

“Adjacencies are important for a few reasons,” Dillon, said. “Harris Teeter already had all those things, so it wouldn’t have mattered if they were not adjacent.”

He also confirmed the company's previous financial guidance, and noted that in the third quarter to-date, identical-store sales growth is running "slightly ahead" of the second-quarter rate of 3.3%, excluding fuel.

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