CINCINNATI, OH – Grocery giant The Kroger Co. announced on Friday its plan to close approximately 60 stores nationwide over the next 18 months, a move the company says will ultimately improve its financial standing and enhance the overall customer experience.

• Scope of Closures – The 60 planned closures represent about 2% of Kroger’s roughly 2,700 stores across 35 states.
• Financial Impact – The company recorded a $100 million impairment charge related to the closures but expects a ‘modest financial benefit’ to be reinvested.
• Market Reaction – Investors responded positively; Kroger’s (KR) stock jumped more than 9% on Friday following the news and strong first-quarter earnings.

The announcement of the closures was made in conjunction with the company’s first-quarter earnings report. While a list of specific locations has not been released, company officials stated the unprofitable stores are geographically spread out across the country.

Why Are These Specific Stores Closing?

According to the company’s filing with the Securities and Exchange Commission, the decision to close the 60 stores resulted in a $100 million impairment charge. During a conference call with Wall Street analysts, Interim CEO Ron Sargent explained that the affected stores are unprofitable and scattered across various Kroger divisions, with most markets only seeing “ones and twos” in terms of closures.

The company assured that it will offer employment opportunities at other locations to all associates currently working at the stores slated for closure. A spokesperson confirmed that no stores are expected to close in the Cincinnati-Dayton region at this time.

How Does This Fit Into Kroger’s Broader Strategy?

While dozens of stores are being shut down, Kroger is simultaneously pushing forward with significant investments. The company reaffirmed its plan to spend between $3.6 billion and $3.8 billion this year on capital expenditures. This includes proceeding with more than 30 “major storing projects” through the end of the year, which features the construction of several larger Marketplace format stores.

This strategy of closing underperforming locations while investing in new and existing high-performers appears to have resonated with investors. The company’s first-quarter results showed a profit of $866 million on sales of $45.1 billion. Alongside the closure news, Kroger boosted its sales guidance for the year, now expecting identical store sales (excluding fuel) to increase between 2.25% and 3.25%.

What’s the Context for These Changes?

The strategic shift comes months after the abrupt resignation of former CEO Rodney McMullen in March following an internal ethics investigation. Sargent, a board member and former CEO of Staples, has been leading the company on an interim basis while a national search for a permanent CEO is underway.

Under Sargent’s leadership, there has been a stated effort to refocus on the core performance of its stores. The recent moves, including the store closures and simultaneous investment in growth areas, reflect a strategy to streamline operations and strengthen the company’s foundation in a competitive grocery market.