Three months ago, after Kroger’s attempt to acquire Albertsons failed, you might have guessed that the company’s bad judgment or bad luck would have cost CEO Rodney McMullen his job. After all, with nearly a billion dollars wasted and the morale of its associates impacted by the long, slow grind of the unsuccessful 26-month process, many boards would have parted ways with its chief executive. However, Kroger’s board has been insulated and myopic for many years, that option wasn’t likely even considered.
But to think that McMullen’s long and distinguished 47-year career at the large Cincinnati-based chain would be ruined by a personal ethics issues is hard to fathom.
But that’s what Kroger said led to his quick exit from the company which was announced on March 3.
Officially, here’s what the retailer’s press release stated: Rodney McMullen has resigned from the company following a board investigation of his personal conduct that, while unrelated to the business, was inconsistent with Kroger’s policy on business ethics. The board has appointed lead director Ronald Sargent to serve as chairman of the board of directors and interim CEO, effective immediately. The board also announced that Mark Sutton will serve as Kroger’s lead independent director.
On February 21, the board was made aware of certain personal conduct by Mr. McMullen and immediately retained outside independent counsel to conduct an investigation, which was overseen by a special board committee. Mr. McMullen’s conduct is not related to the company’s financial performance, operations or reporting, and it did not involve any Kroger associates.
The board of directors has formed a search committee and engaged a nationally recognized firm to conduct a search for Kroger’s next CEO. Mr. Sargent has agreed to serve in his role until the appointment of the next CEO.
“As interim CEO, I am committed to working alongside our proven and experienced management team and dedicated associates to ensure Kroger continues providing exceptional value for our customers,” said Mr. Sargent. “Kroger has been a special place throughout my retail career after spending summers in college working in stores, as well as my first ten years after business school at corporate headquarters, before more recently serving as lead independent director. My decades here have given me a full appreciation of what makes Kroger unique, and I am excited to work even more closely with this talented team. I plan to be a steady, but active hand in the execution of our strategy.”
Mr. Sargent has been a Kroger director since 2006 and has served as the lead director of Kroger since 2017. He spent the first ten years of his professional career at Kroger, working in several roles across stores, sales, marketing, manufacturing and strategy. Mr. Sargent is a veteran retail operator and leader with 35 years of experience, including as the chairman and CEO of Staples, Inc. from 2002 to 2016 after joining the company in 1989. He currently serves on the board of Wells Fargo & Company, where he is chair of the human resources committee, and the board of Five Below, Inc. In connection with his new role, Mr. Sargent will step down from his service on the audit committee, the corporate governance committee and the public responsibilities committee.
“Over the years, Ron has played an integral role in the development and approval of Kroger’s strategy, which has led us to the position of strength where we are today,” said Mark Sutton, Kroger’s newly appointed lead independent director. “Kroger will continue to deliver for our customers, invest in our associates, strengthen our communities, and reward our shareholders under Ron’s leadership.”
Rhetoric aside, finding a new permanent CEO to replace a man who controlled all of Kroger’s internal machinations for the past decade will not be an easy or short-term task.
After scouting the list of internal executives, no one has the experience to step into the top job for a company whose retail sales last year were $150 billion. Furthermore, no in-house candidates have seemingly been groomed to be McMullen’s ultimate successor.
And when a new leader is found, will that person have the skill and courage to make Kroger a more modern retail organization with a more open and accessible culture?
Sorry, Doug McMillon already has a job.
‘Round The Trade
A couple of more notes about Albertsons and Kroger. Steven Feinberg, the co-CEO of large private equity firm Cerberus Capital Management, has resigned his board seat in order to pursue his nomination for U.S. Secretary of Defense. He will be replaced by Frank Bruno, who shares CEO duties with Feinberg at the Wall Street firm. Cerberus remains Albertsons’ largest shareholder – it first acquired equity in the Boise-based chain in 2006. At Kroger, David Kennerely, most recently CFO for PepsiCo-Europe, has joined America’s largest pure-play supermarket chain, in a similar position. He replaces Todd Foley, who held the chief financial officer post since last year on an interim basis after Gary Millership bolted from the supermarket chain to become Costco’s CFO.
As we all know, tariffs aren’t the only potential change coming from the new White House. A day seemingly doesn’t go by without a new executive order being signed, and as such perhaps, consumers’ level of confidence has fallen (for the second month in a row) according to a survey from the University of Michigan and Morning Consult. That’s not surprising since crazy man-child Elon Musk has run roughshod over many government agencies as de facto head of DOGE (Department of Government Efficiency). Mass firings, job callbacks and resignations are the hallmark of Musk’s scattershot approach to finding Federal waste. Among those who resigned after 89 people in his department were fired was Jim Jones, who supervised all food safety initiatives for the FDA. Meanwhile, renewed fears over inflation creep seem very real and will only get more heightened if/when tariffs are imposed. As President Biden painfully learned, it’s not only the economy, it’s the perception of the economy.
And while we’re on the subject of food safety, I did a double-take when I read that notorious deli processor Boar’s Head last month held its first “Food Safety Promise Day,” in which the company was “reinforcing its unwavering commitment to food safety with a company-wide initiative.” During the event, held on February 13, Boar’s Head paused operations at all of its facilities so its employees could focus on the new and enhanced food safety measures that Sarasota, FL-based company has undertaken since 10 people died and more than 60 others were hospitalized after a listeria outbreak at Boar’s Head’s plant in Jarratt, VA. Am I being too cynical or am I correct in believing that Boar’s Head needs to be less enthusiastic and more introspective about the irreparable harm it caused?
February was a big month for financial results (usually Q4 and full fiscal year) and three of the best came from Sprouts Farmers Market, Amazon and Walmart. At Phoneix-based Sprouts, fourth quarter sales jumped 18 percent, comp store revenue vaulted an impressive 11.4 percent and e-commerce sales increased 37 percent. Full year numbers were equally impressive with net sales growing 13 percent and comps rising 7.6 percent. The health and wellness-oriented merchant also met its goal of opening 33 new stores (12 in Q4) and will open at least 35 new units in 2025. Much credit goes to CEO Jack Sinclair, who since taking the helm at Sprouts in 2019, has revitalized the entire organization.
The numbers at Amazon continue to be stellar. “Godzilla” posted yet another monster showing (forgive the awful pun) it its fourth quarter. To wit: net sales increased 10 percent to $187.7 billion; net profit nearly doubled from $10.6 billion in the corresponding Q4 period last year to $20 billion this year. For its 52-week fiscal, profits pole vaulted from $36.9 billion to $68.6 billion. And the biggest Amazon operating group winner was – Amazon Web Services (as usual). AWS’s annual operating income is now $39.8 billion, a more than $15 billion increase from 2023. Unstoppable!
And Walmart continued its strong run of significantly increased sales and profits. In Q4, total sales increased 4.1 percent to $180.1 billion. Operating profit grew 8.3 percent to $600 million, e-commerce was up 16 percent and its ad revenue (a fast-growing part of its business) jumped 29 percent. As we’ve seen with other retailers, Walmart, too, is consolidating and reducing its corporate workforce. With its new modern office campus now partially open in Bentonville, AR, “Godzilla” is attempting to relocate some workers at several regional offices to the new HQ. that means a potential reduction of about 800 associates (if some do not want to relocated) which will impact regional facilities in Hoboken, NJ; San Bruno, CA; and Charlotte, NC (which is closing).
Local Notes
More in line with the financial achievements of other supermarket peers, Ahold Delhaize released its Q4 and full fiscal 2024 sales and earnings and as it’s been for most of last year, the results were decent, but hardly stellar. For the 13-week fourth quarter in the U.S., net sales declined slightly (0.6 percent) to $14.8 billion. However, U.S. operating income jumped 30.1 percent and comp-store revenue grew 1.4 percent (ex-gas). Those are solid results, but ADUSA’s underlying operating margin dipped 1 percent and the closing of 32 Stop & Shop stores (with price investments made at its remaining fleet), the divestiture of FreshDirect (which Ahold Delhaize had to “incentivize” buyer Getir a reported $151million to acquire) and lower gas prices, all stifled significant U.S growth. Sales from the Stoppie closings are expected to decrease ADUSA’s overall revenue by approximately $550 million. The best U.S. news again came from Food Lion and Hannaford, which posted their 49th and 14th consecutive quarterly comp store sales gains respectively.
More Ahold Delhaize USA news: changes in the retailer’s corporate procurement department include Peggy Krebs who is now VP of in-stock grocery where she will manage replenishment, allocation strategy and inventory objectives for all of the ADUSA’s grocery warehouse facilities. She will also be responsible for delivering service levels to the chain’s local brands. Her corollary in dairy, frozen, HBC and homecare is Jack Hold who will continue to serve as interim VP of in stock for those departments. Jordan Nickerson has been named VP-procurement governance where she will lead vendor strategic vendor programs for procurement including the chain’s ADvantage program. Remaining as VP-procurement services is Peter Anthony who will continue to focus on strategic supply chain, technology and initiatives, control tower, data and analytics reporting, continuous improvement and forecasting (I hope he’s getting paid for each job function).
At Giant Food, less than three years into its partnership with Divert Inc., the Landover, MD-based regional chain has reached 80 million pounds of unsold food being transformed into beneficial products that are being used for renewable energy and other sustainable resources.
Back over at corporate headquarters in Zaandam, the Netherlands, Per Bank has been nominated to join Ahold Delhaize’s Supervisory Board. Bank is currently president and CEO of Loblaw’s, the huge Canadian retailer. Bank, a Danish citizen, would potentially replace Bill McEwan, vice-chair of the supervisory board, at the company’s annual general meeting to be held on April 9. He has been affiliated with Delhaize and then Ahold Delhaize since 2011.
Just before presstime, Weis Markets released its Q4 and full fiscal year results. The Sunbury, PA-based regional chain improved all its metrics from the comparable period a year ago. In the fourth quarter, net sales totaled $1.23 billion (compared to $1.21 billion), comp store revenue (ex fuel) increased 1.1 percent and the company’s profit totaled $34.7 million, a 69 percent gain over last year’s earnings. For the 52-week year, sales grew 1.6 percent to $4.77 billion, comps increased 1.9 percent and profits jumped to $109.94 million compared to $103.83 million in 2023.
“Our fiscal year 2024 and fourth quarter results were in line with our expectations thanks to the efforts of our associates at every level of our company. During the year, they helped us work through inflation and supply chain issues in key segments of our business while driving sales and net income increases. Several factors helped us achieve our results, including sustained price investments, disciplined advertising and loyalty marketing programs along with the successful integration of technology to help us improve efficiencies and manage expenses while offering a consistently strong customer experience,” said chairman, president and CEO Jonathan Weis. During 2024, Weis completed 12 major store development projects, two store acquisitions and began construction on four new stores.
Mega opening for a mega merchant. I’m referring to the newest Wegmans ribbon cutting held late last month in Lake Grove, NY, the uber-regional chain’s first long Island unit and 112th overall. The Rochester-based retailer also revealed that its next store will open in Rockville, MD on June 25 and its first Connecticut unit will debut on July 23. Earlier this year, Wegmans revealed it would enter the Pittsburgh market for the first time with a 115,000 square foot stores (likely in 2027) and also plans another new 110,000 square foot unit in another new market – Charlotte, NC – in Q3 of 2026.
Beleaguered Chesapeake, VA-based Dollar Tree has made a bid to acquire 148 stores from an even a more beleaguered retailer (bankrupt Party City). Court approval is expected by late February or early March.
Bryant Harris has been named senior VP and chief merchandising officer at Rite Aid. The last time we saw Harris was as CMO at Wakefern last year and previous industry stops have included Save A Lot and Walmart. We wish him the best of luck – at Rite Aid, he’ll need it (along with a few Hail Mary passes and a horseshoe).
I was very sorry to hear of the recent passing of Kevin Kavanagh, 80, a friend for nearly 50 years. I first met Kevin and his brother Jack when they co-owned (with their dad John) a large food brokerage firm in Boston. When I was a very green 22-year-old journalist, the Kavanaghs were great teachers and companions – both about business and social activities. For the past 21 years, Kevin worked for Utz, helping broaden that brand’s presence in New England. Always an excellent peddler, I’ll miss Kevin’s humor, his storytelling ability and his many contributions to community and charitable causes.
A couple of more obits from the music world, including the death of “The Iceman” – Jerry Butler. The 85-year old Chicago native enjoyed great success during his 65-year career both as a solo artist (“For Your Precious Love” was a number one hit in 1958) and as member of the Impressions where his rich baritone voice blended beautifully with bandmate Curtis Mayfield’s falsetto. Other hits in Butler’s career included “He Will Break Your Heart” (1960) which was later reworked by Tony Orlando into “He Don’t Love You (Like I Love You)” which went to the top of the charts in 1975; “Let It Be Me” (also a hit for the Everly Brothers) and “Only the Strong Survive.” He also wrote the song “I’ve Been Loving You Too Long” which was a best seller for Otis Redding. Butler, along with the rest of The Impressions, was inducted into the Rock & Roll Hall of Fame in 1991.
Another great singer has also passed on. Roberta Flack, the onetime Washington, DC schoolteacher, who moonlighted at a small DC club, Mr. Henry’s (it still exists), in the late 1960s to display her talents as a pianist (Flack was classically trained). Word of mouth spread quickly and soon stars like Burt Bacharach and Johnny Mathis visited the club just to see her perform. She recorded her debut album “First Take” in 1969 which featured the hit song “The First Time Ever I Saw Your Face” (which gained a huge following from the Clint Eastwood movie “Play Misty for Me”) and from that point, Flack followed with a string of hit songs including “Feel Like Making Love,” “Where Is The Love?” and “The Closer I Get To You” (the latter two with the late Donny Hathaway). In 2017, she was asked if she ever went back to Mr. Henry’s, she responded: “yes, I was there recently, I love the crab cakes.” Supremely talented and a major philanthropist, Roberta Flack was 88 when she passed on.
