Kroger Earnings: Divestitures Planned to Stoke Albertson Deal Passage Amid Tough Environment

Narrow-moat Kroger shares moved up 3% on news it would divest 413-650 Albertson stores to competitor C&S, to meet regulatory concerns of its proposed acquisition of Albertson, allowing for a potential completion early next year. We still see regulatory uncertainty, though, as C&S stands to have 600-750 units, while the combined Kroger/Albertson would have a meaningfully larger 4,600 unit footprint. Apparently, the market concords with our view, with Albertson trading around $24 per share, below Kroger’s $34 per share cash offer.