Kroger CEO's resignation comes at crucial time for grocery chain
Kroger board member and former Staples CEO Ron Sargent is taking the helm at the nation’s largest supermarket chain at a critical time as questions about the former Kroger CEO continue to swirl.
On Monday, Kroger disclosed that Rodney McMullen, CEO since 2014, had resigned amid an investigation into his “personal conduct.” Kroger said McMullen conduct “was inconsistent” with its policy of business ethics.
While Kroger has hired a search firm to find its next CEO, Sargent, 69, will lead the grocer as interim CEO. The leadership switch comes at a crucial time:
- Kroger just lost a two-year takeover bid of rival Albertsons and is currently being sued by the grocer;
- Sales have slowed as consumers grapple with food inflation;
- President Trump has just imposed 25% tariffs on Mexico and Canada, tax increases that are expected to affect staples like produce in a matter of weeks if they remain in effect for long.
- Kroger reports its 2024 results on Thursday.
Hours after Kroger's announcement about McMullen, Albertsons disclosed that its CEO Vivek Sankaran would retire on May 1, noting his decision was “not the result of any disagreement” with Albertsons on “any matter relating to the company's operations, policies or practices.”
What we know (and don’t) about the Kroger CEO’s exit
What did McMullen allegedly do? We don’t know the specifics.
Kroger mostly disclosed what McMullen didn’t do: the conduct “is not related to the company's financial performance, operations or reporting, and it did not involve any Kroger associates,” the retailer said. The disclosure appears to rule out problems with the company’s accounting, mishandling of day-to-day business or questionable conduct with a subordinate.
Kroger’s “Policy on Business Ethics” otherwise counsels employees to follow laws and regulations and avoid conflicts of interest.
McMullen’s departure coincided with his counterpart at Albertsons, which thanked Sankaran for his six years running the Boise, Idaho-based retailer.
Kroger reports 2024 results on Thursday
Kroger disclosed on Monday that it expects sales and earnings results to be solid when they are released on Thursday morning. The company said sales would be “at the high end” of its previous forecast, while its earnings would be “slightly above the high end” of its last guidance.
In December, Kroger disclosed its identical store sales excluding fuel growth had slowed in the first nine months of its fiscal year to 1.2% from 1.5% in the same period of 2023.
How Kroger stock was affected
While Kroger’s stock dropped 3% on Monday, it remained higher than before the demise of the $25 billion Albertsons takeover. Since the deal was scrapped, Kroger has announced a $7.5 billion share buyback and plans to lower grocery prices.
Until Monday’s resignation announcement, Kroger’s stock had been hovering near an all-time high. Albertsons is still suing Kroger over the merger for allegedly botching the deal and dooming the companies' bid for regulatory approval. Kroger has called the lawsuit “baseless.”
The overall stock market slid late on Monday after Trump announced he would implement his tariffs on Tuesday, which raised concerns about potential impact to the economy. While the tariffs affect a relatively small slice of the $2 trillion worth of imported goods facing tariffs, the $150 billion worth of food imports from Mexico and Canada might quickly lead to higher prices because they are perishable necessities, economists have noted.
American consumers are weary of inflation, especially at the supermarket, which Trump vowed to fight during his presidential campaign. Since the outbreak of the COVID-19 pandemic in March 2020, overall inflation has risen 23%, according to the U.S. Bureau of Labor Statistics. Inflation on food purchased for home consumption (typically at supermarkets) has been worse: up 27%.