Shortly after the Fast Company story, CNBC cited a source close to the matter who said there is “no truth” to the merger report. The source acknowledged that the two firms had been meeting to discuss a partnership with Shipt, a same-day delivery company acquired by Target last December for $550 million.
The market reaction to the possible merger indicates that investors and traders think one or both of Target and Kroger need to do something big if they want to remain competitive with Amazon.com Inc. (NYSE: AMZN) and Walmart Inc. (NYSE: WMT).
Amazon’s $13.7 billion acquisition of Whole Foods struck fear into the hearts of grocery stores worried that the e-commerce giant will lay waste to the grocery sector in the same way it has left a trail of closed and struggling department stores.
And it’s no great insight to say that Target’s grocery efforts were lackluster at best. Compared to Walmart’s grocery business, Target’s grocery offering has been half-hearted and unfocused.
But could a merger of Kroger and Target salvage either one or just be a tactical move to delay the inevitable? Would Target expand its in-store grocery offerings and give more space to a Kroger-branded grocery section or would the merger merely combine two large companies that would mostly continue doing business as usual?
The answers may depend largely on the accuracy of current projections for online grocery sales. Fast Company notes:
Food Marketing Institute and Nielsen estimate that 70% of consumers will be grocery shopping online within the next five to seven years, according to a January report. The joint report also says that online food and beverage spend could hit $100 billion as early as 2022.
That’s a market worth fighting over. If Kroger and Target were to merge, they had better have a plan on how the combined company can win that fight.
Kroger stock opened at $24.27, up about 3.8% from Thursday’s closing price, but has since dropped back to up about 1% to $23.64, in a 52-week range of $19.69 to $31.45.
Target shares opened at $69.72, up 1.2% from last night’s close. Shares have settled at around $69.24, up about 0.5%, in a 52-week range of $48.56 to $78.70.
24/7 Wall St.Get Ready To Retire (Sponsored)
Start by taking a quick retirement quiz from SmartAsset that will match you with up to 3 financial advisors that serve your area and beyond in 5 minutes, or less.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Get started right here.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
