Kroger Co. acquired Roundy’s Supermarkets for the real estate and the company’s metrics, although it may take more work to improve sales than other potential acquisitions might, Mike Schlotmann told an investors conference Tuesday.
Asked why the company was interested in Milwaukee-based Roundy’s and not, perhaps, an upscale chain in the Southeast — an apparent reference to The Fresh Market, though it was never cited by name — Schlottman, EVP and CFO, said Kroger looks at how potential acquisitions will match its own values and the way another company’s management team deals with customers and employees.
“It may take more work to turn Roundy's sales positive, but the real estate was in great places, and the people managing the business know what they are doing, but they were capital-constrained, particularly as they built out [the Mariano’s stores] in Chicago,” he explained.
“Management knows what it needs to do, and now it will have a different capital structure to get it done.”
Schlottman made his remarks at the annual Consumer and Retail Technology Conference sponsored by Bank of America-Merrill Lynch in New York.
Rodney McMullen, chairman and CEO, told the conference the decision to acquire Roundy’s enabled Kroger to get into new markets quickly via a company with 150 stores and an EBITDA of more than $100 million — “something that would have taken us five to eight years to achieve — and without having 150 stores.”
Added Schlottman, “We look at what an acquisition brings to Kroger and what we bring to it. That continues to be our objective.
"We’re also finding reverse synergies at Roundy’s, and if a merger partner has better processes than we do, we celebrate that, because we’d rather take 150 stores and put those processes into 2,600 stores than take 2,600 stores and put those processes into 150.”
Asked about its Ruler format, Schlottman said Kroger is continuing to figure out how to operate that low-price banner. “We’ve learned more about what not to do than what we should be doing,” he said.