Kroger could consider acquisition after Lucky’s Minnesota expansion, analyst says

May 3, 2016, 2:32pm EDT Updated May 4, 2016, 9:30am EDT

Steve WatkinsStaff ReporterCincinnati Business Courier

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                                                                      ts will get it into the Minnesota market for the first time in decades and could lead it to eye an acquisition, an industry analyst told me.

Lucky’s is looking for locations in the Minneapolis area, Rick Shea, president of Minneapolis-based Shea Food Consultants, told me. That’s a market where Kroger (NYSE: KR) has not operated before. And it’s next to Wisconsin, where Kroger just bought Milwaukee-based Roundy’s Inc. and its 117 stores in the Badger State.

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Kroger could be eyeing the Minneapolis market for its next acquisition target.

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Put those together, and Shea said it could indicate Kroger is considering an acquisition that would make it a major player in the Minneapolis/St. Paul market. That means it could be eyeing Supervalu, the Minneapolis-based parent of Cub Foods. Cub has the top share among supermarkets in Minneapolis. Target, also based in Minneapolis, is No. 2.

“It’s a crowded market, so it’s going to be hard to add scale unless you do it through an acquisition,” Shea said. “The obvious candidate is Supervalu and the Cub chain. And Cub Foods is struggling. It would be a logical acquisition for Kroger.”

The Lucky’s deal makes it even more likely that Kroger could be eyeing Minnesota for an acquisition, Shea said. Kroger operated in that market for about two decades but exited more than 40 years ago. But it can learn about the market from Lucky’s experiences.

“It certainly makes a lot of sense because you do get to know the market better,” Shea said. “It could be a precursor to something bigger (for Kroger).”

Supervalu has 200 traditional supermarkets, largely in the Minnesota market. It also has 1,360 deep-discount Save-A-Lot stores that it’s planning to spin off into a separate public company.

Kroger doesn’t comment on acquisition speculation.

Shea likened Kroger’s potential interest in Minneapolis to its recent expansion into neighboring Wisconsin with the Roundy’s acquisition completed last year. In fact, he said, Cub Foods might be a better fit than Roundy’s Pick ‘n Save stores.