Shares of Target as well as Kroger jump on report of possible merger talks

Amazon acquired Whole Foods Market for $13.7 billion in cash last year, sparking fears the e-commerce giant will disrupt the entire grocery sector.

Target has notably struggled inside fresh food category relative to its peers. Its supply chain for those items has lagged, people familiar with the situation have told CNBC, opening the door for potential partners such as Kroger to bring expertise inside area.

Just last year, Target tapped a former Kroger exec, Jeff Burt, to head its grocery department. Since then, the company has made incremental adjustments to its food offering, redesigning in which area of the store as part of a bigger remodeling strategy. however analysts as well as investors continue to call out the business as lackluster.

“We believe Target has much further to go before the grocery business is usually fully fixed,” GlobalData Retail Managing Director Neil Saunders said.

Instead, Target has focused on its private-label brands for apparel as well as home goods of late, beefing up those categories before moving into food, which can be more capital intensive as well as the return on investment isn’t as compelling.

Kroger as well as Target did not respond to CNBC requests for comment.

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