Kroger says 'high' interest in convenience stores

CINCINNATI — Kroger disclosed a "high level of interest" by prospective buyers for its convenience stores business that it is considering selling as the grocery industry grows more competitive.

Kroger Co. (KR) executives said they continued to evaluate whether to cash out of its 784 convenience stores located across 18 states. The company operates several convenience store brands: Turkey Hill Minit Markets, Loaf ’N Jug, KwikShop, Tom Thumb and Quick Stop.

Last month, the company disclosed it might sell or spin-off the operations that generate $4 billion in annual sales.

"This process is ongoing," said Kroger Chief Operating Officer Mike Schlotman.

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The update came as Kroger reported a $397 million profit Thursday — a 1.5% increase from a year earlier.

Total sales rose 4.5% to $27.7 billion. Identical-store sales, excluding fuel, climbed 1.1% for the fiscal quarter ended Nov. 4.

Importantly, Kroger reported its profit margins improved as it predicted its identical-store sales in 2018 would trump 2017.

Profit and sales results topped Wall Street expectations and Kroger's stock surged as much as $3.32 or 13.6 percent in early trading to $27.70. By mid-afternoon, shares were up 7.5% to $26.21. The stock closed Wednesday at $24.38.

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"While structural challenges remain, Kroger's momentum has started to improve," wrote Wells Fargo analyst Edward Kelly, in a Thursday note to investors.

Despite Amazon's Whole Foods takeover and ongoing price pressure from Walmart, U.S. food deflation came to an end in the latter half of 2017. Kroger also has taken a number of steps to combat the changing grocery landscape.

Wall Street analysts predicted it would report a $360 million profit before one-time items on sales of $27.3 billion, according to Zacks Research. Last year, the grocer reported a $391 million profit on sales of $26.6 billion.

"Customers are recognizing our efforts to redefine the customer experience and rewarding us with their loyalty," CEO Rodney McMullen said. "We continue to accelerate our digital and e-commerce offerings, to grow our brands, to lower prices for customers, and to invest in our associates."

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