Superteam – Competition in the Retail Industry
With how competitive the retail industry is, companies are starting to make very bold decisions to get ahead of each other. Walmart chose to compete with Amazon by introducing the Walmart+ program, and price wars are common these days. In the area of grocery, Walmart is also the dominant force, but that might be set to change after some giants might combine forces.
Kroger, one of Walmart’s greatest competitors, is in talks with retail chain Albertsons in what could be a merger deal combining the two companies. Sources say that if talks don’t fall apart, the deal could be made by the end of next week, and a retail giant could be formed as a result. Kroger currently operates 2,700 stores across the country, bringing in sales of $137.9 billion annually, and Albertsons operates 2,300 stores while reporting sales of $71.9 billion. Although many stores overlap, which would create the need for some combinations, the force of these two combined could allow them to have more negotiating power while allowing flexibility on both ends.
This power has the government concerned, so regulators are watching. Antitrust enforcers have been challenging a lot of mergers due to the stifling of competition in the industry, so there are multiple hurdles that need to be cleared. Albertsons might have to sell a quarter of their stores to a third party to comply according to Wells Fargo, and that might just be a part of it. The retail and food sector are hit the hardest by government regulators, and Kroger has been caught in the crosshairs before. Given the current issues facing the economy, it’ll be hard to tell whether this deal will go through, but Albertsons’ shareholders were excited by this prospect.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.