Kroger announced a new $7.5 billion share repurchase program late Wednesday, a day after a district judge blocked its proposed $24.6 billion takeover of smaller peer Albertsons. Kroger stock popped to a new high on Thursday. Albertsons stock also jumped.
The new buyback plan replaces Kroger's existing $1 billion authorization, which was approved in September 2022, a news release said. It includes $5 billion in accelerated share repurchases. Many analysts and investors had anticipated a buyback announcement after the megamerger setback.
In an Oregon federal court on Tuesday, District Judge Adrienne Nelson halted the megamerger, finding in favor of the U.S. Federal Trade Commission in a win for the Joe Biden administration. The agency had argued that the proposed acquisition violates antitrust law.
Albertsons filed suit on Wednesday, accusing Kroger of "willfully deficient approach to securing regulatory clearance." The company said it opted to terminate the deal after Tuesday's court decision.
The two supermarket giants had agreed to merge more than two years ago. Kroger is the nation's largest independent grocery supermarket chain.
Kroger Stock Buybacks Were Expected To Resume
After the ruling, Morgan Stanley analyst Simeon Gutman predicted that "the immediate future will likely contain a buyback / share repurchase announcement," Gutman added. He described Kroger's underlying metrics as "fine, though not spectacular," hiking his price target on Kroger stock by $4 to to $62.
In a Dec. 7 note prior to the ruling, CFRA Research analyst Arun Sundaram also said that "if a merger doesn't go through, then we think Kroger could accelerate share buybacks." Last month, Sundaram told Grocery Dive that the then-pending Albertsons merger was a distraction from Kroger's actual solid operations. "If you're looking at how the company is just doing, (Kroger) stock should be, in our opinion, much higher than it is today," he said.
KR Stock, Albertsons Stock Jump
Shares of Kroger gained 3.2% in big volume in Thursday's stock market action, making a record high intraday. Kroger stock climbed out of range from a 58.34 buy point. KR stock had popped 5.1% on Tuesday on the merger ruling, rebounding from its 50-day moving average and returning to the buy zone.
On Thursday, Albertson's stock rallied 4.9%, regaining the 50-day line. Shares had plunged to a 52-week low on Tuesday.
Kroger, Walmart, Costco and Amazon.com are among the nation's biggest grocers.
Had the Albertsons deal proceeded, Kroger would have owned about 5,000 stores nationwide. The companies argued a merger would help them to better compete against Walmart, Costco and Amazon.
Kroger stock jumped after the Nov. 5 election on merger hopes after Donald Trump's win.
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