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Today, Kroger (KR) and Walgreens Boots Alliance (WBA) have announced the expansion of their strategic partnership. As announced, Kroger would deploy Kroger Express stores at 35 other Walgreens locations in Knoxville, Tennessee. In addition, these 35 locations will offer Kroger pickup facilities.
Kroger Express stores will open this fall. These stores will offer a selection of products from our Kroger brands (including the organic brand Simple Truth) and national brand products. The merchandise assortment offered at Kroger Express stores can vary and include fresh meats, fruits and vegetables, dairy products, frozen foods and Home Chef meal solutions.
Last year, the two companies announced an agreement to sell Kroger-owned brands in a new store format (now called Kroger Express) at 13 Walgreens stores in northern Kentucky. Selected Walgreens sites offered Kroger Pickup installations for online orders.
As part of the expanded agreement announced today, Walgreens' health and beauty products will be available at 17 Kroger stores in Knoxville, Tennessee starting this fall.
Justification of the agreement between Kroger and Walgreens
Kroger is attempting various strategic initiatives to increase sales. The turnover of the supermarket chain has decreased in the last three quarters. Sales in the first quarter decreased 1.2% to $ 37.3 billion. However, its same-store sales increased 1.5%. In particular, it is struggling to grow in a competitive grocery market. The giants Amazon and Walmart (WMT) are aggressively developing in the grocery sector, especially in the online grocery market. According to SecondMeasure, Walmart Grocery is leading the online grocery sector. Instacart and Amazon follow Walmart's online grocery rankings.
KR's merger with Walgreens to run stores in Walgreens is an attempt to boost revenue. The collection facilities provided in some Walgreens stores will also benefit its online sales. The Walgreens health and beauty product offering is expected to attract more consumers to Kroger stores. Recently, the company also entered into an agreement with Charlotte's Web Holdings to distribute Charlotte's web hemp cannabidiol products in 1,350 stores in 22 states.
For Walgreens stores, Kroger Express stores with their large assortment (2,300 products on average and up to 2,700 products) will help increase traffic. The Walgreens products that will be sold at selected stores this fall include beauty and personal care products, over-the-counter medications and wellness products. Sales of Walgreens products will improve if this pilot project works.
Movement of stock
KR and WBA rose 1.4% and 2.6%, respectively, at 13:46 (ET) today, as investors welcomed the extended agreement. On August 16, these inventories were down 17.6% and 26.1%, respectively, since the beginning of the year. They underperformed the 15.2% rise in the S & P 500 Index.
Read Walgreens or CVS Stock: What is the best value for money? to know the movements of stocks and valuation of Walgreens and its competitor CVS.
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