Business magnate Warren Buffett’s Berkshire Hathaway Inc. revealed late Feb. 14 that it has acquired nearly 19 million shares of stock in The Kroger Co., an event that sparked a jump in after-hours trading for the Cincinnati-based food retailer.
Berkshire Hathaway, Omaha, Neb., is a diversified financial conglomerate with ownership stakes in a variety of businesses and with a reputation for picking long-term winners. It disclosed the ownership stake in Kroger as part of a Form 13F filing with the U.S. Securities and Exchange Commission, revealing it had invested nearly $550 million in Kroger stock, acquiring slightly more than 2% of its outstanding shares.
Berkshire Hathaway's investment in Kroger comes as the retailer faces questions about its race to transform itself to an omnichannel growth company with ambitions to provide shoppers “anything, anytime, anywhere,” in the words of CEO Rodney McMullen. Kroger is homing in on areas of growth outside supermarkets, such as foodservice and e-commerce, and investing heavily to build out next-generation fulfillment through a partnership with British online retailer Ocado.
A financial investor told WGB Berkshire’s investment in a pure-play grocery chain is a first for the Oracle of Omaha and speculated that much of that interest could be tied to Kroger's abundant real estate assets. Berkshire Hathaway previously held a stake in Walmart and is also a holder in Heinz and Coca-Cola, among other investments.
Investor sentiment in Kroger generally turned sour last year as it became clear the company wouldn’t meet initial financial projections of its Restock Kroger strategy, with some industry watchers openly skeptical that the Ocado strategy would work. More recently, Kroger revealed its investment in Lucky's Market was a dud, pulling support shortly before the upstart natural foods retailer filed for Chapter 11 bankruptcy.
However, the company essentially doubled down on Restock late last year, with McMullen pledging to invest more in three areas the company believes it has competitive advantages: fresh food experience, private brands and data and personalization.
Kroger stock jumped in after-hours trading by as much as 7% following the disclosure, which was made after markets closed. Kroger’s stock is down by 2.66% year to date.