MW Kroger CEO Rodney McMullen resigns following probe of personal conduct

By Ciara Linnane

Grocery retailer says CEO's conduct was inconsistent with its policy on business ethics

Kroger Co.'s stock slid 1.4% Monday after the company announced the departure of Chief Executive Rodney McMullen, who has resigned after a board investigation of his personal conduct.

The company $(KR)$ did not offer details of the conduct but said it was "inconsistent with Kroger's Policy on Business Ethics."

The board said it was made aware of the conduct on Feb. 21 and immediately retained outside counsel to conduct an investigation, overseen by a special committee.

"Mr. McMullen's conduct is not related to the company's financial performance, operations or reporting, and it did not involve any Kroger associates," the board said in a statement.

McMullen has headed the company since 2014 and was named chair in 2015. He first started working at the company in the late 1970s as a part-time store clerk.

Kroger named Ronald Sargent board chair and interim CEO while it conducts a search for a permanent replacement. Sargent has been a director since 2006 and has been lead director since 2017.

Mark Sutton will replace Sargent as lead independent director.

"I plan to be a steady, but active hand in the execution of our strategy," Sargent said in prepared remarks. The executive has been with the company since spending summers in college working at Kroger stores.

The company said it now expects full-year same-store sales excluding fuel to be at the high end of its guidance and adjusted per-share earnings to be slightly above the high end of its guidance.

Kroger is scheduled to report fourth-quarter earnings on Thursday. In December, the company said it expected full-year same-store sales excluding fuel to rise 1.2% to 1.5%. The company guided for adjusted earnings per share of $4.35 to $4.45.

Also in December, Kroger threw in the towel on its plan to merge with rival Albertsons Inc. $(ACI)$ in a $25 billion deal that had been beset by regulatory challenges since it was first mooted.

Albertsons retaliated by suing Kroger and seeking billions of dollars, alleging that Kroger failed to put its full effort into getting the deal done. Kroger said the lawsuit was "baseless and without merit."

Kroger announced it would instead conduct a $7.5 billion share-buyback program, news that sent the stock sharply higher.

Wall Street analysts said the end to the deal removed a major overhang on Kroger's stock and predicted that competition between the two companies could increase, which would be good for consumers.

Kroger said it would start by redeeming $4.7 billion of debt issued last August and would host an investor day sometime in the spring to provide an update on its plans.

"The strength of our balance sheet and sustainability of our model allows us to pursue a variety of growth opportunities, including further investment in our store network through new stores and remodels," McMullen said at the time.

He added that the chain's free cash flow would allow it to continue shareholder payouts and give it the "capacity to invest in lower prices and higher associate wages."

Analysts say the big challenge for Kroger now centers around its ability to take market share from rivals that include Walmart Inc. $(WMT)$ and Costco Wholesale Corp. $(COST)$.

Walmart and Costco have attracted more customers seeking deals as the cost of living has run higher in the last few years. Walmart has drawn wealthier shoppers, while Costco has drawn younger ones.

Kroger's stock has gained 30% in the last 12 months, while the S&P 500 SPX has gained 15.6%.

-Ciara Linnane

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March 03, 2025 10:15 ET (15:15 GMT)

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