Adds analyst comment in paragraph 6

By Anuja Bharat Mistry

March 3 (Reuters) - Albertsons ACI.N said on Monday its CEO Vivek Sankaran will retire and insider Susan Morris would assume the top role, as the supermarket chain shifts focus to build its digital sales and retail media business.

Sankaran, who took over the helm in 2019, led the company through its scuttled merger with Kroger KR.N. Albertsons sued Kroger in December, alleging a breach of contract that led to the demise of a planned $25 billion deal.

Morris, who has held the role of Albertsons' chief operations officer since 2018, will take over the new role on May 1. She will also replace Sankaran on the company's board. Shares of Albertsons fell 1.5% in after-market trading.

The succession plan comes at a time when Albertsons is trying to move on from its two-year-long efforts to merge with rival Kroger. Earlier on Monday, Kroger ousted its long-time CEO Rodney McMullen after a board investigation found that his personal conduct was "inconsistent" with certain company policies.

McMullen had staunchly defended the combination with Albertsons as a way to fight higher prices and better compete with Walmart WMT.N and Costco COST.O.

"These leadership shake-ups come right after their failed merger, adding more pressure on both companies. Albertsons looks like it's playing it safe, but Kroger's unexpected CEO exit could create some instability," said Angeli Gianchandani, adjunct instructor at New York University's School of Professional Studies.

As part of its strategy to move beyond the terminated merger, Albertsons is ramping up investments to boost digital sales and a fast-growing and profitable advertising business to fend off competition from larger retailers. It also plans to generate $1.5 billion in savings over the next three years.

The supermarket chain said Morris will take over the execution of its "Customers for Life" strategy, through which it aims to retain customers through loyalty offerings and personalized digital experience.

(Reporting by Anuja Bharat Mistry and Bhanvi Satija in Bengaluru; Editing by Alan Barona)

((AnujaBharat.Mistry@thomsonreuters.com))