Kroger (KR) is now at a crossroads: As CEO Rodney McMullen announced his resignation, same-store sale growth lagged behind competition and its proposed merger with Albertsons fell through. 

On Monday before market open, the company announced McMullen would be stepping down immediately "following a Board investigation of his personal conduct that, while unrelated to the business, was inconsistent with Kroger’s Policy on Business Ethics." Kroger family member and industry veteran Ron Sargent was named interim chairman and CEO. 

Analysts called the announcement surprising. 

"We thought Kroger would shake up leadership, following the failed merger with Albertson's, but obviously this is not how we envisioned this playing out," CFRA analyst Arun Sundaram told Yahoo Finance. "Despite how things ended for Rodney McMullen, now is a good time to see new leadership at Kroger." 

The grocer is set to report its fiscal fourth quarter and full-year 2024 report on Thursday before market open.

This is one of many C-suite changeups in recent history.

Last month, the company announced PepsiCo (PEP) executive David Kennerley would join the company on March 10 and officially succeed interim CFO Todd Foley on April 3. Foley took the interim position after Gary Millerchip left for Costco last February. 

Its chief merchandising officer, Stuart Aitken, who was a former leading internal candidate per Joe Feldman of Telsey Advisory Group, also stepped down at the end of last year to become CEO of Circana.

Shares of the company dropped nearly 2% on Monday. 

Morningstar analyst Noah Rohr told Yahoo Finance over the phone that investors were considering how these "new faces" would play out for the company and updated guidance. 

Kroger now expects full-year same-store sales, without fuel, to be at the high end of its guidance range. In the previous quarter, the company shared the expected range of 1.2% to 1.5%. 

The company also said adjusted earnings would be slightly above the high end of its guidance range. The previously shared range was $4.35 to $4.45. 

Rohr, who said shares are "slightly overvalued" with a fair price target of $59, noted the updated guidance likely "assuaged some investor concerns" around the "uncertainty with the C-suite." 

He expects long-term same-store sales growth guidance of 2.0% to 2.5%. 

Sundaram said 2025 will be a "stronger" year compared to 2024 and is estimating the same range for sales growth. 

"Food inflation has picked up a little bit. That's typically good for same-store sales growth ... too much inflation is bad, but too little inflation is also bad," he said. 

As of Monday, analysts on the Street had 13 Buy ratings, 10 Holds, and three Sells on the stock.

McMullen's news comes as the grocer's same-store sales growth has lagged behind competitors Walmart (WMT) and Costco (COST). 

Same-store sales grew 2.3% in the third quarter for Kroger, compared to 7.1% for Costco, which is also set to report its fourth quarter on Thursday. Walmart boasted a 4.9% same-store sales growth in its Q4. 

"Despite the fact that Walmart and Costco have more discretionary items, [they] are still seeing stronger same-store sales growth than Kroger, which goes to show how strong some of the larger peers are," Sundaram said. 

Sprouts Farmers Market (SFM) also saw an 11.50% increase. 

"A few years ago, [Sprouts Farmers Market's] same-store sales growth was significantly lagging everyone else's really, even Kroger's and especially Walmart's and Costco's ... now they've turned it around," Sundaram said. 

Conventional grocers like Albertsons and Kroger have yet to see that same turnaround, he added.  

Albertsons only saw same-store sales increase 2% in its latest quarter. 

Jeff Greenberg via Getty Images

For the past two years, Sundaram said the team was also distracted by the failed $24.6 billion merger with Albertsons, which was officially blocked by the Federal Trade Commission in December. 

Rohr said "even with the increased scale" of the combined company, "they still wouldn't be able to totally rival the larger players," calling it one of many "headwinds" the company has been up against. 

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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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