Kroger’s announcement last week that it plans to buy regional supermarket chain Giant Eagle is, in some ways, a back-to-the-future moment for the two food retailers.
Three of the five families that would go on to form Giant Eagle initially formed Eagle Grocery, but then, in 1928, agreed to sell the company to Kroger, which by then had been in business for more than 40 years. After waiting out a three-year non-compete agreement, those families joined two others to create Giant Eagle, opening their first store on Brownsville Road in the Pittsburgh borough of Mount Oliver in June 1936.
By mid-1938, Giant Eagle had 10 locations, according to the Heinz History Center. The grocer continued to expand, pushing the average size of its stores to 15,000 square feet by the 1950s and later buying a former Kroger warehouse in Lawrenceville, Pennsylvania, that more than doubled its distribution space.
Despite its early success and rapid expansion in the region, Giant Eagle has in recent years encountered difficulty keeping pace with newer competitors, especially Walmart. In 2019, for example, Giant Eagle controlled nearly 30% of the grocery market in its hometown of Pittsburgh, but by 2022 ceded leadership in the market to Walmart, with which it has continued to jockey for dominance.
Kroger has also struggled to keep up as the grocery market has evolved. The company famously tried to merge with rival Albertsons to expand its breadth and has been regrouping since that deal failed in 2024. Kroger’s plan to merge with Giant Eagle represents the first time the nation’s largest grocery chain has tried to buy another supermarket operator since its effort to acquire Albertsons collapsed.
Here are five key things to know about Kroger’s effort to purchase Giant Eagle.
Kroger signaled that it can easily afford to buy Giant Eagle
Kroger emphasized that it will not have to stretch itself financially to purchase Giant Eagle. When it announced the deal, Kroger said it would finance the $1.65 billion transaction with cash, adding that it expects to maintain the target range for its leverage ratio going forward.
The company also said that it plans to continue its share repurchase program and maintain its dividend after the merger closes.
Kroger had about $2.9 billion in cash and temporary cash investments as of May 23, down from around $3.3 billion at the end of January.
By comparison, Kroger said in 2022 that it intended to borrow money to help fund its merger with Albertsons. Kroger also paused its share repurchase program at the time to help keep its debt level in check.
Speaking during Kroger’s first-quarter earnings call on June 19 — ahead of the company’s announcement that it plans to buy Giant Eagle — Kroger CFO David Kennerley underscored the company’s determination to maintain its financial strength as it looks for ways to expand, noting that Kroger’s operating results helped it record strong cash flow during the period. But he indicated that the retailer is prepared to take on more debt than it currently has on its books, without providing a timeframe.
“We view this flexibility as a strategic asset. It gives us optionality to invest in high-return opportunities while maintaining our commitment to investment-grade credit,” Kennerley said. “Our disciplined capital allocation continues to fuel our performance as we balance investments in growth opportunities, all while maintaining a strong financial foundation.”
The deal will give Kroger added scale for a modest price
Kroger has agreed to absorb Giant Eagle at a time when the regional grocer is facing intense competition from other retailers, especially Walmart. But while Giant Eagle is losing market share, the pressure the company is under also helped Kroger strike a deal to acquire it for a relative bargain, analysts at R5 Capital wrote in a research note.
One reason the transaction stands to benefit Kroger is that the stores it is looking to acquire will help it better stand up to mass merchants, the research firm said. Kroger will need to invest in bringing down prices at Giant Eagle to improve the chain’s ability to compete, but “we see no reason why Giant Eagle shouldn’t operate at a similar EBITDA margin as the rest of Kroger, strongly suggesting Kroger paid relatively little for a lot of long-term EBITDA benefit,” R5 wrote in its note, referring to a key measure of profitability.
Giant Eagle also represents a ripe opportunity for cost savings, especially around purchasing, distribution, and selling, general and administrative expenses, according to R5. Those savings should be enough to offset the cost Kroger will incur to lower prices, the firm said.
R5 added that it believes CPGs will be amenable to helping Kroger bring prices down at Giant Eagle, particularly because Kroger will be able to tap consumer data from the Pittsburgh-based chain to enhance its data-analysis operations.
Both grocers have made recent efforts to cut prices
Kroger’s deal to buy Giant Eagle is unfolding at a time when both retailers have highlighted their work to cut prices.
Kroger’s newly appointed CEO, Greg Foran, who joined the company in February, quickly called attention to how the grocer aims to focus on pricing and its store experience as competitive advantages
Foran told investors in June that Kroger will work to simplify its promotions and strengthen its price position. He told Bloomberg that the supermarket chain is preparing to test sweeping price cuts in a bid to take on the likes of Walmart and Aldi.
In a sign of how Kroger might approach reducing prices at Giant Eagle, Foran said Kroger plans to support its efforts to cut costs for shoppers with a focus on reducing its own expenses.
“We are investing in price with discipline, fully funded through cost savings while maintaining a strong focus on margin performance,” he said during the earnings call.
Meanwhile, Giant Eagle announced last year a $100 million effort to support “new and brighter stores and more everyday value and quality.” As part of that campaign, Giant Eagle said it would launch a seasonal pricing initiative targeted at inflation relief for customers, starting with a “$1 Deals” one-week sale covering 1,000 items, including pasta and baby food. The initiative came on the heels of other price reduction efforts by the grocer.
A shared focus on store improvements
Foran said during the June earnings call that the grocer has a “strong store footprint” and is working on scaling store-based fulfillment to improve the economics of online orders, but noted that “the gap between our best stores and the rest of the fleet needs to improve.” He also told investors that fleet expansion will unlock market share as Kroger looks to keep pace with rivals.
For its part, Giant Eagle said last year that it would devote millions of dollars to remodeling 12 supermarkets in Pennsylvania and Ohio as well as upgrading more than 60 in-store pharmacy departments. The grocer also said it plans to improve the quality of its produce and expand its employee training to provide better customer service.
In November, Giant Eagle opened a Market District store at The Meridian development in Pittsburgh. Per local news reports, the grocer earlier this year closed stores in the Ohio cities of Lancaster and Columbus.
As part of the deal, Kroger and Giant Eagle said they also expect to make a limited number of store divestitures. But the companies didn’t provide details.
Giant Eagle is holding onto its identity
While concerns about potential impacts to workers have cropped up around major grocery M&A deals, Giant Eagle was quick to tell local media outlets that the grocer doesn’t expect major labor changes as a result of its deal with Kroger.
Giant Eagle CEO Bill Artman told The Tribune-Review, a newspaper serving the greater Pittsburgh metropolitan area, that he does not expect the acquisition to impact frontline workers, and Giant Eagle confirmed that comment to Grocery Dive. The grocer also told Grocery Dive that it plans to maintain its corporate office in Cranberry Township, Pennsylvania, and operate under the same leadership. The grocer relocated to that corporate headquarters, which is about 20 miles north of Pittsburgh, in 2024.
“As far as the corporate office goes, and jobs within the corporate offices — this transaction will close sometime in ‘27, pending government regulatory acceptance, and then we’ll evaluate the strengths and opportunities that exist between our team and what currently exists at Kroger,” Artman told the Pittsburgh Post-Gazette.
R5 Capital noted that the deal could bolster Giant Eagle’s operations and, in turn, better support its workers.
“A strengthened Giant Eagle is good for the union workforce so we believe the unions will likely get on board,” R5 Capital wrote.
Giant Eagle also made it clear to its customers that they can expect to continue seeing its brand after the deal’s expected completion in 2027: “Giant Eagle will retain our name,” according to a banner on its website.
