Kroger Buys Upscale Harris Teeter

Traditional grocer Kroger (NYSE: KR) announced today that it will be buying smaller grocery chain Harris Teeter (NYSE: HTSI) for $2.44 billion. Harris Teeter is a small upscale grocery chain with just 212 stores compared to Kroger's 2,400 stores. Kroger does about $97 billion in annual revenue compared to Harris Teeter's $4.5 billion.

Kroger benefits from this acquisition because Harris Teeter has many locations in vacation spots and university towns where Kroger doesn't have much presence.

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Whenever a small company is purchased by a much larger one there is always a concern that customers will flee, fearing that things can only go downhill. If Kroger tries to change the day-to-day at Harris Teeter the grocery store could lose its customer base.

Kroger is the second largest grocery store by revenue in the United States behind Wal-Mart (NYSE: WMT). While this acquisition adds very little revenue it does give Kroger a better ability to compete against upscale grocers like Whole Foods (NASDAQ: WFM).

In 2012 Kroger recorded $96.8 billion in revenue and net income of $1.5 billion. The stock rose 2.65% on the news.

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