Shares of Albertsons jump on report of potential merger with Kroger

Shares of Albertsons jumped and were briefly halted on Thursday morning, after a report that the grocery chain is discussing a potential merger with grocery giant Kroger.

Shares of Albertsons rose about 8% in early trading. Shares of Kroger were roughly flat.

Bloomberg reported early Thursday that the companies may agree to a merger as soon as this week. It cited people familiar with the matter who asked not to be identified since they were discussing confidential information.

The people said no final decisions had been made and that talks could still be pushed back or fall apart, Bloomberg reported.

The two companies could not be immediately reached by CNBC for comment.

Kroger is the largest supermarket operator in the country. It is made up of more than a dozen banners, including Fred Meyer, Ralphs, King Soopers, Harris Teeter and its namesake brand. It trails behind Walmart, which is the top grocer in the U.S. by revenue.

The talks come as competition in the grocery industry has intensified. About five years ago, Amazon spooked legacy grocers by acquiring Whole Foods. Its stores, which now include Amazon Fresh, still command a small percentage of the overall U.S. grocery market, but sparked a wave of investment.

Kroger, for example, struck a deal with British online grocer Ocado to build huge robot-powered fulfillment centers to pick and pack online grocery orders. It has used the new business model to break into new markets, including Florida. It also plans to expand in the Northeast.

The pandemic also pushed the industry to better cater to customer preferences, with services such as curbside pickup and home delivery. Yet those investments have also pressured grocers’ profits. Already, the grocery business is known for its thin margins and inflation has driven up the costs of food.

This story is developing. Please check back for updates.