McMullen served as Kroger’s CEO for more than a decade. (Jeenah Moon/Bloomberg News)
Kroger Co. replaced CEO Rodney McMullen following an investigation into his personal conduct, which the U.S. supermarket chain said was unrelated to the company’s financial performance and didn’t involve Kroger employees.
Lead director Ron Sargent, 69, was named chairman and interim CEO effective immediately. The Cincinnati-based company has also initiated a search for a permanent replacement, it said in a statement. Sargent has been a director since 2006 and formerly served as CEO of Staples Inc.
McMullen served as Kroger’s CEO for more than a decade.
Kroger’s shares fell about 3% at the open of trading in New York. The stock had gained 6% this year through Feb. 28, compared to a 1.2% advance for the S&P 500 Index.
The company ranks No. 26 on the Transport Topics Top 100 list of the largest private carriers in North America.
The board of directors said it was made aware on Feb. 21 of “certain personal conduct by McMullen and immediately retained outside independent counsel to conduct an investigation.” The investigation is being overseen by a special board committee.
While the behavior didn’t involve the company’s operations, it was “inconsistent” with Kroger’s policy on “business ethics,” the company said.
The probe concluded in recent days, with McMullen resigning March 3, according to a person familiar with the matter. Sargent is unlikely to serve as CEO long term, the person said.
A Kroger spokesperson declined to comment further on the investigation and CEO change.
Stock Clerk
McMullen, 64, has overseen Kroger, the largest U.S. supermarket operator, for over a decade. He joined as a part-time stock clerk in Lexington, Ky., in 1978 and rose through the executive ranks.
He served as chief financial officer, vice chairman and chief operating officer before becoming CEO. During his tenure, he helped lead various acquisitions, the emergence of online shopping and navigating the pandemic.
McMullen and his team oversaw the integration of a $13 billion merger in 1999 with Fred Meyer, which made Kroger the biggest grocer in the country. The supermarket operator later bought Harris Teeter, Roundy’s and Home Chef, among others.
Botched Deal
The former CEO was also the face of a botched $24.6 billion deal to buy Albertsons Cos., which the U.S. government blocked after finding the takeover would lessen competition for grocery shoppers. It would have created the biggest U.S. grocery deal in history, bringing together more than 4,000 stores.
Like its competitors, Kroger has focused on diversifying beyond the core retail business into areas that have faster growth, such as advertising and data analytics. It also teamed up with UK-based Ocado Group to build warehouses for online orders, though that deal has drawn skepticism.
McMullen, who also sits on the boards of VF Corp. and Xavier University, will forfeit all unvested equity awards outstanding under Kroger’s 2019 long-term incentive plan and won’t be eligible for his 2024 bonus. He will retain any equity awards that are fully vested as of the resignation date.
The company said it expects Kroger’s full-year identical sales without fuel to be at the high end of its guidance range and adjusted earnings per share to be slightly above the high end of its guidance range. The company is scheduled to report earnings for its fourth quarter on March 6.
