Kroger Co.’s stock slid 1% early Monday after the company announced the departure of Chief Executive Rodney McMullen, who has resigned after a board investigation of his personal conduct.
The company (KR) did not offer details of the conduct but said it was “inconsistent with Kroger’s Policy on Business Ethics.”
The board said it was made aware of the conduct on Feb. 21 and immediately retained outside counsel to conduct an investigation, overseen by a special committee.
“Mr. McMullen’s conduct is not related to the company’s financial performance, operations or reporting, and it did not involve any Kroger associates,” the board said in a statement.
McMullen has headed the company since 2014 and was named chairman in 2015.
Kroger has named Ronald Sargent chairman of the board and interim CEO while it conducts a search for a permanent replacement. Sargent has been a director since 2006 and has been lead director since 2017.
Mark Sutton will replace Sargent as lead independent director.
“I plan to be a steady, but active hand in the execution of our strategy,” Sargent said in prepared remarks. The executive has been with the company since spending summers in college working at Kroger stores.
The company said it now expects full-year same-store sales excluding fuel to be at the high end of its guidance and for adjusted per-share earnings to be slightly above the high end of its guidance.
Kroger is scheduled to report fourth-quarter earnings on Thursday. In December, the company said it expected full-year same-store sales excluding fuel to rise 1.2% to 1.5%. The company guided for adjusted EPS of $4.35 to $4.45.
Also in December, Kroger threw in the towel on its plan to merge with rival Albertsons Inc. (ACI) in a $25 billion deal, which had been beset by regulatory challenges since it was first mooted.
Albertsons retaliated by suing Kroger and seeking billions alleging that Kroger failed to put its full effort into getting the deal done. Kroger said the lawsuit was “baseless and without merit.”
Kroger announced it would instead conduct a $7.5 billion share-buyback program. The news sent the stock sharply higher.
The stock has gained 31.9% in the last 12 months, while the S&P 500 SPX has gained 15.9%.
