Kroger CEO Rodney McMullen resigns after investigation into his ‘personal conduct’

Lead director Ron Sargent, 69, was named chairman and interim CEO effective immediately. The 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.

Kroger’s shares turned negative on the news, falling 1% as of 7:25 a.m. before regular trading in New York. Kroger’s stock had gained 6% this year through Feb. 28, compared to a 1.2% advance for the S&P 500 Index.

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.

Stock Clerk

McMullen has overseen Kroger, the largest US supermarket operator, for over a decade. He joined as a part-time stock clerk in Lexington, Kentucky, in 1978 and rose through the executive ranks.

The former CEO was the face of a botched $24.6 billion deal to buy Albertsons Cos., which the US government blocked after finding the takeover would lessen competition for grocery shoppers. It would have created the biggest US grocery deal in history, bringing together more than 4,000 stores.

McMullen will forfeit all unvested equity awards outstanding under the company’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.

He also sits on the boards of VF Corp. and Xavier University.

Kroger’s board has formed a search committee to find its next CEO and has engaged a recruiting firm.

The company also 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.