Market briefly abuzz with report of Target-Kroger merger talks, but source says nothing to it

The market was briefly abuzz Friday morning with a report from Fast Company that cited unnamed sources who said Target and Kroger have been in merger talks for months.

But a source familiar with the matter told the Star Tribune that there is no truth to the report. The source speculated that the confusion may have stemmed from the talks Target has been having with a number of retailers about joining its same-day delivery platform through Shipt, a firm Target acquired late last year.

Kroger's shares spiked 7 percent before the markets opened this morning on the initial report. In its report, Fast Company said the two retailers first began conversations last summer that continued in the fall and are ongoing this year. The report noted the flurry of activity in the grocery space since Amazon's acquisition last year of Whole Foods.

It also notes that Target's grocery chief, Jeff Burt, was hired last year from Kroger.

Burt was brought on to help Target fix what has been an ongoing weakness for it especially as chains such as Wal-Mart and Aldi and Hy-Vee have been upping their grocery games.

In the last couple years, Target has been working to improve its supply chain to offer fresher and more organic produce as well as to introduce more better-for-you products. It has been expanding its beer and wine selection, which has been showing positive results.

It now has employees dedicated to the grocery department in its stores to improve service. And as it has been remodeling stores, with 325 locations on deck to get makeovers this year, Target has been improving in-store grocery presentation with updated lighting and produce bins.

"It will be subtle changes," he said. "It may not be something we shout about, but we know the changes we're making in assortment and presentation and service. … They don't jump out at you, but we know what we've done and the guest responds well to it."

Target, which has historically been more conservative when it comes to acquisitions, began to do more in this space last year when it bought Grand Junction and Shipt. I asked Cornell in late February if we should expect to see Target to make more deals this year.

Here's what he had to say: