The grocery sector may be in for a few lean months, if not years.
As noted across several web sources, including Seeking Alpha, a number of executives offering insight at several industry conferences have said that sales are sluggish and that, at least in some cases, the causes are dual in nature, linked to tough pricing and also to less money coming from government benefits.
The pressure is widespread enough to have led companies as diverse as SuperValu and Sprouts Farmers Market to warn of margin pressure as a mainstay of business through at least the end of the year.
Forbes reported on Friday (Sept. 9) that those two aforementioned firms, along with Kroger, have seen their share prices decline in the wake of sliding commodities prices, a deflationary environment that has led to those firms lowering their near-term earnings outlooks. Kroger, for example, lowered its earnings projections to $2.10–$2.20 a share for the year, where previously that forecast had been $2.19–$2.28 per share. Separately, SuperValu said that EBITDA will fall as much as 5 percent year over year, with previous estimates at a 1.5 percent slip. The firm pointed to deflation in foodstuffs, as well as a slowdown in the supplemental nutritional benefits program as compared sequentially to the first quarter. Sprouts said that comparable same-store sales will be flat, where the firm has once looked for as much as 4 percent growth along that metric.
Against that backdrop, meat prices have dropped as much 17 percent from last year, and that is an accelerated pace from the 14 percent slip year over year seen in meat prices in July, as calculated by BMO Analyst Andrew Strelzik, thus adding pressure to margins. Separately, said Forbes, another BMO analyst, Kelly Bania, noted that, although supermarket volume shopping overall was strong, grocery sales were flat, which is lower, sequentially, than the very slight 20 basis point growth seen in July.
The retail sales numbers provide little succor, coming in flat in July, as grocery stores were weak and so was spending at department stores and restaurants. Could it be that the shift detailed by PYMNTS — as sales move toward online channels — might also hit retail sales in the grocery space as people spend less time, physically, in store aisles?