PYMNTS-MonitorEdge-May-2024

Grocery Tracker: March Flatness

Kroger, Costco and Whole Foods all closed out up for the second full week of trading in March—the first real sign of positive growth for the three national U.S. food retail stocks we track since the end of February. International food retail group Ahold Delhaize also closed out the week on an upward trend, though its entry into 2017 hasn’t been as rocky as its stateside counterparts.

Diving in, Kroger (KR) closed out last week on the up, rising 0.78 percent from Thursday’s close to hit $29.55. In after-hours trading, KR gained an additional 0.17 percent to reach $29.60. While these numbers hint at the potential for a refreshing change of pace for KR on the market, there’s still a long way to go to recover completely.

Kroger stock is still down some 14.37 percent from the beginning of the year. And while the median analyst forecast places KR stock up about 18 percent in the coming year, it could be a hard-fought battle—though the grocery giant has some store-transformation tricks up its sleeve, including testing home grocery delivery with Uber, that could help to put it in much better market standing come 2018.

Costco (COST) also closed out last week’s trading in the green, up 0.45 percent to $167.81. The big box giant was riding on all-time highs just before March rolled in and brought things down a notch after quarterly earnings missed expectations. But unlike some of its purely grocery competitors, Costco has managed to see value growth even in the midst of food deflation. COST is up 4.81 percent since Jan. 1 and median analyst forecasts posit nearly 10 percent growth by this time next year.

Whole Foods (WFM) ended last week at $29.53, up 0.20 percent from Thursday’s close. After-hours trading saw prices rise an additional 1.15 percent. While this instance of positive growth is a nice change for WFM, analysts anticipate flat to slightly lower value in the long run. WFM prices are down 4 percent from the start of 2017, and by this time next year they’re expected to sink an additional 1.8 percent.

For Whole Foods, the slowing rate of decline will likely come from cost-cutting and reinvention efforts the company has been working to enact over the last year or so to combat an increasingly discount-happy and digital consumer base.

Ahold Delhaize (AD) continues its bumpy ride through 2017 as Friday numbers closed up for the day, down for the week but up for the year-so-far at €20.39. AD’s outlook is positive as the average analyst forecast for the next 12 months indicates the potential for over 16 percent growth—though given AD’s behavior in the past, the upward trend may be a bit circuitous week-to-week.

What these long-term projections indicate for the incumbent grocery space is that analysts are largely optimistic across the various plays to keep up with the changing retail grocery consumer—upping digital options, in-store tech, loyalty and delivery plays while trimming the fat elsewhere looks to pay off in the near future.

This climate of consumer-centric reinvention extends to a recent move by Southeastern Grocers LLC—parent company of BI-LO, Fresco y Más, Harveys and Winn-Dixie—to upgrade its store loyalty offering by joining American Express’ coalition loyalty program, Plenti.

Starting April 5, customers can earn and use points for savings on groceries across Southeastern Grocers as well as on gas with Exxon and Mobil stations. Additionally, the points earned can be used at Plenti’s thousands of other online and retail partner locations.

“At Southeastern Grocers, we are always looking for ways to provide better value to our customers. Our new rewards program with Plenti provides our customers the ability to not only gain savings on gas but on groceries as well,” said Sharry Cramond, CMO, Southeastern Grocers. “The new program will, therefore, offer more ways to earn, more ways to save and even greater flexibility for our customers–thanking and rewarding them for their loyalty.”

The loyalty factor is increasingly key for incumbent supermarkets as challenger Amazon continues its push into the grocery space. Most recently, the online retail giant partners with meal kit delivery service Marley Spoon to start delivering Martha Stewart’s meal kits via Amazon Fresh.

While the Amazon partnership will most directly affect prepared food startup operations like Plated, Blue Apron and HelloFresh, it could also spell trouble for supermarkets. Meal kits and prepared food options are becoming the new norm at grocery stores, part of a larger “grocerant” and expanded services push to draw foot traffic (and consumer dollars) back into physical grocery stores.

While still relatively small when compared to the food industry at large, the U.S. meal kit delivery market is growing quickly. Data from Packaged Facts projected some $1.5 billion in sales for the meal kit market in 2016, with growth anticipated to hit as much as $5 billion within the next five years, said Forbes.

Naturally, Amazon wants a bite—and since Amazon has the benefit of a large product inventory, reach and delivery infrastructure, the grocery space is on its toes. The online retail giant is already gunning for supremacy in online and physical grocery sales. If Amazon continues to grow its meal kit delivery options, the retail giant could take another chunk out of supermarkets’ tenuous hold on their revenue streams.

PYMNTS-MonitorEdge-May-2024