Monday, March 27, 2017

Wegmans plans openings for two North Jersey stores

Wegmans announced that new stores in Hanover, NJ and Montvale, NJ will open this year on July 23 and September 24, respectively. Each store will feature a Burger Bar, which is Wegmans' in-store restaurant counter. They will also have wine, beer and spirits shops operated by a third-party.

The stores are the company's closest locations to New York City so far. A Rochester, NY newspaper reported that stores may be coming in 2018 to Westchester County and Brooklyn.

Target unveils "reimagined" store design

Target unveiled its design last week for a "reimagined" 124,000 square foot store, the first of which is scheduled to open near Houston, TX in October. An additional 40 stores are slated to be redesigned during the same time period. Target plans to convert about 500 stores to the new design - or a similar design based on customer feedback - in 2018 and 2019.

According to Target Chairman and CEO Brian Cornell, the redesign will introduce separate entrances and parking for groceries and products ordered online, where employees will deliver the orders to customers in their cars.

The redesign also includes stenciled concrete floors, revised lighting and elevated merchandise presentations. The appearance of the grocery section will also be upgraded, and will include an expanded assortment of fresh produce and quick meal options.

Target employees in these locations will be equipped with mobile technology that will enable them to search inventory, take payment and arrange for delivery, all from the sales floor.


Giant to close to Lancaster County stores

Giant Food Stores announced it would close two stores in Lancaster County, PA on May 18. The stores are located on Reservoir Street in Lancaster and Fruitville Pike in Manheim.

According to a story in Pennlive.com, the Lancaster store is 37 years old, and the Manheim location was acquired 10 years ago.

Albertsons in talks to acquire Sprouts

It was reported last week that Albertsons is considering a deal to acquire Sprouts Farmers Markets, and an industry source told me that he thought the likelihood of such a deal was 50-50.

Sprouts, based in Phoenix, is the largest farmers' market-style food retailer in the country. It operates more than 250 stores in 15 states, not including Pennsylvania, where a Philadelphia store is planned. There are no stores currently in New Jersey either, and it has been rumored that the company is looking for a site in South Jersey.

According to reports, Sprouts has plans to open 32 stores this year, following 36 new stores last year and 27 in 2015.

Jefferies Anlyst Chris Mandeville said last week that "the logic of a deal makes sense in our view," but added that it would be very expensive.

Albertsons, which is owned by Cerberus Capital, acquired Safeway and Supervalu in recent years. Reports said that the company was in talks to acquire Price Chopper late last year, but the deal never happened.

Monday, March 20, 2017

Food deflation and competition hurting supermarket profit margins

A story this morning in USA Today reported that "low food prices and razor-sharp competition" are putting a serious dent into grocery chain profits. However, the issue is good news for consumers, who last year saw the first annual decline in supermarket prices since 1967.

According to Supermarket Analyst Phil Lempert, the low food prices and competition have created "a price war among everybody." This price war, combined with supermarkets' efforts to attract new customers (mainly via investments in pricing), have badly hurt profit margins.

According to the Agricultural Department's Economic Research Service, prices of supermarket items declined 1.3% in 2016 compared to the year before. The article cites confirming evidence from Wegmans and Costco, both of whom provided examples of recently lowered prices on items like bananas, peanut butter, eggs, pistachios and laundry detergent, among others.

The USDA said that meat, chicken and eggs have seen some of the biggest price cuts due to oversupply and lower than expected exports.

Kelly Bania, a senior analyst at BMO Capital Markets, added that "we're definitely in a prolonged deflationary period."

Thursday, March 16, 2017

Aldi to spend billions on new stores and remodels

Aldi announced earlier this year that it plans to remodel more than 1,300 stores by 2020 at a cost of $1.6 billion. The remodeled stores will focus on fresh items, including produce, dairy and bakery sections, and feature open ceilings, natural lighting and environmentally-friendly building materials.

Currently Aldi owns and operates about 1,600 stores in the U.S., and by the end of 2018 it expects the number of stores to exceed 2,000. The company says that an investment totaling about $3 billion will be necessary to acquire land, facilities and equipment for the new stores.

Locations for new stores coming soon to the Greater Philadelphia market include Limerick, PA and Voorhees, NJ, among others.

Wednesday, March 15, 2017

Target investing in pricing, e-commerce, small format stores

Target announced that it plans to shift away from promotional pricing and back to every day low pricing as part of a $1 billion investment this year. The change in pricing is part of the company's overall strategy to enhance the in-store experience and leverage its stores as fulfillment centers for online orders.

CEO Brian Cornell said the investments in pricing will be spread throughout the store, but will begin with food, personal care and household essentials, "the trip-driving items our guests depend on every day," he said.

Target has been testing its food offerings at prototype stores in California and Texas, including transitions to daily delivery of produce.

In addition to Target's price investments, the company plans to remodel stores and open about 100 small-format stores in the next three years. The TargetExpress banner will be found mostly in urban markets, densely populated suburbs and college campuses. Currently there are 32 TargetExpress stores, all of which are highly tailored to suit the needs of the individual neighborhoods, the company said.

According to a story in Supermarket News, the small-format stores are part of Target's e-commerce strategy. Company executives reported that physical stores played a key role in fulfillment during the past holiday season, with 80% of online orders being picked up at stores.

These changes come in the wake of a sharp decline in profit in 2016. Net income fell 18.6% for the year, with sales down 5.8% to $69.5 billion.