According to a report from Fitch Ratings, supermarkets appear to be stabilizing after several tough years, thanks in large part to higher food prices. For the last few years, supermarkets have cut prices and increased promotions to combat increased competition from dollar stores and discounters. However, top grocery chains like Safeway, Supervalu and Kroger are now showing improving sales and margin trends as food costs have enabled them to raise prices.
According to the report, although the higher prices will be beneficial to supermarkets, other long-term challenges remain, including rising health care costs, labor rates and a continued increase in competition from discounters.
Fitch maintained a "Stable" ratings outlook on Safeway (Genuardi's) and Kroger, and a "Negative" outlook on Supervalu (Acme, Save-A-Lot).
In other supermarket news, Progressive Grocer magazine has named ShopRite its Retailer of the Year for 2011.
"ShopRite continues to raise the bar in one of the most frequently competitive geographic marketing territories in the country, " said Meg Major, Progressive Grocer's editor-in-chief. "Its robust growth in the face of aggressive competition, and its extraordinary industry success and local community leadership, enable the regional chain to truly stand apart in the highly competitive food industry..."
The 47-member Wakefern cooperative owns and operates more than 220 supermarkets under the ShopRite banner in Pennsylvania, New Jersey, Delaware, Connecticut and Maryland. In June, Food Trade News Publisher Jeff Metzger wrote that ShopRite posted "the first triple crown in the history of the food and drug businesses in Philly and Metro New York by establishing leadership positions in the 11 county Northern New Jersey market, the 15 county Delaware Valley market and the eight county Greater Philadelphia market."