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."
Showing posts with label Kelly Bania. Show all posts
Showing posts with label Kelly Bania. Show all posts
Monday, March 20, 2017
Tuesday, January 31, 2017
U.S. grocery sales volume weakened in December
According to published reports, U.S. grocery sales continued to slump in December, despite price deflation.
According to IRI, dollar sales were down by 1.7% (excluding mass merchants like Walmart) in the four weeks ended December 18, 2016 as compared to the same period a year earlier. In addition, sales volume was down by 2.3%. These decreases represent the weakest monthly sales growth figures since November 2013, when sales were affected by a Thanksgiving calendar shift.
BMO Capital Markets Analyst Kelly Bania was at a loss to explain the slowdown.
"We initially thought maybe there was a trade-out to restaurants. But we haven't seen anything in the restaurant data to support that," Bania said. "It doesn't look like it's a shift to Walmart either. We don't have a great explanation for it."
Burt P. Flickinger III, managing director for Strategic Resource Group, suggested that holiday promotions for department stores and mass merchants may have drawn more dollars away from grocery than usual. He also mentioned relatively light promotions from consumer goods companies as a possible culprit.
According to IRI, dollar sales were down by 1.7% (excluding mass merchants like Walmart) in the four weeks ended December 18, 2016 as compared to the same period a year earlier. In addition, sales volume was down by 2.3%. These decreases represent the weakest monthly sales growth figures since November 2013, when sales were affected by a Thanksgiving calendar shift.
BMO Capital Markets Analyst Kelly Bania was at a loss to explain the slowdown.
"We initially thought maybe there was a trade-out to restaurants. But we haven't seen anything in the restaurant data to support that," Bania said. "It doesn't look like it's a shift to Walmart either. We don't have a great explanation for it."
Burt P. Flickinger III, managing director for Strategic Resource Group, suggested that holiday promotions for department stores and mass merchants may have drawn more dollars away from grocery than usual. He also mentioned relatively light promotions from consumer goods companies as a possible culprit.
Subscribe to:
Posts (Atom)