While department stores and luxury retailers have been the poster children for retailers experiencing financial difficulties in 2016, food retailers have continued to thrive. Nearly one quarter of retailers listed in the 2016 STORES Hot 100 are supermarkets, indicating that these retailers as a whole are in a better growth position than the majority of their retail counterparts.
Other retail sectors may experience volatility from time to time due to factors such as weather, economic conditions, oil prices or generational consumer preferences, but food is a necessary commodity for all consumers.
Many of the U.S.’ top grocers had a successful 2016 thus far:
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Walmart experienced low single digit growth in Q1 grocery sales due to strong traffic, better in-stock levels and a focus on assortment. The mega-retailer even saw a 7.1% comparable store sales increase at its smaller Neighborhood Market store formats, and has expanded online grocery to 40 markets;
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Kroger saw 10% profit boosts in Q1 to $680 million and has expanded its Clicklist online grocery pickup option to more than 25 markets;
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Ahold and Delhaize officially completed their merger in July 2016 to become the fourth-largest supermarket chain in the U.S.;
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Albertsons, the parent company of its namesake supermarket brand and Safeway, remains the third-largest private company in the U.S. and has filed for an IPO; and
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Publix recently released its Q2 earnings results, in which sales increased $8.1 billion and store sales increased 1.1% as the grocer transitioned CEOs.
The only grocery chain that stands out in particular as having a difficult stretch in its most recent quarter is Whole Foods Market, which saw its net income fall 22.1% to $120 million and experienced a 2.6% comparable store sales decline. Whole Foods has positioned itself as a grocer selling only natural, organic foods, but the introduction of similar products in more traditional supermarkets has forced the retailer to introduce a new value-driven concept brand, 365 by Whole Foods Market.
Whole Foods’ problems in an environment that is experiencing consistent growth shows that consumers are more willing to buy their food from anywhere — particularly if they don’t have to pay premium prices for it. Today, many supermarkets are willing to offer a wider range of food options and work with suppliers to expand their offerings. With sourcing capabilities aligned with consumer desires, more grocery stores can create their own specialized sections, or even consider testing experimental stores.
“The supermarket channel remains remarkably vibrant,” said John Rand, SVP of Retail Insights for Kantar Retail in a statement. “As a response to the many obvious challenges to the traditional business, many supermarket retailers are in a high state of activity as they seek to differentiate, adopt new practices and reconsider their brand and shopper focus.”
Kantar Retail collected data from the STORES Hot 100 list. The data is based on sales growth in 2015 over 2014 and ranks both public and privately held U.S. retailers with domestic sales of $300 million or greater. On average, businesses on the list saw growth of 14.7%, up from 13.2% the year before.
