Grocery Stores - Between Divesture, Expansion and Health Trends
via WSJ.com - January 15, 2013, 8:22 a.m. ET
LONDON, January 15, 2013 /PRNewswire/ -- 2013 looks poised to be an interesting year for companies in the grocery store industry, as individual companies such as Supervalu Inc., The Kroger Co., Safeway Inc. (NYSE:SWY), Whole Foods Market Inc. and The Fresh Market Inc., have all been making charges in an attempt to capture a greater market share. Some companies have been divesting themselves of certain assets so as to better focus on select areas of business, while others have been opening new locations. With the U.S. economy continuing to recover as well as a greater importance being put on health, the growing demand for organic and healthier foods has also had an influence on what retailers are stocking the shelves with. Several companies have also turned in stellar quarterly results of late which have drawn the eye of a number of investors. While the industry currently has a lot going for it, an economic stumble at home or rising input costs could shirk margins in an already highly competitive marketplace. See how companies in this grocery stores industry have fared the past year and what our analysts predict for their 2013 performance.
The challenging economic climate has led companies to take a variety of approaches to best move forward. In the case of Supervalu (NYSE:SVU), the company newly announced a definitive agreement whereby it will sell its Albertsons, Acme, Jewel-Osco, Shaw's and Star Market stores, as well as related Osco and Sav-on in-store pharmacies to AB Acquisition LLC in a deal worth $3.3 billion (approximately $3.2 billion in debt and $100 million in cash). Upon completion of the deal, Supervalu will have three market-leading business units to focus on. The Fresh Market (NASDAQ:TFM), on the other hand, has been expanding its business of late. The company has opened several new stores, including its first in California, and has leases for four new stores in Houston, Texas, which, according to the company, should be up and running in the second half of fiscal 2013. A number of companies have also been offering discounts on certain items, in an attempt to grow their sales and customer loyalty. Safeway falls into this category, as the company offered deals on a number of popular items over the holidays.
A growing number of individuals in the U.S. are paying more attention to what they are eating, and are also willing to pay more for healthier options. Organic foods are no longer confined to a small section in grocery stores, and a focus on health has improved sales for a number of companies that specialize in it. Whole Foods Market (NASDAQ:WFM) certainly fits into this category, and the company has newly announced a new line of snacks, breakfast foods and pantry items designed to cater to the health conscious consumer. The line is called Engine 2 Plant-Strong products, and has been developed with Rip Esselstyn, author and founder of "The Engine 2 Diet(TM)".
On the earnings side of things, select industry players, such as The Fresh Market and The Kroger Co. (NYSE:KR), have been turning in solid results. In its most recent quarterly report, The Fresh Market saw its net sales jump by 22.1% and comparable store sales rise 5.6% compared to the same period a year ago. Net income was also impressive, coming in at $10.9 million, a 19% rise in year-over-year comparisons. The Kroger Co. also turned in strong numbers, with sales and adjusted earnings per diluted share increasing when compared to the same period last year. You can speak on one of our financial experts to get in-depth analysis on Kroger's recent quarterly earnings.
With Americans loosening their purse strings in the wake of better economic times, grocery stores look well positioned to take advantage of the improving trend. If input cost increase stores could see a return to razor thin margins, but for now, the industry looks well equipped to start the year off strong.
On the earnings side of things, select industry players, such as The Fresh Market and The Kroger Co., have been turning in solid results. In its most recent quarterly report, The Fresh Market saw its net sales jump by 22.1% and comparable store sales rise 5.6% compared to the same period a year ago. Net income was also impressive, coming in at $10.9 million, a 19% rise in year-over-year comparisons. The Kroger Co. also turned in strong numbers, with sales and adjusted earnings per diluted share increasing when compared to the same period last year.
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