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We have been short the traditional grocers and think now is the time to press the shorts. During the pandemic, we moved from being long the grocers to being short, too early in hindsight. The variants of COVID-19 lengthened the pandemic restrictions which kept food at home consumption elevated. In the past weeks, consumer shopping behavior has shifted as the impact of inflationary price increases for food, fuel, and nearly everything else has hit the consumer while lower government transfer payments have removed support. The consumer has started to prioritize spending categories and there will be new winners and losers.
We examined the following topics:
- The multiple drivers of food inflation
- The impacts of elevated food inflation
- The changing consumer behavior
- Wallet share winners and losers
- Supply chain challenges
- Competitive activity
- Gross margin outlook
- Input cost outlook
- Freight cost outlook
- Traffic trends
- Government transfer payments
- E-commerce investments
The investment themes for our call:
