Return to the store (KR)
Online grocery sales decreased 3.8% YOY in April according to Brick Meets Click. Morning Consult, a data intelligence company, reported a decline in the frequency of online grocery orders. The weekly online grocery ordering for high-income households fell 29% in October 2021 to 18% in April 2022. For millennials and urbanites the share fell 7% points and for parents with kids under 18, the share fell 9% points. Consumers looking for deals are returning to the store. The decline in concern about the pandemic is one reason for the return to shopping in the store. Out-of-stocks and e-commerce fees also contribute to the rise of in-person shopping. Grocery e-commerce needs higher volumes to justify the additional expenses and capital investment. The pandemic accelerated share gains for e-commerce, it did not cause a permanent step-change in share.
Vaccines spoiling (ACI)
More than 82 million COVID-19 vaccine doses have been wasted since December 2020. That equates to more than 11% of the doses distributed by the government. Vaccines are distributed in multi-dose vials and once opened the vaccines are only good for a couple of hours before it spoils. CVS led all retailers in disposing of 11.8 million doses or about 13% of the doses it received. Walmart was reported to have wasted 10 million doses. Walgreens disposed of an estimated 8.3 million doses. Rite Aid, Publix, and Costco disposed of more than a quarter of the doses they received. Through February 2022 Albertsons had administered 12 million vaccinations. Management cited the vaccinations as a margin tailwind over the past year.
Who is getting the traffic? (GO, SFM)
With food price inflation continuing to accelerate and national gasoline prices 45% higher YOY consumers have adjusted their grocery shopping behavior. Grocery Outlet as a value grocer offers consumers prices 40%+ lower than traditional supermarkets. Traffic to the stores has increased over 10% for the past four weeks compared to the prior year. Grocery Outlet’s traffic comparisons are relatively easy compared to other grocers’ due to its high mix of stores in California which kept COVID-19 restrictions in place longer than in other states. In Q1 management said ticket was the primary driver of the 5.2% growth in same store sales, but traffic trends improved throughout the quarter and sequentially to Q4.
Sprouts Farmers Market is a specialty grocer that changed its promotional approach in its fresh produce department. It removed its traffic-driving promotions in produce to shift to a farmer’s market offering focusing on locally grown items. In Q1 management said traffic continued to be positive, but fewer items in the basket were the headwind to same store sales growth of 1.6%. According to placer.ai traffic has fallen more than 5% YOY since the middle of February as seen in the following chart. Grocery Outlet is on our long list and Sprouts Farmers Market is on our short list.
