Online grocery grows in June (KR)
U.S. online grocery sales grew 5.9% YOY in June, accelerating from growth of 1.7% in May. Sequentially sales grew 1.4% in June from May. Pickup sales grew 6.3% YOY in June while delivery sales grew 19%. In the second quarter total digital grocery sales grew 0.9%. As a percentage of the total grocery market in Q2 online grocery sales were 13.6%, up 1.5% points from the prior year. Delivery and pickup sales represented 10.9% of total grocery, up from 9.3% last year. Growth in MAUs and higher average orders were offset by lower order frequency in June and Q2. Delivery represented 34.2% of online grocery while pickup represented 45.7%, with the remainder being ship-to-home (which supermarkets do not participate in). Ship-to-home sales decreased 13.3% YOY in June. Digital grocery sales growth trails food inflation. The business model for digital grocery requires further growth to generate adequate returns. For Kroger, this means there is no looking back as it continues to open Ocado distribution centers. Last week Kroger announced two new Ocado fulfillment centers, bringing the total number to 12.
Haleon spinoff (HLN LN, PRGO)
Haleon, GSK’s consumer health unit, will begin trading today. GSK shareholders will receive one share of Haleon for each share of GSK held on Friday. Pfizer will own 32% of Haleon, while GSK shareholders will own 54.5%, GSK will own 6%, and Scottish limited partnerships (pension) will own 7.5%. GSK plans to sell its stake “in a disciplined manner.” Pfizer plans to sell its stake after the lock-up expiration in November. On July 22, Haleon’s ADRs will be listed in the U.S. Haleon will carry £10B in debt (4x levered), and the market capitalization projects to be ~£30B. GSK rejected a Unilever 50B takeover bid in January for Haleon, highlighting its attractiveness. Haleon has revenue of £10.5B. Perrigo will have some more company in the consumer healthcare sector. Reckitt trades at 15x EV/EBITDA while Perrigo trades at 11x. Perrigo is even more attractive with the growth drivers in 2023 and a valuation of less than 9x consensus expectations that are too low.
Retail sales decelerate for grocery stores (ACI)
U.S. retail sales increased 1.0% in June from May. Adjusted for inflation real sales growth of 1.3% was slightly negative. Sales grew 8.4% YOY. Grocery store sales increased 8.3% in June, decelerating from 8.6% in May as seen in the following chart. Foodservice and drinking places had sales growth of 13.4% in June, decelerating from 17.6% in May. Retail sales for food at home and away from home increased 17.4% in June, decelerating from 18.2% in May.
