Changing eating behaviors (WMT)
According to NPD, the spending gap between higher and lower-income households is becoming more pronounced due to rising inflation. Households earning less than $75,000 a year, representing 46% of the U.S. population, are consuming 89% of their meals at home. The lower-income households are consuming more frozen and shelf-stable foods and are under-indexing in fresh foods. Lower-income households are purchasing private label foods 26% more than higher-income households. Numerous companies noted changes in consumers’ spending on food in the Q2 earnings calls. We summarized notable management call-outs by topic and investment theme in our 2H Themes Update on Monday CLICK HERE for the replay.
Flu down under (PRGO)
The Southern Hemisphere has been experiencing a surge in influenza cases earlier this season. The Pan American Health Organization said, “Mexico and Peru have seen higher numbers of influenza cases than expected, and Argentina, Chile, and Uruguay have reported more hospitalizations than usual due to the virus.” Australia’s flu season started six to eight weeks earlier than usual. Some doctors expect a larger flu season this year in the U.S., because fewer of us have been exposed to the influenza virus over the past two years. Flu vaccines are expected to be available at pharmacies and doctors’ offices in a few weeks.
Since many cases of influenza are not tested by a lab, the severity of the flu/cold season may be better seen by the incoming calls inquiring about cough/cold symptoms to Australia’s Healthdirect helpline as seen below.
Out-comping (GO)
Grocery Outlet’s traffic trends have been outperforming both Kroger and Albertsons since the beginning of the year. According to the Placer.ai traffic data the inflection was in the middle of February when Grocery Outlet’s traffic stayed positive YOY while Kroger and Albertsons became negative. Grocery Outlet’s traffic has continued to improve and since the end of June has been above 10%. Grocery Outlet reported SSS growth of 11.2% in Q2 compared to 6.8% for Albertsons. Kroger reported 4.1% SSS growth in the April Q. Grocery Outlet is benefiting from inflationary headwinds as consumers look to the value food retailer to stretch their food budgets.
