November SSS (COST)
Costco reported November SSS growth ex. gas and Fx of 5.3%, consisting of 4.6% growth in the U.S., 6.6% growth in Canada, and 8.3% growth in other international countries. November is a deceleration from the 6.1% growth in the U.S. in October, 8.8% growth in Canada, and 7.9% growth in other international countries. Traffic to U.S. stores accelerated from +1.7% in October to +2.4% in November. Inflation in food was even compared to October. Food and sundries comps were up LDD%, fresh food was up MSD%, and non-food was down LSD% in November. The food trends were similar to September and October while non-food trends decelerated from +MSD% in September, to +LSD% in October, and -LSD% in November. The deceleration in non-food items reflects weaker trends in general merchandise that the discounters have experienced for several months as headwinds strengthen against consumer spending.
Grocery traffic (KR, ACI)
Traffic to grocery stores the day before Thanksgiving fell 2.5% compared to the prior year. Traffic was still 4.5% higher than the pre-pandemic 2019 Thanksgiving eve.
Traffic in 2022 is down in part due to more single-person visits compared to the prior year when more household members visited together. The grocery industry’s traffic was only 87.8% of the daily average traffic for the first three quarters of 2022. When comparing traffic on Thanksgiving eve to the average daily visits for supermarket chains, Kroger was at 82.8% of its daily average while Albertsons was at a much higher 99.5%. Fewer shoppers in the visit to the store has impacted the club channel’s traffic trends the most.
Beef pendulum swings (TSN)
Cattle feeders are seeing a swing their way with prices up $3 last week which left the packers with the largest negative margins in almost six years. The average cattle feeding margin was estimated at $165 per head for the week ended November 26, up $41 from the prior week according to the Sterling Beef Profit Tracker. Beef packer margins were estimated at -$28 per head, the largest loss since January 2017. In comparison, just a month ago the packer margin was $66 per head and a year ago it was $488. Prices have retreated with Choice beef cutout averaging $251 per cwt, down 0.7% week over week and down 7% from a year ago. At the same time costs have been rising with the total feed cost at $597 per head, up 23% from the prior year. The profit pendulum is swinging toward the ranchers while feedlots and packers are seeing a reversal in fortunes after significant moves during the pandemic. Tyson shares are down 24% YTD, reflecting the weaker margin outlook.
