Visits to food retailers decline (KR, WMT)
According to placer.ai visits to grocery stores, dollar stores, and superstores declined YOY in Q4. Albertsons’ traffic decreased by 6.9% while Safeway decreased by 4.6%. Kroger’s traffic decreased by 6.3%. Some of the regional, private grocers outperformed their public peers. Aldi’s traffic increased by 6.8% YOY, HEB increased by 0.9%, and Publix decreased by 4%. All of the superstores and club stores had traffic decreases in Q4. Walmart’s traffic decreased by 3.3% YOY while Target’s traffic fell by 1.7%. Traffic to Sam’s Club decreased by 2.6%, while BJ’s decreased by 4.8%, and Costco decreased by 5.6%. Walmart had an offsetting increase in the length of visit which could have driven a larger basket size. Placer.ai’s traffic measures cell phone traffic so part of the decrease in traffic has been fewer members in the shopping party.
Flu monitor (PRGO)
The CDC estimates that there have been at least 25 million illnesses from the flu this season through the week ended January 20, up one million from the previous week. The flu had surged since Thanksgiving but is declining in most areas despite the Christmas and New Year’s holidays. The flu sometimes has two peaks, but influenza A(H3N2) continues to be the main subtype. The cumulative hospitalization rate was more than 1.6 times higher than the highest cumulative in-season hospitalization rate observed for this week since 2010-11. 13.1% of deaths that occurred during the week were attributed to pneumonia, influenza, or COVID-19, above the 6.8% threshold for an epidemic. Perrigo’s Q4 is mostly set for the cough & cold season as orders are already in and production is maximized, especially for liquid medicines. Most retailers are short of cough & cold medicine. A larger or longer cough & cold season would be seen in Q1 results as retailers reorder more inventory.
River of rain (STKL)
Extreme drought has been completely eliminated in California with the most recent storms. 92% of the state is now in at least “moderate drought.” While small reservoirs in the state have returned to average levels, many larger reservoirs remain low. Lake Mead is at 28% of its capacity. It is the first time since April 2020 that there is no extreme level of drought in the state. One weather forecast estimated the state received 32 trillion gallons of water in the past three weeks. The NOAA Drought Monitor authors caution that it is too early to tell if the rains ended the drought that was several years in the making.
The drought has also improved in many western states, but the Colorado River Basin lags behind the Sierra Nevadas in water recovery. The snowpack in California is at 129% of normal. Parts of the Sierra Nevada Mountains are at nearly three times their average for this time of the year. Colorado’s snowpack is at 128% of normal while parts of Utah are over 200%.
California farmers receive more revenue from specialty crops like fruits, nuts, and vegetables than row crops like corn, rice, and alfalfa. Almonds and grapes are the two most valuable crops in the state. The recent rains will not be a problem for crops like nuts and tomatoes but have impacted winter crops like strawberries and leafy greens. The Central Valley of California comprises only 1% of the farmland in the U.S. but produces a quarter of the country’s food. More than one-third of U.S. vegetables and two-thirds of fruits and nuts are grown in California.
