Online grocery spend (WMT)
The share of adults who shopped for groceries in a store decreased six percentage points YOY in May as seen in the chart below. The percentage who said they shopped in a store fell to 77% in May from 80% in April and 83% in January. Gen Z and Millennials were the least likely to say they shopped in the store. Delivery increased from 18% in January to 21% in May. Pickup increased from 12% in January to 14% in May. Pickup in the store increased from 8% in January to 11% in May.
The Brick Meets Click survey reported a 3.4% YOY drop in digital grocery spend in May. The decline was driven by fewer households buying groceries online as well as a decline in the average number of orders placed by active shoppers. Digital grocery spend is contracting with modest pressure on the consumer’s budgets. Additional steps to improve the profitability of digital would likely result in further declines. Walmart’s e-commerce sales grew 27% in Q1 as it continues to take share in online grocery sales.
Gasoline prices (CASY, WMT)
We are now lapping the peak gasoline prices from last summer’s surge. The national average gasoline price has fallen 28% YOY. The national average diesel price has fallen 33% YOY. The average gasoline price in California is 24% lower YOY. Gasoline had a second price surge in September and October last year that the rest of the country did not experience.
Higher gasoline prices in the summer of 2022 were generally not noted as a meaningful headwind for grocery spending. Food service and drinking places retail sales saw a marked deceleration in June and July on a one and two year basis. Companies like Casey’s General Stores and Walmart also noted an improvement when gasoline prices fell. Lower diesel prices are also a gross margin tailwind as most freight carriers have diesel surcharges.
Amazon making waves in grocery again (KR)
The London Times reported that there are rumors Amazon and other tech companies are considering making a bid for Ocado. As of January 28, Kroger valued its investment in Ocado at $401M. In 2022, Kroger recorded a $586M unrealized loss on its investment after recording an $821M loss in 2021. After initially owning a 1% stake in Ocado, Kroger purchased an additional 5% of the company in 2018 when Ocado agreed to an exclusive partnership with Kroger in the U.S. Kroger agreed to open 20 Ocado fulfillment centers in the U.S., but only eight are currently operational. Kroger has ordered another 16. Amazon has made waves in grocery before. Most of Ocado’s agreements allow the retailers to terminate their agreements if Ocado were under the control of a competitor. Kroger’s agreement with Ocado was signed to help it compete digitally against Amazon.
