Canadian beer (TAP)
Total beer volumes in Canada decreased 5.4% YOY in October, the fifth consecutive month of decline. Domestic beer volumes decreased by 5.2%, improving slightly from the 7.2% decline in September. Imported beer volumes decreased by 6.6%, improving from -18% for the past two months. The government in Ontario will soon announce the changes to the province’s beer laws it has been considering. The changes most likely will end the near monopoly on beer sales that The Beer Store enjoys. Molson Coors owns 48% of The Beer Store.
Gross margins vs. sales (IMKTA)
Ingles Markets reported a 9% sales increase in FQ4. The quarter had 14 weeks compared to 13 weeks in the prior year. Adjusting for the extra week implies a ~1.6% increase, a sequential deceleration from 3.8%. Gross margins contracted by 180bps due to inflation and supply chain costs. Gross margin pressure worsened from 50bps of contraction in FQ3. Inventories were 7.9% larger than the prior year. Operating and administrative expenses deleveraged by 50bps. Diluted EPS fell 25% YOY. Ingles Markets operates 198 supermarkets in six southeastern states. Supermarkets are seeing operating margins contract as passing on price increases becomes more difficult. The grocers will have to decide to invest in sales or maintain prices and see sales decline.
Taking share In Groceries (WMT, GO)
Dollar Tree’s (covered by Brian McGough) consumable comp grew 11.1% with volume growth of 6%. According to Nielsen, the company gained 30bps of market share. Family Dollar’s consumable comp increased 6.2%, and consumables' penetration reached an all-time high of 82%. The company said sales slowed substantially later in the quarter. Management said, “Lower-income customers at Family Dollar have been especially pressured by reductions in government SNAP benefits. Nationwide, third quarter SNAP benefits were down 23% on a year-over-year basis, which was much more than the 5% reduction in quarter one or the 16% reduction in quarter two.” Regarding Thanksgiving grocery promotions, management said, “We saw a lot of incredibly well-priced grocery items this year coming out of the big box and the grocery channel.” Dollar Tree’s consumable growth outpaced the broader sector, while Family Dollar’s consumable growth was only matched by Walmart and Grocery Outlet. Value food retailers, Walmart, and club stores are gaining share at the expense of supermarkets.
