Below is a brief excerpt from a complementary research note written by our Consumer Staples analysts Howard Penney and Daniel Biolsi. We are pleased to announce our new Sector Pro Product Consumables Pro. Click HERE to learn more.
The food manufacturing PPI spread to CPI for food at home is at the widest margin in some five years, as seen in the chart below. Kroger saw some of its best gross margin gains during that period.
Retail prices for food at home (a proxy for supermarket inflation) were up 4.1% YOY in September, decelerating from 4.6% in August. The CPI for fruits and vegetables was up 3.0% in September from 2.7% in August.
The index for meats, poultry, fish, and eggs fell 0.4% in September, its third consecutive monthly decline.
The CPI for food away from home accelerated to 3.8% in September from 3.5% in August.
The spread between the CPI for food at home to food away from home narrowed to 30bps in September, the narrowest differential since the pandemic began in March, as seen in the following chart.
We continue to be constructive on the grocery sector. Grocery Outlet, Sprouts Farmers Market, and Albertsons are Best Idea Longs. We are above consensus expectations on both sales and gross margins.