The shares of grocery store chain Safeway Inc. (SWY), first discussed here on February 20, 2009, at a price of $20.09, have pulled backed toward $20 after testing $24 last autumn, but I still like the shares at this juncture. Here's why:

Intense competition will pressure grocery prices, hurting Safeway's revenue, but the view from here argues the worst is over concerning store traffic in California, a major market for SWY.

Meanwhile, margins should increase slightly in 2011, aided by an improved product mix.

Continue reading Has Safeway's Pullback Created an Opportunity?

Has Safeway's Pullback Created an Opportunity? originally appeared on BloggingStocks on Thu, 27 Jan 2011 16:30:00 EST. Please see our terms for use of feeds.

Continue reading Walgreen to Sell Fresh Foods and Prepared Meals

Walgreen to Sell Fresh Foods and Prepared Meals originally appeared on BloggingStocks on Mon, 08 Feb 2010 14:30:00 EST. Please see our terms for use of feeds.

Food stamps are pumping up revenue at retailers across the country. Costco (COST), Wal-Mart (WMT) and others are seeing rushes an hour before funds are credited to electronic benefits transfer cards. Wal-Mart's CFO, Tom Schoewe, has noted the trend, telling Reuters, "Once the clock strikes midnight [on the last day of the month] and EBT cards are charged, you can see our results start to tick up."

Spending via EBT is not only increasing, it generally happens quickly. JPMorgan (JPM), which runs EBT programs for more than 20 states, reports that buyers run through 85% of food stamp funds within the first three days of their availability.

Continue reading Retailers See Market Opportunities Below the Poverty Line

Retailers See Market Opportunities Below the Poverty Line originally appeared on BloggingStocks on Mon, 21 Dec 2009 08:20:00 EST. Please see our terms for use of feeds.

Continue reading Target to start stocking fresh food in its stores to revive sales

Target to start stocking fresh food in its stores to revive sales originally appeared on BloggingStocks on Wed, 13 May 2009 18:00:00 EST. Please see our terms for use of feeds.

Call me sentimental, but there are many things I miss about my old stomping grounds of Cincinnati, Ohio. The trendy but well-run restaurants lining the Hyde Park neighborhood. Joseph-Beth, the best bookstore I've ever entered. Certain karaoke bars. Cincinnati chili, of course.

And Kroger. Yes, Kroger Co. (NYSE: KR), headquartered in the Queen City, is the top grocery chain in the country, but has no locations in Chicago. I miss its store-brand crackers, its salad bar, and occasionally, even its commercials.

Continue reading Kroger earnings edge higher in the fourth quarter

Kroger earnings edge higher in the fourth quarter originally appeared on BloggingStocks on Tue, 10 Mar 2009 11:15:00 EST. Please see our terms for use of feeds.

Is it really possible to make money in this market?

Surprisingly, the answer is yes. Despite the market being down more than 10% at the start of this year, there have been a number of winners that have done quite well.

As I have said many times, the current environment is very unique. Nobody has ever seen anything like this. To survive, one must throw out the old playbook and adapt to the new reality.

Continue reading Whole Foods takes off

Whole Foods takes off originally appeared on BloggingStocks on Fri, 20 Feb 2009 17:30:00 EST. Please see our terms for use of feeds.

Time was, we all felt rich. And we all felt entitled to spend money on ridiculous items at chocolate stores like Godiva, coffee shops like Starbucks (NYSE: SBUX) and, yes, upscale supermarkets like Whole Foods (NASDAQ:WFMI).

Those days are long gone, and even today's reduced expectations for this extremely well-run company are possibly too optimistic. EPS for 2008 were down 20% and company shares, floating in the $7-$10 range, are well off of 52-week highs.

Continue reading Whole Foods Markets: Victim of a structural shift

Whole Foods Markets: Victim of a structural shift originally appeared on BloggingStocks on Wed, 18 Feb 2009 15:03:00 EST. Please see our terms for use of feeds.

• Stick to a shopping list and shun 'impulse' buys: Wang says this is perhaps the biggest money saver. "From the moment you walk in the store, grocery stores are designed to get you to buy more items than you plan to buy," Wang said. "You are bombarded with stimuli that tempts you to spend, and it works, so stick to your list. If it's not on the list, ask yourself if you need the item, or are buying merely on impulse."

• Coupon card: Most grocery chains offer a coupon card that automatically deducts for items on sale. Sign up for one and use it. But evaluate the coupons some cash registers dispense with a sales receipt. "Ask yourself if you need it or if it is on your list," Wang said.
  

• Evaluate buying in bulk. "Buying larger sizes usually lowers cost per food purchased but ask yourself if you will need and use the item," Wang said. "If the item is not your list, don't buy it, as you could be succumbing to an impulse buy, which will drive your food bill up."

Continue reading As food prices rise 10% in a year, a few tips to lower your grocery bill

As food prices rise 10% in a year, a few tips to lower your grocery bill originally appeared on BloggingStocks on Fri, 03 Oct 2008 16:55:00 EST. Please see our terms for use of feeds.

Continue reading Look for smaller supermarkets and more 'local' markets ahead

Look for smaller supermarkets and more 'local' markets ahead originally appeared on BloggingStocks on Wed, 10 Sep 2008 14:58:00 EST. Please see our terms for use of feeds.

A&P (GAP) grocery stores on path to profitability originally appeared on BloggingStocks on Wed, 23 Jul 2008 13:48:00 EST. Please see our terms for use of feeds.

Mammoth grocery-store chain The Kroger Co. (NYSE: KR) recently posted very solid third quarter (3Q) results. Total sales increased 10% to $16 billion for the quarter. This marks the 10th quarter in a row that Kroger has posted sales increases of at least 3%. Year-to-date (YTD) total sales increased 7.6% to $53 billion. 3Q net earnings were equally impressive, $253.8 million or $0.37 per diluted share. This represents a $39 million improvement over 3Q 2006 net earnings. Grocery stores have notoriously low profit margins, so it speaks well of Kroger management that Kroger earned these good numbers while increasing profit margins slightly, expanding capital investment to $555 million, growing its own line of organic goods, while simultaneously decreasing general administrative expenses.

YTD net earnings stand at $857.6 million or $1.22 per diluted share, a 20% increase over 2006 results. Given the strong comparable stores sales growth, Kroger CEO David Dillon has raised FY 2007 guidance to reflect 5% overall sales growth, which will exceed the previous guidance figure of $1.67 per diluted share. Kroger repurchased 16.5 million shares in 3Q 2007, for a total of $442 million, with $200 million leftover for 4Q buybacks.

Investors were perhaps hoping for even better news from Kroger. The stock lost over 8% of its value in the previous week, and closed at $25.88 on 19 December, down $0.29.

Kroger increases guidance originally appeared on BloggingStocks on Thu, 20 Dec 2007 17:25:00 EST. Please see our terms for use of feeds.

Safeway is a safe harbor originally appeared on BloggingStocks on Fri, 14 Dec 2007 18:57:00 EST. Please see our terms for use of feeds.

Grocery store chain Winn Dixie Stores Inc. (NASDAQ: WINN) is emerging from bankruptcy with remodeled stores, better shopping conditions and product mix, improved customer service, and strict attention to cost management. Same store sales for 1Q 2008 are essentially flat, but the company posted a huge reduction in net loss, $800,000, down from $24.6 million net loss one year ago, a $23.8 million improvement. Net income for 1Q 2008 was $1.6 billion, up $11 million. Gross profits increased $22 million to $446.4 million, and the 30 remodeled stores have registered increased foot traffic. Winn Dixie plans to remodel a total of 75 stores in 2008.

Winn Dixie is also focusing on cost control as it emerges from Chapter 11. Administrative and promotional expenses have been slashed, as have costs at the company's distribution facilities. Winn Dixie still faces significant capital expenditures for store remodeling, at least $140 million. Legal costs to emerge from bankruptcy will run in the $5 million to $7 million range.

Even in the midst of a difficult and complex multi-year turnaround, Winn Dixie has acted to gain the goodwill of consumers and investors. Winn Dixie remodeled and reopened one of the first full-service grocery stores in lower east side New Orleans to help the city rebuild. The company is on the front lines in the fight against breast cancer, providing educational materials in its stores and sponsoring free mammograms for women without access to health care services.

The stock currently trades around $19. Given the success of the company's turnaround thus far, this is a stock for bargain hunters to investigate.

Winn Dixie (WINN) emerging from bankruptcy originally appeared on BloggingStocks on Tue, 20 Nov 2007 15:50:00 EST. Please see our terms for use of feeds.

A piece in the Wall Street Journal (subscription required) looks at how Wal-Mart's (NYSE: WMT) decision to cut back on its supercenter expansion will effect the revenues and earnings of grocery stores as well as companies that supply grocery stores.

Some suggest that Wal-Mart's biggest suppliers, companies like Kellogg (NYSE: K) and General Mills (NYSE: GIS), could be hurt by the cutback in expansion. But it seems like it could just as easily swing the other way: Will people really consume less cereal because there isn't a new Wal-Mart in town? I doubt it, and suppliers could benefit from the greater pricing power that they enjoy with smaller companies as opposed to Wal-Mart, which wants to buy everything a little (and sometimes a lot) cheaper than everyone else.

I'm a little bit puzzled at how negatively analysts are seeing this news as being for the suppliers. While it's true that Wal-Mart makes up a huge portion of the business of many food companies, the sales that were going to go to Wal-Mart will now go to its competitors, who will be able to move more product without a new competitor in town. And, with few exceptions, sales to companies like Kroger will probably carry higher gross margins than sales to the world's biggest retailer.

The major grocery chains are, of course, jumping for joy at this news. Trying to compete with Wal-Mart, especially on price, is extremely difficult for every one of its competitors, and grocery stores normally lose a massive amount of market share when a new Wal-Mart supercenter moves in.

The only loser here may be the consumer, who will have to pay more for groceries.

How will Wal-Mart's slowing growth affect grocers? originally appeared on BloggingStocks on Wed, 06 Jun 2007 20:20:00 EST. Please see our terms for use of feeds.

The best way to beat Wal-Mart (NYSE: WMT) is to avoid trying to copy it, and some grocery stores are finally figuring that out. After years of trying to compete with the big box on price, which is impossible, they're now trying to offer consumers what Wal-Mart can't offer: A less hectic shopping environment, better service, and a generally more pleasant experience. And they're finding out that many, many consumers are willing to pay a a little extra for that.

Grocers are finding that they can beat Wal-Mart with services like prepared foods, and consumers like that stores like Kroger (NYSE: KR) and Safeway (NYSE: SWY) are rarely out of stock on items, a common problem at Wal-Mart supercenters. Some consumers are also realizing that by following the weekly specials, they can sometimes save money by shopping at traditional grocery stores.

The moral of the story is clear: Most mom and pop stores, and even huge chains like Kroger, will never really be able to compete with Wal-Mart on price. So why bother trying? When a Wal-Mart opens up nearby, they will lose some customers. But there is an ample market for quality service and a good shopping experience, the two things that Wal-Mart really can't provide.

When looking at ways to compete, companies have to ask themselves "What can I do that my competitor can't?" After finally realizing that they won't win in a price-war with Wal-Mart, they've given up that battle. And that just might be the first step toward victory.

How to beat Wal-Mart: Don't try to copy it originally appeared on BloggingStocks on Wed, 06 Jun 2007 19:30:00 EST. Please see our terms for use of feeds.

Who says you can't save the planet and be stylish?

Last month, the city of San Francisco banned the use of nonbiodegradable plastic grocery bags, and other metropolitan areas are considering similar proposals. Just in time, designers Hermes and Stella McCartney have gotten into the reusable grocery-tote business, created for shoppers who need to show off their haute couture while they dash out for Romaine and instant oatmeal. The Hermes version will hit U.S. stores this summer. Made of "hand-wrought" silk, it carries a price tag of $960 (roughly equal to the amount I spend on groceries over the course of six months). McCartney's offering is a bargain, at just $495 for organic canvas.

A fan of committing to help the environment without the highway robbery? For 60 bucks, you can get a FEED Bag, the proceeds from which provide enough nourishment for one child for an entire school year (where, exactly, do the profits for the Hermes and McCartney bags wind up?). Endorsed by first niece Lauren Bush, the FEED Bag craze seems to be sweeping the nation; there's a four-to-six week wait for the canvas tote on Amazon.com (NASDAQ: AMZN).

For the bargain price of $1.99 each, you can pick up a reusable canvas tote or two at Trader Joe's. Next time I'm at my favorite natural-foods chain, I must remember to do so. I already have a great one, five years old and solid as ever, from The Strand. And it didn't even cost me a week's paycheck.

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.

Who spends $960 on a reusable shopping bag? originally appeared on BloggingStocks on Tue, 08 May 2007 13:44:00 EST. Please see our terms for use of feeds.

This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and watch out for more Battle of the Brands posts.

There exists, somewhere between the fearsome mass-ness of the mainstream grocery store and the high-pitched good works of the coop, farmer's market, or CSA, a world in which low prices are valued slightly higher than locality of the source but, more than anything, the products must be good. Fair-trade, organic, without trans-fatty acids, with fewer artificial colorings or preservatives or Disney characters than all the other products.

It's the world of the natural foods market. A world dominated by two very dissimilar and yet, from a target market perspective, nearly identical competitors: Whole Foods Market, Inc. (NASDAQ: WFMI) and Trader Joe's, a unit of German private company Aldi Group.

Walking into a store -- or simply gazing at one from across the street -- you have a very different picture. On one corner, in the midst of a posh shopping area or trendy boutique-spattered neighborhood, Whole Foods, with its glistening crates of fresh produce, honeydew melons, purple potatoes, and blood oranges piled high in an abundance of exoticism. The doors open smoothly, the merchandise is displayed beautifully, and a high-ceilinged eating area is often overflowing with customers enjoying their deli purchases. Customers enter slowly, looking around as if discovering a stunning architectural landmark for the first time.

Continue reading Whole Foods vs. Trader Joe's: Battle of the Brands

Whole Foods vs. Trader Joe's: Battle of the Brands originally appeared on BloggingStocks on Wed, 11 Apr 2007 14:31:00 EST. Please see our terms for use of feeds.

Grocery stores are no strangers to leveraged buyouts. Back in the roaring 1980s, they were a juicy target for private equity firms.

Well, according to a piece in the Wall Street Journal, we may see a comeback in activity in the sector. The paper says that Kroger (NYSE: KR) is a buyout target.

I can see why. In light of the competition - such as from Wal-Mart Stores, Inc.(NYSE: WMT) - there is lots of pressure on traditional grocery stores to make changes. Also, valuations are reasonable.

Kroger certainly has a big footprint. There are 2,468 stores in 31 states (with more than two dozen brands such as Ralph's and Fred Meyer). The company is either ranked #1 or #2 in 38 of its 44 biggest markets.

Lately, Kroger's stock price has been rallying and sports a market cap of $20 billion. If you throw in the long term debt, the company has an enterprise value of $27 billion. That means the company is selling at about 8X EBITDA, which is at a level where a deal can get done.

Who are the buyers? None were mentioned. Although, it looks like Goldman Sachs (NYSE: GS) is the financial advisor for Kroger.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Kroger in play? originally appeared on BloggingStocks on Fri, 06 Apr 2007 11:05:00 EST. Please see our terms for use of feeds.

Kohlberg Kravis Roberts seems to be popping up everywhere lately. On the heels of the group's $44 billion dollar offer for TXU, KKR is now expressing interest [subscription required] in J Sainsbury, Great Britain's third largest supermarket chain. The firms are attracted by the stable cash flows and frequently large property holdings that these companies offer. Here is a list of some of the top American grocery chains. Which of these, if any, do you think will be interesting to private equity firms?

Safeway Inc. (NYSE:SWY): Operates roughly 1,775 stores in California, Oregon, Washington, Alaska, Colorado, Arizona, Texas, the Chicago metropolitan area and the Mid-Atlantic region. The company boasts a solid return on equity and a P/E of 21.

Kroger Co. (NYSE:KR): This company fought off a KKR-led buyout attempt in 1988 with a $40 per share dividend. Is it the 1980s again? Will KKR return with a vengeance? This could be the stuff movies are made of!

SuperValu Inc. (NYSE:SVU): Will this look like a super value to a private equity firm? The company has a heavier debt load and a lower return on equity than Safeway and Kroger, but perhaps someone will see an opportunity for improvement.

Grocery stores are a boring business to most investors. It is exactly that predictability that may make them attractive buyout candidates.

Sales at the grocery store attract private equity originally appeared on BloggingStocks on Mon, 26 Feb 2007 14:43:00 EST. Please see our terms for use of feeds.

Whole Foods Market, Inc. (NASDAQ:WFMI) was reinstated as outperform on 11-10-06. This stock is very attractive to me based on the things I've read about it. If the analyst's assertions are true, and WFMI's stock lost value based on a simple change in management focus from business operations to maintaining share price, then what should be happening in timely fashion will be a moderated climb back up to WFMI's fair market value. Salim Haji, an excellent writer over at The Motley Fool, offers the opinion that this stock has an intrinsic value in the $50 to $60 range.

With additional consideration of the fact that WFMI is undertaking a strategic stock buy back program, if I was looking for some fun places to play with some funds, this would be one of them. It is my opinion that this stock deserves some close attention right now. I think it is headed back up. One other thing I take into consideration about this situation is the possibility that Wal-Mart is going to fall flat on its corporate face with its "organic" food roll out. If that happens, (and I think it will), then Whole Foods Market will add even a bit more sparkle to my eye!

You can learn more about organic foods at About Organics.

Whole Foods, poised for better things originally appeared on BloggingStocks on Sun, 12 Nov 2006 20:12:00 EST. Please see our terms for use of feeds.