The climate remained generally unchanged from recent years for most of the Mid-Atlantic region’s supermarket, drug, club, c-store and mass merchants. In fact, while the region remains woefully over-stored and diverse in operating styles with an economy that’s still not quite right, the past 12 months proved that the better operators could adapt, and in some cases prosper, despite the challenging landscape.
Those retailers that proved they could make the necessary market adjustments and moved their sales needles forward included Aldi, Costco, Kroger, Safeway, Trader Joe’s, Wegmans and Weis Markets. It’s no mistake that many of those names have frequented the “winners” list in recent years – they all operate stores that offer customers a distinct separation from most of the rest of their competitors, be it with price, customer service/training, quality “fresh” presentation (and overall merchandising skill) and unique
variety. New to that group this year are Safeway and Weis, two conventional grocers that for years operated as middle-of-the pack, “vanilla” retailers. Both have clearly stepped up their games in the past year, offering a combination of the above listed attributes.
On the other side of the ledger (mainly based on sales) were Ahold USA’s Giant/Landover unit (although there was some improvement from the prior year) and its Martin’s operation in Richmond, which will likely be history shortly, once the FTC-mandated sales of its operation in that market is completed.
Also finding the going continuing to be rough were Shoppers Food & Pharmacy, Farm Fresh (both units of Supervalu), Food Lion (a small improvement in the region, but continuing to lose share in almost every metro market in the region) and Mars Super Markets (which will exit the market next month).
Our annual retail market survey measures sales for the 12-month period ended March 31, 2015 and covers an 88-county territory that ranges from Central Pennsylvania to Southeastern Virginia including key marketing areas Baltimore-Washington, Harrisburg-York-Lancaster and Richmond-Norfolk.
Here’s a look at how the top 10 retailers fared this year. The good news for Giant/Landover is that its “Project Thunder” marketing plan is a solid and relatively well-executed program and division president Gordon Reid is admired and respected by his team. The bad news: there’s still not enough labor in the stores and, despite the market’s best locations, Giant continues to lose market share against competitors
from all channels that have feasted on Giant’s weaknesses for the past decade. For the year, the Landover, MD division produced sales of $5.38 billion, down from $5.52 billion last year with two fewer stores (166 vs. 164).
Ranking second once again was Wal-Mart, which produced estimated extrapolated food and drug sales of $4.46 billion for its 162 units (up from $4.22 billion with 154 stores last year). Same store sales were up only marginally, but the “Behemoth” prospered by expanding its Neighborhood Markets portfolio and adding several new SuperCenters.
Last year, after a decade of declining revenue, Food Lion improved its comparable stores sales performance over the past 12 months. This year, greater improvement could be seen in the more rural areas where it operates. But when it faced more rugged competition (especially from price-driven operators) in the metro areas of Richmond and Norfolk, the soon-to-be unit of Ahold Delhaize struggled.
Overall estimated sales at its 290 stores in the region dropped from $3.23 billion to $3.21 billion for the 12-month period ended March 31, 2016.
Ranking fourth among all food and drug retailers in the region was CVS, which operated 14 net new stores over the past 12 months. With 17 units, the Woonsocket, RI drug chain amassed estimated annual sales of $2.78 billion, compared to $2.67 billion last year. CVS remained the largest drug chain in the region.
After years of mediocrity, Safeway changed its view this year. With a new management team installed, and inspired by Albertsons’ operations-driven style and decentralized structure, Safeway improved its overall sales performance significantly. It also climbed a spot on the market leaderboard and now ranks fifth in the region. Sales at its 123 stores in the Mid-Atlantic were $2.74 billion, an increase of $112 million over the previous year.
Giant/Carlisle (Martin’s) remained Ahold USA’s best performing unit (on a comp-store basis), although its steadily declining performance in Richmond impacted its overall sales. The only non-union division of AUSA now ranks sixth in the market with revenue of $2.70 billion for its 79 units that operate in Pennsylvania, Maryland and Virginia.
It was another challenging year for Shoppers Food & Pharmacy, which now operates 55 stores (one fewer than last year). As much as the intense, diversified competition has impacted Shoppers, corporate parent Supervalu has also contributed to the damage by continuing to undercapitalize the discount merchant and providing little creative support to the Bowie, MD-based regional chain. Sales for the year are estimated at $1.604 billion. Ten years ago, Shoppers operated 63 stores and amassed sales of $1.83 billion.
Target remained in eighth place among all Mid-Atlantic retailers, producing estimated sales of $1.601 billion for its 101 units in the region, one more store than last year when the Minneapolis-based mass merchant amassed estimated revenue of $1.58 billion. Although it is still struggling to find the right “go-to-market” strategy for its food offerings, the culture and the results have improved for the company under relatively new CEO Brian Cornell (ex-Wal-Mart, ex-Safeway). Cornell has vowed to make food a major priority in Target’s future store development.
Based on its dynamic growth in the region over the past 15 years, the most recent 12 months were rather quiet ones for Harris Teeter. The segregated, upscale Kroger unit only opened two new supermarkets (giving it 62 stores in the Mid-Atlantic). Sales are estimated at $1.59 billion, a healthy increase from last year’s estimated revenue of $1.47 billion.
Rounding out the top 10 Mid-Atlantic retail leaders was the largest convenience store chain in the country – 7-Eleven. The c-store operator continued on its path of modest comp-store improvement, while upgrading many of its stores. 7-Eleven operates more stores in the region than any other retailer – 984 –
which produced estimated sales of $1.42 billion in revenue, up from $1.38 billion last year.
Other retailers amassing more than one billion in annual sales included the 107 “International Markets” (these are ethnic and specialty stores – primarily Hispanic and Asian units – that we have lumped together). Stores included in this market study must be larger than 10,000 square feet in size and/or produce annual
sales of at least $5 million). The “International Markets” are one of the fastest growing food retail segments in the entire region – there were three more stores than last year – and we estimate that their collective annual sales are $1.37 billion.
Club store giant Costco operated 29 stores in the region (one more than last year) and garnered estimated annual extrapolated food and drug sales of $1.35 billion; Rite Aid, which continued to rebound nicely for
a second consecutive year, saw sales improve at its 383 stores in the region to an estimated $1.26 billion; and rival Walgreens (which maintained the highest per-store average among all drug chains) accumulated estimated annual sales of $1.12 billion at its 221 stores in the region. Walgreens is awaiting FTC approval
to acquire Rite Aid, in a deal first announced last summer. Two retailers that surpassed the $1 billion market (in the Mid-Atlantic region) for the first time were Wegmans and Weis Markets, which were both mentioned earlier as two of the best performing merchants in the region over the past year. Wegmans opened one new store (Alexandria, VA) during our measuring period and will open four more Mid-Atlantic units in 2016. Estimated sales for the uber-volume merchant is $1.11 billion for its 15 stores.
At Weis Markets, which has agreed to acquire five Baltimore-area Mars units (and is reportedly in the running to buy multiple Food Lion stores in the Ahold Delhaize divestiture process), the key result from upgraded stores, sharper pricing and improved merchandising was producing among the best comp-store increases of any retailer in any channel in the market – $1.03 billion with its same 63 stores – a gain of nearly $46 million over last year.
Other retailers of significance which moved the sales needle forward and/or continued to open new stores included: BJ’s Wholesale Club (29 stores and an extrapolated estimated annual volume of $897.8 million); Kroger (which is the newly crowned market leader in Richmond – 30 stores, estimated volume of $895.9 million); Whole Foods (25 stores, estimated sales of $864.9 million); Trader Joe’s (23 stores, estimated volume of $458.4 million) and Aldi (68 stores and estimated annual revenue of $377.7).
By class of trade, the leaders are: Supermarkets – Giant/Landover (164 stores, $5.38 billion in sales); clubs – Costco (29 stores $1.35 billion in extrapolated sales); mass – Wal-Mart (162 stores; $4.46 billion in extrapolated sales); drug – CVS (517 stores and $2.78 billion in estimated sales); and convenience stores –
7-Eleven (984 stores and an estimated $1.42 billion in revenue). Additionally, the 20 military commissaries rang up annual sales of $735.9 million, continuing the decline of military commissary volume since 2009.
Viewed as a group, the 44 corporate chains in the market operated 4,715 stores and accrued $45.14 billion in annual sales, good for 97.15 percent of the Mid-Atlantic region’s $46.47 billion food and drug market.
Among all independent retailers (those operating between two and 17 stores), Baltimore-based B. Green & Co. became the region’s top indie with 10 stores (including one new unit in Arnold, MD) amassing $186 million in annual sales. Dropping a spot was perennial independent leader Mars Super Markets, which announced last month that it is shutting its doors after 73 years in business. The Baltimore-based family-owned retailer continued to close stores in recent years and its 13 remaining stores produced estimated annual sales of $180.9 million during the past 12 months. Other independent retailers topping the $100 million sales mark included MOM’s Organic Market (12 stores with estimated annual sales of $152.9 million) and Karns Prime & Fancy Foods (eight stores that compiled $132.5 million in annual sales).
As a collective group, the 15 independent retailing organizations in the Mid-Atlantic operated 83 stores which garnered sales of $1.07 billion (marginally down from last year’s number of $110 billion). Independents controlled 2.27 percent of the region’s food and drug revenue.
The biggest stories of the year that have or will affect the Mid-Atlantic region included Ahold’s merger with Delhaize (expected to close in the next six weeks); Walgreens’ proposed acquisition of Rite Aid; the permanent closing of America’s first supermarket chain – A&P – which was f founded 1858; the sale of The Fresh Market to private equity firm Apollo Global Management (where former Food Lion CEO Rick Anicetti
was named chief executive); Supervalu (Shoppers, Farm Fresh) tabbing former C&S executive Mark Gross as its new CEO, replacing the retired Sam Duncan; BJ’s, which is owned by PE firms Leonard Green and CVC Capital Partners, appointing Chris Baldwin as CEO, replacing Laura Sen, who was elevated to non-executive chairman; and the market withdrawal of Mars after 73 years as a staple of the Baltimore market.
And there’s Lidl, which will be even a bigger story starting in 2018 when it opens its first of what will presumably be more than 100 stores from New Jersey to Georgia. During the past year, the German-based discounter established its U.S. headquarters in Arlington, VA, named Brendan Proctor from its Irish division as U. S. chief executive, announced that it will build three distribution centers (Fredericksburg, VA; Alamance County, NC and Elkton, MD) and has acquired property at more than 60 locations where it will build “from the ground up” 35,000 square foot discount stores.