Despite robust reports of online sales during the five-day Thanksgiving holiday period (beginning on Thanksgiving Day on 11/28 and ending on “Cyber Monday” on 12/2), an informal poll of most of the 10 chain and independent supermarket merchants in the Mid-Atlantic revealed that their brick-and-mortar sales were generally flat.
“Sales were not bad,” said an executive of a regional chain based in Pennsylvania, whose summary accurately reflected the feeling of most others we polled (two retailers told us that they were pleased with their Thanksgiving results). “But they were nowhere in line with the record online sales that other non-grocery retailers posted during Thanksgiving. We were kind of predicting what actually happened. Thanksgiving occurred late in the month when budgets are tightest for some consumers. And even though we got a little push from increased vendor promotions, we got no benefit from the price increases of the past few years which have mitigated. In fact, we even saw some deflation which adversely impacted total revenue. With still some uncertainty about the economy and a new president with a bold agenda about to take office, consumers remain cautious. I think most retailers believe next year will continue to be a grind.”
Oh, about those record online numbers. According to Adobe Analytics, consumers spent $10.8 billion online on “Black Friday.” On Thanksgiving Day, online sales were estimated at $6.1 billion, a 9 percent increase from 2023. On “Cyber Monday,” Adobe Analytics said that consumers spent a record $13.3 billion online, a 7.3 percent increase over last year’s record spend. I guess big screen TVs and Peloton bikes replaced the desire to buy an extra bag of stuffing.
However, food retailing over the past decade has become much more complex and challenging than the measure of one holiday period. Overstoring hasn’t abated one bit, and the diversity of food retailing styles present in all markets has led to a significant differential in financial progress and success.
To wit: Walmart and Target. The “Bentonville Behemoth” has been on quite a roll lately. While many other retailers have posted flat or declining comp store revenue, Walmart continues to zoom. In its recently completed 3rd quarter, total sales increased 5.5 percent to $169.6 billion and operating income grew 8.2 percent to $6.7 billion. At its U.S. stores, comp store revenue was up 5.3 percent. Other metrics were just as strong, too. Walmart benefited from attracting more high-end customers and also from its growing e-commerce business and the investment in upgrading its distribution center network where 21 of its 42 DCs are now automated through robotics. With a renewed focus on building and upgrading its physical store network, nobody is better positioned for future success than Walmart.
At Target, the competitor most comparably linked to Walmart, Q3 results couldn’t have been much different (and worse). Total sales were flat, reaching $25.7 billion for the period ended November 2. Comp store revenue declined 1.9 percent while net income dipped to $854 million from $971 million a year ago. While Target CEO Brian Cornell, a steady hand who’s been at the helm of the Minneapolis mass merchant for 10 years, can talk about the impact of the short dockworkers’ strike or the reality of soft demand, the fact remains that Walmart continues to kick Target’s butt. Could it be that Target has lost its “cool” mojo, caused in part by mediocre merchandising and indifferent associates at store level, which used to be two of Tar-jay’s most resilient strengths?
‘Round The Trade
Continuing the conversation about current market conditions and worries retailers have going forward, it was interesting to hear Walmart CEO Doug McMillon address his concerns at the annual Morgan Stanley Global Consumer Conference held in Manhattan earlier this month. McMillon remains uneasy about the creep of food price inflation (which increased 1.8 percent in October) and how it is likely to continue in 2025. The home-grown chief executive noted that he’s again seeing some price increases in areas other than the headline items – eggs, dairy, cocoa – and said he noted that processed food prices may not decrease next year at all. Of course, nobody’s done better than the “Behemoth” over the past four years in convincing consumers that despite significant inflation beginning with the pandemic in 2020, Walmart’s across-the-board pricing remains the strongest in the industry. He also noted that despite strong Thanksgiving sales, hitting the company’s sales mark for Christmas will be a challenge because of a shortened season due to the late Thanksgiving date. However, he added that that he’s confident of achieving his goals due to excellent inventory planning and flow.
A few weeks earlier on CNBC, Walmart CFO John David Rainey addressed the topic of future tariffs on imported goods that have been a cornerstone of incoming President Donald Trump’s policy agenda for years. Rainey said that if tariffs are implemented (ranging from 10 percent to 60 percent on Chinese imports), retail pricing will increase. “We’ve been living under a tariff environment for seven years,” said Rainey on the network’s “Squawk on the Street” show. “Tariffs, though, are inflationary for customers, so we want to work with suppliers and our own private brand assortment to try to bring down prices.”
And then there’s SNAP, another potential target of the incoming Trump administration. Although he has yet to identify how SNAP benefits might be changed, his proposed 2021 budget included reducing food assistance spending by $180 billion budget (which became moot when Joe Biden won the 2020 election). Retailers have already felt the pain of SNAP benefit reductions when President Biden reset benefits to pre-COVID levels in 2022. And if Trump want to snip more, there’s a lot of cutting that can be done when you consider that more than 42 million Americans now receive some form of food assistance compensation, and the SNAP budget was nearly $113 billion in 2023. After all, somebody’s gotta pay for those proposed tax cuts that Trump wants to give to those in the highest tax bracket.
It’s amazing that after nearly 27 months, there’s still no decision on the legality of the Kroger-Albertsons merger. That could change soon though. On December 10 (I’m writing this on December 6), Washington State Superior Court Judge Marshall Ferguson is set to make a ruling in that state’s lawsuit which seeks to quash the merger effort. His original decision was originally expected on November 15. No word on when similar litigation in Colorado will be adjudicated (that trial ended in early October). And I’m clueless on when U.S. District Judge Adrienne Nelson will issue her ruling on the Federal case in Portland, OR where that trial ended in mid-September. I know the wheels of justice travel slowly, but this seems like inertia. The leverage remains with the state and federal governments, because Kroger and Albertsons need to prevail in all three cases in order to move forward. Sure, they can appeal any or all of the verdicts and hope that the new Trump administration relieves FTC chairwoman Lina Khan of her duties, but how much more time and money (legal fees now of more than $1 billion) do both companies want to spend waiting for momentum to possibly shift their way? Tick, tick, tick.
There’s some more recent news affecting both Kroger and Albertsons. A class-action suit in Denver has been filed against both retailers, claiming that the two chains agreed to “no poach” agreements with each other during a 2022 strike. While Kroger and Albertsons have denied that such agreements ever occurred, UCFW Local 7 is seeking to recover lost or unsecured wages during the walkout and Colorado Attorney General Phil Weiser (the same man who filed suit against both companies in the merger attempt), is also seeking $1 million in civil penalties from the two chains. I’m not sure this qualifies as poaching, but Stuart Aitken, chief merchandising and marketing officer at Kroger, will be leaving the Cincinnati chain at the end of the year to become CEO of Circana, the consumer behavior and data syndication firm. The company used to be known as the owners of IRI and The NPD before rebranding itself in early 2023. Aitken has done an excellent job at Kroger since he became chief merchant in 2019 and his appointment to lead a prestigious firm like Circana is a great opportunity for him. He will replace the retiring Kirk Perry on January 1. To fill Aitken’s former post, Kroger has named Mary Ellen Adcock to supervise all aspects of merch and marketing. She’s been with Kroger since 1999 and most recently served as senior VP-operations, a role that encompasses food safety, customer and associate experience and asset protection.
UNFI (aka “the gang that can’t shoot straight”), is shutting its Lincoln, RI field office and laying off 121 administrative associates. That follows another job riffing in October that impacted about 300 administrative staffers whose jobs were outsourced to a third-party firm. At the warehouse level things aren’t that spiffy either. During the past two years, Teamsters have organized about a half a dozen UNFI distribution centers adding about 2,000 union members to UNFI’s payroll. You might want to ask UNFI’s independent retailers the same question. Maybe the facts and the truth are a bit elusive, but didn’t I read that in UNFI’s most recently completed quarter (Q4) its net loss was $37 million (negative $112 million for the full fiscal), yet according to CEO Sandy Douglas’ appraisal after those financials were released in October, “We delivered fourth quarter results that drove fiscal 2024 performance to the upper end of our previously provided outlook.” Douglas is another creative chief executive who has mastered the craft of “doublespeak.”
UNFI’s problems are significant and aren’t improving in a measurable way (at least not yet), but they would win food industry company of the year when compared to Boar’s Head. The damaged Sarasota, FL-based deli processor with some bad liverwurst issues, announced that it has appointed Frank Yiannis as its interim chief safety advisor. Yiannis was a former deputy commissioner of the FDA and will be responsible for helping to ensure leading standards of food safety and quality across the organization. He’ll also lead the recently formed “Boar’s Head Food Safety Advisory Council” which includes other food safety “notables” as David Acheson, Mindy Brashears and Martin Wiedmann. After the reports of disgusting sanitary conditions for years at its Jarratt, VA processing facility (now closed) emerged, you might think a more proactive approach for a once admired industry leader would have been standard operating procedure. Sadly, that only happens when you get caught. We wish Yiannas well, but this really sounds like a textbook case of “TLTL” (too little, too late).
Local Notes
I’ve got bittersweet feelings about Food Lion president Meg Ham’s upcoming retirement on May 2. She’s a great leader whose tireless work ethic and excellent people skills, and she’s extremely admired by the company’s associates, its vendors, her bosses at Ahold Delhaize and her industry peers. She has spent her entire 35-year grocery career with one organization (Delhaize America/Ahold Delhaize USA – Hannaford, Botton Dollar and Food Lion) and when she was named president of the Salisbury, NC-based brand in 2014, she seized the opportunity to become one of the most successful leaders in the retail food industry. Meg and her team have totally turned around the organization, which had been kind of a directionless semi-discounter stuck in the muddy middle of mediocrity. She energized her team, used the capital she was given wisely, remodeling hundreds of stores and helping create a marketing plan that made the chain relevant again. She encouraged participation in local charities and community efforts and proved that with street smarts and a humanitarian approach to the business, success could be achieved. From a measurement perspective, nothing speaks louder than Food Lion’s 48 consecutive quarters of comp store sales growth. More importantly, Meg Ham is one of the nicest people in the grocery biz. We wish her well in all future endeavors. Her successor is expected to be named by the end of the year.
Utz Brands opened a new 650,000 square foot distribution center earlier this month near its corporate headquarters in Hanover, PA. The new depot, appropriately called the Rice Distribution Center, covers the equivalent of 11 football fields and will allow the publicly-traded snack food manufacturer to consolidate much of diversified line under one roof. Especially rewarding was seeing Mike Rice (former CEO and chairman) and his wonderful wife Jane, at the dedication. You won’t find two nicer, more philanthropic people than the Rices, who have given so much back to the community over the past 50 years.
Sprouts, which has been on a quite a growth spurt in the Mid-Atlantic over the past 18 months, cut the ribbon on its newest store in Middletown, DE on December 6, its second store in the First State.
How about Mark Clouse? The Campbell’s CEO, who’s done a great job of righting the once wobbly red & white ship since he was tapped for the top job in 2019, abruptly resigned earlier this month to take on another executive post – president of the Washington Commanders football team. At first blush, the move seems stunning, but there’s some connective tissue here. Clouse, a 1990 West Point graduate, played on Army’s varsity basketball team and has had a relationship with the Commanders’ new ownership group – Harris Blitzer Sports & Entertainment – which also owns the Philadelphia 76ers and the New Jersey Devils. Clouse ought to be praised and envied – who wouldn’t want to lead a rejuvenated sports organization in the prime of his life after a great career at Campbells, Kraft, Mondelēz and Pinnacle Foods? Mick Beekhuizen, most recently president of the Camden, NJ-based manufacturer’s $5.3 billion meals and beverages division, now becomes Campbell’s 15th CEO in its 155-year history. He joined the company five years ago as chief financial officer. He also served as CFO of Chobani from 2016-2019.
We have some deaths to report this month. Passing away was Jim Abrahams, 80, the comedy producer who, along with brothers David and Jerry Zucker, wrote such modern comedy classics as “Airplane” (1980) and the three “Naked Gun” films (1988-1984). Clearly taking a page out of Mel Brooks’ comedy style, Abrahams and the Zuckers were able to develop semi-realistic scripts and blend them into 90 minutes of hilarity that held their audience’s captive. Such lines in “Airplane” as “Looks like I picked the wrong week to stop sniffing glue” – Lloyd Bridges; and Dr. Rumack (Leslie Nielsen): “Can you fly this plane and land it?” Striker (Robert Hays): “Surely, you can’t be serious.” Rumack: “I am serious. And don’t call me Shirley.” Or this classic from “ The Naked Gun: Files From the Police Squad!” Sgt. Ed Hocken (George Kennedy – after bad guy Vincent Ludwig, played by Ricardo Montalban, has been shot with a cuff link, run over by a bus, flattened by a steamroller and trampled by the USC marching band): “Oh, Frank! It’s horrible. That’s so horrible!” Lt. Frank Drebin (Leslie Nielsen). “I know, Ed.” Ed: “My father went the same way.” In describing his style of comedy, Abrahams told The Philadelphia Inquirer, “We like to think of our humor as innocent, there’s lots of innuendo, but its childlike. I’d take a 7-year-old to see that. The toilet humor – they’d probably like that the best.” It’s an apt description of the works of a very funny man.
Alice Brock has also died. That name might stump you, but Alice Brock is the “Alice” behind the famous Arlo Guthrie 18-minute talking blues song “Alice’s Restaurant” (1967). The famous anti-war song partially centers around The Back Room, a restaurant in Stockbridge, MA, which Alice and Ray Brock owned and where Guthrie (son of folk singing icon Woody Guthrie) hoped to enjoy a Thanksgiving meal in 1965. The song meanders into multiple subjects including garbage dumping, “Officer Obie” and draft board classification. The real Alice Brock was in fact a painter and author who divorced her husband and closed The Back Room in 1967. In the early 1970s, she moved to Cape Cod and lived the rest of her life in Provincetown, MA. Ironically, her death at age 83, occurred a week before Thanksgiving.
Also leaving us was Reg Murphy, former editor and publisher of the Atlanta Constitution, San Francisco Examiner and Baltimore Sun, who made headlines in 1974 when he was abducted for two days and was released after $700,000 ransom was paid to his kidnapper, who was captured six hours later. I got to know Reg pretty well when he was named publisher of the Sunpapers in 1981 and took an interest in the food business, which was a significant part of the paper’s advertising base (he was also a raconteur of sorts). I recall several long lunches with Reg where he happily (and actively) shared his vast knowledge of wine with me. I do recall one such eating and drinking adventure when I asked him what he thought of the fledgling Maryland wine industry and their offerings. “The local wines…they’re not bad – if you like battery acid.”
