Until the past decade, the food retailer “circle of life” seemed fairly logical. You could readily spot the winners, losers, those in the middle of the pack, and those newer entries that were making a mark. Once the battles were fought, the losers were squeezed into submission and almost always sought market withdrawal.
However, in recent years, the prediction game has become more ambiguous. The evaluation process of identifying winners, losers and emerging players remains pretty much the same; it’s the withdrawal rate (or lack thereof) that’s changed.
Based on sales and earnings results alone, it didn’t take much intuition to come to the conclusion that mega-chains retailers like A&P and Grand Union would fall. Moreover, store visits alone readily indicated that former emerging entries like Tesco’s Fresh & Easy, Delhaize America’s Bottom Line (and Bloom) or France-inspired Leedmark produced significant lower revenue than projected and ultimately would become nothing more than footnotes in history.
What’s changed over the past 10 years is that even the losers tend to hang on longer, primarily because the companies that own these merchants have deep pockets and can survive longer than their predecessors of the past.
But at some point you’ve got to cut your losses and that’s now happening with unproductive retailers like Shoppers, whose parent firm UNFI continues to close stores; Lidl, which has had five CEOs in the U.S. over the past 11 years; and Grocery Outlet, which just announced it would close 24 stores in the Mid-Atlantic region.
I’ve written my pieces about the poor leadership at UNFI and Lidl contributing to their problems, but Grocery Outlet’s path to the bottom (in the Mid-Atlantic) is worth a separate entry.
The company began in 1946 and over the past 80 years has grown rapidly utilizing a mostly franchise-driven model that features many closeout or overstocked items. Since its inception, it has been family-owned, private-equity controlled and since 2019, been publicly-traded. In 2012, it acquired Amelia’s, a Lancaster, PA-area discounter that operated 16 stores in Central Pennsylvania. However, it’s really been over the past five years that Emeryville, CA-based discounter began rapidly expanding in this region.
More than 45 new stores were added in the Mid-Atlantic and states like Maryland, Virginia, New Jersey, Delaware, Connecticut and Ohio saw their first Grocery Outlet units.
While current CEO Jason Potter (who arrived in 2025) correctly acknowledged the company’s expansion was too rapid, there were other troublesome indicators that should have been obvious.
It’s clear that Grocery Outlet’s model works on the West Coast where its go-to-market strategy is established and about 90 percent of its stores are located. However, with many of its new stores, Grocery Outlet was literally the “last retailer in.” It’s always tougher to build sales and share when you’re the newest guy on the block. Especially when other discounters often already inhabit your “block” – Walmart and Aldi in particular – and operate better than you do.
Then there’s the core model itself: the fluctuating nature of many of its products makes it harder for the consumer to embrace brand loyalty. And unlike other small-box discounters, Grocery Outlet’s franchisee ownership produced significant inconsistency – some owners had never operated a grocery store, other owners had retail experience but in other markets, and some had direct food retail experience but not necessarily as owners.
And as was the case with the other poorly performing retailers (and you can include Save A Lot in that list), management turnover has been a problem. Whatever happened to RJ Sheedy, Pamela Burke and Heather Mayo?
Potter’s got a mess on his hands, not just in the Mid-Atlantic. Grocery Outlet’s Q4 metrics were horrible: comp store sales were down 0.8 percent; its net loss was a whopping $218.2 million in the 13-week period; and its stock price took a big hit. As we went to press on March 7, Grocery Outlet’s stock was trading at just above $6 per share; last August, that price per share number was $18.43.
‘Round The Trade
While the vibe around Kroger lately has been good considering its most recent quarterly financial report and the selection of Greg Foran as its new CEO, there was recently a bit more sobering news to report. Federal judge Adrienne Nelson (who presided over the failed merger court case in 2024) has ruled that eight states and the District of Columbia, who also sued to stop the deal, are entitled to collect attorneys’ fees from both retailers. Each state – Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon, Wyoming as well as Washington DC – must provide details to the court of how much they spent by the end of March. While there’s no estimate on what that collective final tally will be, the two retailers were ordered to pay $28.3 million to the state of Washington in a separate case. And we’re not even talking about the billion dollar plus attorneys’ fees each merchant has accrued from its own attorneys. Ouch!…also paying some extracurricular fees is Walmart, which will will dole out $100 million to settle an FTC complaint that charged the “Behemoth” of falsely claiming that all of its customer tips would actually go to delivery drivers. That wasn’t the case as tips were split, creating a deceptive practice, the commission alleged.
We’ve got earnings to report. From the club store channel, both Costco and BJ’s continue to produce very strong numbers despite overall consumer economic challenges. At Issaquah, WA-based Costco, the national club store leader, Q2 metrics were stellar. Net sales increased 9.1 percent to $2.1 billion for the 12-week period ended February 15. Comp store revenue (ex-fuel) grew an impressive 5.9 percent in the U.S.
During the company’s conference call with financial analysts, CEO Ron Vachris, noted that the impact of tariffs remains “very fluid.” Costco was one of the first corporations to sue the federal government over the legality of tariffs. With the U.S. Supreme Court ruling last month that the Trump administration’s tariff policies were unlawful, Costco is in line for a significant refund (at least on paper).
At rival, BJ’s, which does not have stores west of the Mississippi (except for five club units in Texas), its Q4 and year-end numbers were also very healthy. Net sales jumped 5.5 percent to $5.45 billion for the 13-week period and profit increased 2.6 percent to $125.9 million for the quarter. Comp store sales grew 2.6 percent (ex-fuel), and during fiscal 2025 the Marlborough, MA merchant added 500,000 new members. That largely accounted for much of BJ’s 9.5 percent membership income increase to $500 million. In fiscal 2025, the discount retailer opened 14 new clubs and said it was on track to add 25-30 new clubs by the end of 2026.
And then there’s UNFI which posted mixed results in its recently completed 2nd quarter. Overall sales in were just shy of $8 billion, a dip of 2.6 percent compared to Q2 last year. A closer look at its sales numbers indicates that conventional product sales declined 12 percent while natural product sales (led by its biggest customer, Whole Foods) increased 7 percent. Same-store revenue was down 2 percent.
However, for the first time in a few years, the Providence, RI wholesaler/retailer earned a profit. While its net income was only $20 million, it hopefully stops a trend of multiple unprofitable quarters.
In my opinion, the problems at UNFI outweigh the positives. So, if you want to want to believe CEO Sandy Douglas’ rah-rah rhetoric – “Looking ahead, our new business pipeline is strong. And we remain committed to continuously improving our effectiveness and efficiency, delivering our updated outlook, and strengthening our capabilities to create long-term value for our customers, suppliers, associates, and shareholders – that’s your choice. My decision making is based on a detailed analysis of UNFI’s numbers (slightly improved, but still below average) and ongoing conversations with about eight of its independent wholesale customers in the Mid-Atlantic. If Douglas talked to them more frequently, he might not be so bullish about UNFI’s future.
We also have a couple of obituaries to report this month including the passing of football coach Lou Holtz, the legendary college football coach, best known for his 11-year tenure at Notre Dame when his teams went 100-32-2 (second in wins only to the legendary Knute Rockne). Holtz’s story is noteworthy – his career record as a head coach was 249-132-7 over 33 years at the Fightin’ Irish, William & Mary, NC State, the University of Arkansas, the University of Minnesota and the University of South Carolina. Not bad for a small-town dreamer who grew up in Follansbee, WV and once said of himself, “I’m not very smart and I’m not very impressive. I’m 5’10”, weigh 152 pounds, speak with a lisp, appear afflicted with a combination of scurvy and beriberi, and ranked 234th in a high school class of 278.”
But Holtz was whip-smart about football and combined a keen eye for talent and a coaching style that blended toughness and humor. That wit and football wisdom were clearly on display when he served as a color analyst for 12 years at CBS and ESPN. Holtz, 89, was inducted into the College Football Hall of Fame in 2008.
Following the immortal words from his biggest hit song “I-Feel-Like-I’m-Fixin’-To-Die-Rag,” “Country” Joe McDonald has, indeed, died. The folk and rock singer, who came to prominence at the Woodstock festival in 1969 was 84. McDonald’s band, Country Joe and the Fish, was already a popular Bay Area attraction prior to the iconic rock festival. But he rose to prominence when about a half a million people cheered wildly when they heard his signature tune which was preceded by the band’s anti-Vietnam “cheer” (“give me an “f…”). And this is how old I am: I actually saw McDonald and his band in early 1970 and I remember the concert well. Not possessed of great voice and not surrounded by top-flight musicians (except for lead guitar player Barry Melton), McDonald was an entertaining act – more performance artist than rock star. After the “Fish” broke up later in 1970, McDonald continued to perform (mainly as a solo artist) and released more than 25 albums from 1970-2012. If you’ve seen the movie “Woodstock” (1970), McDonald’s powerful performance should still remain imprinted in your memory.
Jeff Metzger is publisher emeritus of Food World and Food Trade News and founder of Taking Stock LLC, a grocery industry advisory and consulting firm.
