Grocery Store Sales Figures Hinge on Commodity Prices

Commodity price deflation continues to plague grocery stores.

In the quarter ending Dec. 3, Albertsons saw identical store sales drop by 2.1%. Safeway stores experienced a slide of 2.2%.

Another grocer also saw a weak sales performance.

Here's more from a Jan. 23 article:

It wasn't a good week for grocery store sales reports.  [Besides Albertsons and Safeway], Ahold Delhaize reported less-than-stellar numbers.

This isn't a shock to the industry, however. Analysts have seen food price deflation in commodities such as meat, eggs and dairy take their toll on the grocery industry for more than a year. In fact, last year retailers saw an 11-month span of year-over-year sales declines, one of the worst periods of decline in close to 60 years.

According to the USDA, retail prices for beef, pork and poultry ended 2016 with decreases of about 7%, 4%, and 3% respectively. Analysts explain that declining food prices are a result of food retailers attempting to pass on cost savings to customers to gain a competitive edge. However, once a price deflation war starts, retail price decline can start to exceed the initial cost saving, hurting the overall sales and margin of retailers.

The good news for Albertsons is that it ... was able to maintain or increase its share in the food retail channel during the time of the three-quarter decline. That shows it's not really losing customers to other channels and really just needs a turnaround in commodity prices to occur to see positive figures again. Most analysts think that will happen sooner rather than later.

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