Comps Could Weaken With Less Inflation: Economist

ELLIOT ZWIEBACH

COLUMBUS, Ohio — Supermarkets may see growth trends weaken this year if food inflation eases, a senior economist with TNS Retail Forward here said yesterday during a webinar on the sales outlook for 2008. According to Frank Badillo, supermarkets and drug stores benefited last year from inflation, "but those growth trends are likely to subside in 2008 as food inflation begins to subside, resulting in weaker same-store sales comparisons." However, supermarkets should benefit as more consumers opt not to eat at restaurants, Badillo noted. "Consumers coming to grips with credit issues and strains on their budgets will continue to cut back on eating out throughout the year, and that could be good for supermarkets," he said. In terms of the overall outlook for the year, "2008 looks downright painful," Badillo said. "The first half should be similar to what we saw during the holidays or become slightly worse, and while there's a chance a recovery could begin in the second half, it depends how long the negative shift in expectations persists. If businesses cut investments and jobs, that could lead to a recession, and any impact from the tax rebate under discussion and cuts in interest rates probably won't mean much in the first half. Any positive impact will have more to do with steadying expectations, which could possibly lead to a second-half recovery, though there are no guarantees."

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