SALES, PAST AND FUTURE
The number crunchers have had their way and midyear sales results are in, so now is a good time to pause and see how supermarket sales trends are shaping up so far this year. And it's also a good time to weigh the opinion of industry executives as they reflect on how sales may play out for the balance of the year.First, let's take a look at overall numbers concerning retail sales. Unfortunately, it
August 5, 1996
David Merrefield
The number crunchers have had their way and midyear sales results are in, so now is a good time to pause and see how supermarket sales trends are shaping up so far this year. And it's also a good time to weigh the opinion of industry executives as they reflect on how sales may play out for the balance of the year.
First, let's take a look at overall numbers concerning retail sales. Unfortunately, it turns out, growth in the grocery sector looks a little on the anemic side as measured both by how it's trending and by comparison to other forms of retailing.
According to data compiled by the U.S. Department of Commerce and consulting firm Management Horizons, June's grocery sales increased 2.2%, the second month running of weaker growth. A look at the whole year shows that sales growth started below 2% in January, rising to April's high of a little more than 3%, then turned downward. These percentages represent year-over-year comparisons.
By comparison with other forms of retailing, the average sales growth for all non-auto retail sales was 4.5% in June, against the same month a year earlier. Why are consumers evidently becoming cautious when it comes to food spending, and what does the future hold? Food-retailing executives, when asked to ponder such questions, have a variety of reasons for consumer behavior, and a variety of predictions about future sales, as is to be expected in a business as regional as is food retailing.
Many -- but by no means all -- executives say consumers are holding their purses tightly in anticipation of a declining economy and a post-election tax increase. Here's what one executive had to say on those topics: "Customers will continue to be very frugal in how they spend their money because their personal debt loads are at record heights, and as we get closer to the election they will probably get more pessimistic because they know that, after the election, it's likely taxes will be raised." Another, speaking about more technical aspects of the industry and the economy, noted that the outlook actually is good: "We see earnings numbers improving almost without exception, and there are better controls over expenses. Sales are beginning to firm." There's a lot more about what the future of food sales may hold in a news feature that starts on Page 1. But no matter how important industry and macroeconomic factors are in making predictions about the future of business activity, the unpleasant fact remains that supermarket sales increases are running below increase levels registered by many other forms of retailing. This suggests there may be factors other than those cited by industry seers eating away at sales increases. So here are a couple of suggestions: First, consumers may find that trading down to less expensive food items is a relatively painless way to conserve cash, and they may be putting some of the savings into other retail channels. This also explains why food-at-home inflation has little immediate and direct effect on top lines.
Second, some in the industry may underestimate the aggregate downside effect created by the constant drain of dollars toward supercenters, membership clubs, home-meal replacement providers and others. In sum, this is no time for despair, but it's no time to let down the guard either.