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Zacks Industry Outlook Highlights: Kroger, Companhia Brasileira de Distribuicao, Carrefour and Walmart
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For Immediate Release
Chicago, IL – November 11, 2021 – Today, Zacks Equity Research discusses Supermarket, including The Kroger Co. (KR - Free Report) Companhia Brasileira de Distribuicao , Carrefour SA (CRRFY - Free Report) and Walmart Inc. (WMT - Free Report) .
Players in the Zacks Retail – Supermarkets industry are benefiting from their constant endeavors to solidify store and online operations. Companies have been committed to improving delivery and payment options alongside bolstering assortments, while these investments and high COVID-related costs threaten margins.
Nevertheless, rising store traffic and online demand together with concerted efforts to bolster omnichannel operations keep Kroger, Companhia Brasileira de Distribuicao and Carrefour well-positioned.
About the Industry
The Zacks Retail – Supermarkets industry includes supermarket retailers, which offer grocery, health and beauty aids, household chemicals, electronics, stationery, automotive accessories, hardware and paint, sporting goods, fabrics and crafts, entertainment products, home furnishings and much more. Players in this industry operate through various formats such as supermarkets, multi-department stores, retail stores, discount stores, supercenters, hypermarkets and warehouse clubs.
Nevertheless, food retail accounts for a chunk of their business. The industry has undergone a significant transformation over the years, with e-commerce playing a strong role. Given consumers’ rising preference for online shopping, industry participants have been enhancing pickup and delivery services as well as offering easy payment options.
3 Trends Shaping the Future of the Supermarkets Industry
Solid Omnichannel Efforts: Supermarket retailers have been pushing the edge out of the envelope to strengthen operations – both stores and online. To this end, they have been focused on store improvisation, merchandise enhancement, prudent pricing strategy and efforts to replenish assortments. Additionally, companies have been exploring every nook and cranny to bolster online operations. In fact, the pandemic-led social distancing has taken online shopping to another level – causing industry players to constantly step up their efforts in this arena through meaningful buyouts, alliances, and improved delivery and payment systems.
In this regard, companies like Walmart have been benefiting from their same-day delivery, buy online and pick-up in-store, curbside pickup as well as contactless payment options. We believe that the elevated online shopping trend is likely to stay. That said, store traffic has also been improving with things getting back to normal and people stepping out. Certainly, companies’ concerted efforts to unite store and online operations to offer customers a solid omnichannel experience position them well.
Spike in Demand to Stay: Supermarket companies have been benefiting from high demand (especially online) for essentials due to the pandemic-induced elevated at-home consumption. Incidentally, higher dine at-home and work from home practices have boosted demand for staple products, especially groceries, cleaning supplies, and medicines.
Although demand has moderated from the year-ago period that saw a major surge due to the initial panic-buying, it remains higher than the pre-pandemic levels. In fact, even with things opening up and curbs being lifted, the pent-up demand trend is likely to stay in the near term, as a number of Americans still prefer to work and cook at home. This indeed calls for supermarket players to continue making investments toward innovative offerings and merchandising to make the most of such trends.
Pressure on Margins: Supermarket players are facing margin pressure owing to elevated COVID-related costs. These include additional employee payments and benefits along with costs associated with upgraded safety and sanitization to protect the health of customers and team members.
Apart from this, companies’ constant efforts to bolster online operations and improve supply-chain networks entail heavy investments – which again comes at the cost of margins. Additionally, continued price investments and other promotion activities weigh on margins.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Retail – Supermarkets industry is housed within the broader Zacks Retail – Wholesale sector. The industry currently carries a Zacks Industry Rank #71, which places it in the top 28% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually becoming more confident about this group’s earnings growth potential. Since the beginning of June 2021, the industry’s consensus earnings estimate for 2021 has increased 7.7%.
Let’s look at the industry’s performance and current valuation.
Industry Versus Broader Market
The Zacks Retail – Supermarkets industry has underperformed the S&P 500 composite over the past year, while it outpaced the broader Zacks Retail – Wholesale sector in the same time frame.
The industry has gained 3.7% over this period compared with the S&P 500’s growth of 34.9%. Meanwhile, the broader sector dipped 2% in the said time frame.
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing consumer staples stocks, the industry is currently trading at 21.14X compared with the S&P 500’s 22.2X and the sector’s 28.98X.
Over the last five years, the industry has traded as high as 24.32X and as low as 15.4X, with the median being at 20.15X.
3 Supermarket Stocks to Keep a Close Eye On
The Kroger Co.: The Zacks Rank #1 (Strong Buy) stock has risen 10.2% in the past six months. Kroger’s digital business remains one of its key growth drivers. The company has been focusing on a no-contact delivery option, low-contact pick up service and ship-to-home orders.
Apart from this, the company’s “Restock Kroger” program involving investments in the omni-channel platform, identifying margin-rich alternative profit streams, merchandise optimization, and lowering of expenses has been gaining traction. A dominant position among the nation’s largest grocery retailers enables Kroger to boost market share with the expansion of plant-based products, digital coupons, order online pick up in-store and smart shopping lists.
Further, the company’s Customer 1st strategy enriches consumers’ shopping experience and convinces them to return to stores. Kroger has seen upward estimate revisions for its fiscal 2021 bottom line over the past 60 days by 7.4%. The Cincinnati-based retailer has an estimated long-term earnings growth rate of 8.9% as well as a trailing four-quarter earnings surprise of 18%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Companhia Brasileira: The company is gaining on its digital transformation efforts in the face of consumers’ increased preference for online shopping. Certainly, its delivery models, including same-day delivery — Express and Click & Collect, Traditional or next-day delivery, and Last Mile or next-hour delivery — James Delivery and Open Platform, have been working well.
Apart from this, Companhia Brasileira’s focus on store expansion is noteworthy. The Zacks Consensus Estimate for its current fiscal-year bottom line has risen considerably over the past 30 days. Notably, this Brazilian retailer of food, clothing, home appliances, electronics, and other products has an estimated long-term earnings growth rate of 33.3%. Shares of the Zacks Rank #3 (Hold) company have declined 39.4% in the past six months.
Carrefour: This France-based company has been benefiting from its efforts to strengthen its store base as well as contributions from acquisitions. Also, the company’s e-commerce business has been performing strongly. Apart from this, the company is gaining on its Carrefour 2022 strategic plan. This supermarket company’s consensus mark for current-year earnings has remained stable in the past 30 days. The Zacks Rank #3 stock has dropped 8.5% in the past six months.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights: Kroger, Companhia Brasileira de Distribuicao, Carrefour and Walmart
For Immediate Release
Chicago, IL – November 11, 2021 – Today, Zacks Equity Research discusses Supermarket, including The Kroger Co. (KR - Free Report) Companhia Brasileira de Distribuicao , Carrefour SA (CRRFY - Free Report) and Walmart Inc. (WMT - Free Report) .
Link: https://www.zacks.com/commentary/1826352/3-supermarket-stocks-to-watch-on-robust-industry-trends
Players in the Zacks Retail – Supermarkets industry are benefiting from their constant endeavors to solidify store and online operations. Companies have been committed to improving delivery and payment options alongside bolstering assortments, while these investments and high COVID-related costs threaten margins.
Nevertheless, rising store traffic and online demand together with concerted efforts to bolster omnichannel operations keep Kroger, Companhia Brasileira de Distribuicao and Carrefour well-positioned.
About the Industry
The Zacks Retail – Supermarkets industry includes supermarket retailers, which offer grocery, health and beauty aids, household chemicals, electronics, stationery, automotive accessories, hardware and paint, sporting goods, fabrics and crafts, entertainment products, home furnishings and much more. Players in this industry operate through various formats such as supermarkets, multi-department stores, retail stores, discount stores, supercenters, hypermarkets and warehouse clubs.
Nevertheless, food retail accounts for a chunk of their business. The industry has undergone a significant transformation over the years, with e-commerce playing a strong role. Given consumers’ rising preference for online shopping, industry participants have been enhancing pickup and delivery services as well as offering easy payment options.
3 Trends Shaping the Future of the Supermarkets Industry
Solid Omnichannel Efforts: Supermarket retailers have been pushing the edge out of the envelope to strengthen operations – both stores and online. To this end, they have been focused on store improvisation, merchandise enhancement, prudent pricing strategy and efforts to replenish assortments. Additionally, companies have been exploring every nook and cranny to bolster online operations. In fact, the pandemic-led social distancing has taken online shopping to another level – causing industry players to constantly step up their efforts in this arena through meaningful buyouts, alliances, and improved delivery and payment systems.
In this regard, companies like Walmart have been benefiting from their same-day delivery, buy online and pick-up in-store, curbside pickup as well as contactless payment options. We believe that the elevated online shopping trend is likely to stay. That said, store traffic has also been improving with things getting back to normal and people stepping out. Certainly, companies’ concerted efforts to unite store and online operations to offer customers a solid omnichannel experience position them well.
Spike in Demand to Stay: Supermarket companies have been benefiting from high demand (especially online) for essentials due to the pandemic-induced elevated at-home consumption. Incidentally, higher dine at-home and work from home practices have boosted demand for staple products, especially groceries, cleaning supplies, and medicines.
Although demand has moderated from the year-ago period that saw a major surge due to the initial panic-buying, it remains higher than the pre-pandemic levels. In fact, even with things opening up and curbs being lifted, the pent-up demand trend is likely to stay in the near term, as a number of Americans still prefer to work and cook at home. This indeed calls for supermarket players to continue making investments toward innovative offerings and merchandising to make the most of such trends.
Pressure on Margins: Supermarket players are facing margin pressure owing to elevated COVID-related costs. These include additional employee payments and benefits along with costs associated with upgraded safety and sanitization to protect the health of customers and team members.
Apart from this, companies’ constant efforts to bolster online operations and improve supply-chain networks entail heavy investments – which again comes at the cost of margins. Additionally, continued price investments and other promotion activities weigh on margins.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Retail – Supermarkets industry is housed within the broader Zacks Retail – Wholesale sector. The industry currently carries a Zacks Industry Rank #71, which places it in the top 28% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually becoming more confident about this group’s earnings growth potential. Since the beginning of June 2021, the industry’s consensus earnings estimate for 2021 has increased 7.7%.
Let’s look at the industry’s performance and current valuation.
Industry Versus Broader Market
The Zacks Retail – Supermarkets industry has underperformed the S&P 500 composite over the past year, while it outpaced the broader Zacks Retail – Wholesale sector in the same time frame.
The industry has gained 3.7% over this period compared with the S&P 500’s growth of 34.9%. Meanwhile, the broader sector dipped 2% in the said time frame.
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing consumer staples stocks, the industry is currently trading at 21.14X compared with the S&P 500’s 22.2X and the sector’s 28.98X.
Over the last five years, the industry has traded as high as 24.32X and as low as 15.4X, with the median being at 20.15X.
3 Supermarket Stocks to Keep a Close Eye On
The Kroger Co.: The Zacks Rank #1 (Strong Buy) stock has risen 10.2% in the past six months. Kroger’s digital business remains one of its key growth drivers. The company has been focusing on a no-contact delivery option, low-contact pick up service and ship-to-home orders.
Apart from this, the company’s “Restock Kroger” program involving investments in the omni-channel platform, identifying margin-rich alternative profit streams, merchandise optimization, and lowering of expenses has been gaining traction. A dominant position among the nation’s largest grocery retailers enables Kroger to boost market share with the expansion of plant-based products, digital coupons, order online pick up in-store and smart shopping lists.
Further, the company’s Customer 1st strategy enriches consumers’ shopping experience and convinces them to return to stores. Kroger has seen upward estimate revisions for its fiscal 2021 bottom line over the past 60 days by 7.4%. The Cincinnati-based retailer has an estimated long-term earnings growth rate of 8.9% as well as a trailing four-quarter earnings surprise of 18%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Companhia Brasileira: The company is gaining on its digital transformation efforts in the face of consumers’ increased preference for online shopping. Certainly, its delivery models, including same-day delivery — Express and Click & Collect, Traditional or next-day delivery, and Last Mile or next-hour delivery — James Delivery and Open Platform, have been working well.
Apart from this, Companhia Brasileira’s focus on store expansion is noteworthy. The Zacks Consensus Estimate for its current fiscal-year bottom line has risen considerably over the past 30 days. Notably, this Brazilian retailer of food, clothing, home appliances, electronics, and other products has an estimated long-term earnings growth rate of 33.3%. Shares of the Zacks Rank #3 (Hold) company have declined 39.4% in the past six months.
Carrefour: This France-based company has been benefiting from its efforts to strengthen its store base as well as contributions from acquisitions. Also, the company’s e-commerce business has been performing strongly. Apart from this, the company is gaining on its Carrefour 2022 strategic plan. This supermarket company’s consensus mark for current-year earnings has remained stable in the past 30 days. The Zacks Rank #3 stock has dropped 8.5% in the past six months.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.