The Zacks Retail – Supermarkets industry is benefiting from expanding omnichannel capabilities, rising digital engagement and growing demand for convenient shopping and meal solutions. Retailers are strengthening differentiation through private brands, prepared foods, loyalty programs and personalized offerings, while retail media and data-driven services are creating attractive new profit pools. At the same time, automation, artificial intelligence and better use of store networks should improve fulfillment efficiency and support digital profitability. 

While labor, transportation, shrink and supply-chain costs continue to influence margins, retailers are pursuing productivity, sourcing and efficiency initiatives to manage these pressures. Against this backdrop, Walmart Inc. (WMT Quick QuoteWMT - Free Report) , The Kroger Co. (KR Quick QuoteKR - Free Report) and Yesway, Inc. (YSWY Quick QuoteYSWY - Free Report) appear well positioned to capitalize on the industry’s evolving growth opportunities.

About the Industry

The Zacks Retail – Supermarkets industry includes supermarket retailers that 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 more. Players in this industry operate through various formats such as supermarkets, multi-department stores, retail stores, discount stores, supercenters, hypermarkets and warehouse clubs. 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 enhanced pickup and delivery services and are offering easy payment options.

Major Trends Shaping the Future of the Supermarket Industry

Omnichannel Grocery Becomes a Stronger Growth Engine: Digital grocery is becoming an increasingly important part of the supermarket model as consumers seek greater convenience, faster delivery and seamless shopping across stores, apps and pickup channels. Retailers are using their physical store networks as fulfillment hubs while investing in automation, artificial intelligence and supply-chain technology to improve order accuracy and delivery economics. Demand is also shifting toward faster fulfillment, encouraging operators to expand same-day and rapid-delivery capabilities. Supermarkets with strong omnichannel platforms can increase shopping frequency, strengthen customer retention and capture a larger share of household spending.

Private Brands and Meal Solutions Gain Importance: Private-label products are becoming an important growth and differentiation tool for supermarkets as consumers seek affordability and quality. Retailers are expanding their own-brand portfolios across value, premium, organic and health-focused categories, helping them address multiple customer segments while strengthening merchandise margins. Prepared foods, ready-to-eat meals and convenient meal solutions are also gaining importance. Supermarkets are responding by improving fresh offerings, expanding foodservice capabilities and introducing differentiated products that encourage repeat visits. Continued innovation in private brands and prepared foods should enable retailers to strengthen customer loyalty, reduce dependence on national brands and capture a greater share of consumer food spending.

Retail Media and Loyalty Create New Profit Pools: Supermarkets are increasingly expanding beyond traditional merchandise margins by developing retail media, digital advertising, loyalty programs, memberships and data-driven services. These businesses allow retailers to monetize large customer bases and first-party shopping data while helping suppliers reach consumers closer to the point of purchase. Loyalty ecosystems are also becoming more sophisticated, supporting personalized promotions, targeted offers and stronger customer engagement across physical and digital channels. As these platforms scale, they can contribute higher-margin revenues that are less dependent on grocery pricing and promotional activity. 

Structural Costs Continue to Pressure Margins: Supermarket operators continue to face elevated operating costs while simultaneously investing heavily to remain competitive. Labor, employee benefits, transportation, shrink, utilities and supply-chain expenses remain important pressures, while retailers are also committing capital to automation, digital fulfillment, artificial intelligence, store modernization and inventory systems. These investments are becoming increasingly necessary as customers expect better availability, faster delivery and more seamless omnichannel experiences. However, the combination of rising costs and continued price investment can place pressure on the industry's already narrow margins. Operators that successfully improve productivity and reduce fulfillment costs should be better positioned to protect profitability.

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 #84, which places it in the top 34% 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 outperform the bottom 50% by a factor of more than 2 to 1. 

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 while outpacing the broader Zacks Retail – Wholesale sector over the past year.

The industry has risen 3.8% over this period compared with the S&P 500’s growth of 17.6%. Meanwhile, the broader sector has dipped 3.3% in the said time frame.

One-Year Price Performance

Industry's Current Valuation

On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing retail stocks, the industry is currently trading at 31.72X compared with the S&P 500’s 20.06X and the sector’s 21.48X.

Over the last five years, the industry has traded as high as 40.07X and as low as 17.50X, with the median being 22.92X, as the chart below shows.

Price-to-Earnings Ratio (Past 5 Years)

3 Supermarket Stocks to Keep a Close Eye On

Walmart: The Bentonville, AR-based company’s combination of scale, price leadership, broad assortment and expanding omnichannel capabilities continues to strengthen its competitive position across retail. WMT’s growing e-commerce, marketplace, advertising and membership businesses are improving the Zacks Rank #3 (Hold) company’s revenue mix, while investments in automation, fulfillment speed and artificial intelligence are enhancing customer convenience and operating efficiency. Walmart’s physical network also provides a powerful foundation for faster delivery and deeper customer engagement across shopping occasions. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.   

With its core retail engine increasingly supported by higher-margin platform businesses, Walmart appears well positioned for sustained growth and stronger long-term economics. The Zacks Consensus Estimate for WMT’s current fiscal-year earnings per share (EPS) has remained unchanged at $2.87 in the past 30 days, with the consensus mark indicating growth of 8.7% from the prior-year period. Shares of WMT have tumbled 7.5% over the past three months.

Price and Consensus: WMT

The Kroger Co.: The Zacks Rank #3 company’s case is supported by a strong grocery franchise, expanding digital capabilities, differentiated private brands and a growing portfolio of higher-margin businesses. Kroger is strengthening its value proposition while using sourcing, procurement and productivity savings to fund customer investments, and its e-commerce and retail-media operations are becoming increasingly important contributors to profitability. Continued innovation across private brands, prepared meals, health and wellness, loyalty and personalized marketing should further deepen customer engagement and strengthen competitive differentiation. 

With multiple growth engines complementing its core supermarket business, the Cincinnati, OH-based company appears well positioned to enhance profitability and support sustained long-term growth. The Zacks Consensus Estimate for KR’s current fiscal-year EPS has declined by 2 cents to $5.19 in the past 30 days, though the consensus mark suggests nearly 7% growth from the year-ago period reported figure. Kroger shares have climbed 0.1% over the past three months.

Price and Consensus: KR

Yesway: The fast-growing convenience-store operator benefits from a differentiated convenience-retail platform built around its established regional brands, destination foodservice offerings, strategically located real estate and growing diesel capabilities. Yesway’s proprietary food offerings, private-label expansion and loyalty program support customer traffic and attractive merchandise economics, while ongoing store development, fuel upgrades and selective acquisitions provide multiple avenues for growth. The Zacks Rank #3 company’s disciplined approach to capital allocation and focus on improving productivity across its existing store base further strengthen its operating model. 

With a differentiated offering and a focused expansion strategy, Yesway appears well positioned to deepen its presence in core markets and sustain long-term growth. The Zacks Consensus Estimate for YSWY’s current fiscal-year EPS has remained stable at $1.73 in the past 30 days. The Fort Worth, TX-based company’s shares have declined 3.4% over the past three months.

Price and Consensus: YSWY