Proprietary Data Insights
Top Grocery Store Stock Searches This Month
You can learn a lot about the effects of inflation on the typical consumer by looking at grocery stores. So that’s what The Juice does today.
And it’s extra important, given word Wednesday that the cost of food at home increased 1.3% in July. The overall food index is up 10.9% year-over-year, the largest annual increase since 1979. This was partially offset by a sharp 7.7% decrease in gas prices, helping overall inflation stay flat between June and July. Compared to this time last year, inflation across the board is up 8.5%.
Anyhow, we got the idea for today’s installment when we opened our proprietary Trackstar database of the tickers investors search for most. Trackstar alerted us to the fact that large chain, Kroger (KR), surged to the top of the list among grocery stores.
One reason why? Kroger recently increased full-year guidance. As The Juice’s tale of two consumers hypothesis continues to play out, Kroger’s strong outlook counters inflation-related warnings from Walmart (WMT) and Target (TGT).
Going Private. Not Going Big.
At Kroger, sales of its private label brands increased 6.3% in the quarter.
You often hear people refer to them as “generic” brands, but “private label” simply refers to products with, in this case, the Kroger name on the packaging.
North of 90% of Kroger customers purchased a store-owned brand from the chain in Q2.
This jibes with what Sprouts Farmers Market (SFM), #2 in Trackstar, reported in its most recent earnings:
Source: Sprouts Farmers Market Q2 earnings presentation
And an informative excerpt from the company’s earnings conference call, via CEO Jack L. Sinclair:
We’re seeing some trade down, as we’ve talked about in the last meeting. And the number of the sizing of avocados that people are buying, the sizing — the number of grapes that they’ll buy in — at any one time, so people are moderating the number of cherries that they’ll buy. We — clearly, produce is a big part of our business. And people buying — still buying a lot of produce from us, but the weight of what they’re buying is probably going down a little bit going forward.
Or cheap beer me, that is!
Molson Coors (TAP) recently noted at least some consumers are trading down to the less expensive, economy beers in its broad portfolio:
Source: Molson Coors Q2 earnings presentation
Similar deal at Chipotle Mexican Grill (CMG): More frequent visits from high-income earners alongside fewer burrito purchases by people making less than 75 grand a year.
Back to the grocery stores. Scroll with us for some equally as interesting data on shopping patterns across the nation.
Can You Still Find Love In The Produce Aisle?
If you don’t swipe to find a match or frequent bars, you might look to strike up a conversation in the produce aisle. At least that’s the old adage. Your opening line deals with how to determine the freshness of that watermelon you see your prospective date sizing up.
If you’re looking for a mate keen on saving a few bucks during lean economic times – maybe so they’ll have more cash left over to invest! – we got you.
But first, here’s a super interesting chart on the relationship between the cost of food and grocery store visits.
As the cost of food at home has risen, the number of grocery store visits tends to decline.
We also see a change in the type of grocery stores people frequent.
Small print there (zoom it in, baby!), but the main takeaway from that data.
Grocers with a focus on value have seen increased traffic, while Trader Joe’s and other more expensive markets have seen decreased traffic.
Value can be private label brands at Kroger. For the (relatively) more affluent and health-conscious shopper, it can be private label or bulk purchases at Sprouts.
For the lower-income end of the spectrum, it can be Aldi, Walmart’s grocery-focused Walmart Neighborhood Market, Save-A-Lot, or Grocery Outlet Bargain Market (GO).
Consider Grocery Outlet Bargain Market. The company owns and operates deep discount grocery stores in states such as California, Oregon, Idaho, and New Jersey. In Q2, it reported a 15.7% increase in net sales and an 11.2% pop in comparable same store sales. The company also upped guidance for the rest of the year. And its stock has crushed it.
Another trend, local (or seemingly local) ethnic markets are seeing more traffic. That’s definitely the case in Los Angeles, where The Juice emanates from daily.
The Bottom Line: It’s quite straightforward. People, at various income levels, are finding ways to deal with inflation.
More budget-conscious consumers are hitting up grocery stores that offer the deepest discounts. Even some more affluent shoppers are shifting how they spend – often by trading down in terms of quantity – at higher end markets.
As an investor, maybe you dream of having a partner – or maybe you have one already – who loves to save money so they can invest it. You might just bump into this person – accidentally, of course! – in the produce aisle of Sprouts or while navigating your local farmers’ market.
As an investor, you might also be looking for names who not only increase guidance during turbulent economic times, but appear well-positioned to come out of them in positions of strength.
Today, The Juice gave you a few stocks to put on your radar.
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