Supermarkets Unfazed by Economic Pressures

Wal-Mart Stores last week said its customers appear to be under intense financial pressure because of the economy, but food retailers around the country told SN they have not seen much impact on consumer spending as back-to-school season approaches. I can't tell that we've been negatively affected by the economy, said Roger Collins, chief executive officer, Harps Food Stores,

BENTONVILLE, Ark. — Wal-Mart Stores here last week said its customers appear to be under intense financial pressure because of the economy, but food retailers around the country told SN they have not seen much impact on consumer spending as back-to-school season approaches.

“I can't tell that we've been negatively affected by the economy,” said Roger Collins, chief executive officer, Harps Food Stores, Springdale, Ark. “I haven't noticed any significant changes this year as compared to last. Our sales have been good. For the most part we've been able to pass along our price increases to the customers.”

In a recorded call discussing Wal-Mart's second-quarter results, H. Lee Scott, chairman and CEO, said the housing slowdown has affected the retailer's sales to some degree, but grocery sales remained strong. In fact, the higher sales mix of grocery products has put more pressure on the company's margins because of their reduced profitability. The company lowered its earnings forecast for the year.

“U.S. consumers continue to be under difficult pressure economically,” Lee said. “The top concerns among our customers are economic: money and finances; the increase in the cost of living and gas prices. It is no secret that many customers are running out of money towards the end of the month. The paycheck cycle is in fact more pronounced now than it ever has been.”

Some supermarket operators say customers may be making fewer trips to Wal-Mart Supercenters because of the high cost of gasoline, which in turn is benefiting traditional food retailers with their more convenient locations.

“I think people are thinking twice about driving long distances,” said Kelly Epperson, a spokeswoman for Homeland Stores, Oklahoma City. “If you were 20 miles from a Super Wal-Mart, maybe you're not making that trip every week. Now maybe you do it once a month because gas is higher, and you're going to a traditional grocery store more often. That may be making a difference. You also may not be eating out as much. One way to keep expenses down is to eat in.”

She said Homeland, a division of Associated Wholesale Grocers, Kansas City, Kan., has experienced strong sales recently, which she attributed to expanded prepared, fresh and healthful offerings.

“[Most] of our stores in Oklahoma are trending up significantly over the same period last year,” she said. “We have just a few stores that are trending down, and one of those was a lake store where we had so much rain this spring they closed the lake, so people weren't visiting as much. And three stores that have had a brand-new supercenter open next to them are trending down. So that's just four stores trending down out of 51.”

Among the changes that are driving sales at Homeland, she said, are new hot meal solutions in the deli; an emphasis on triple-inspected and expanded varieties of produce; and hormone-free and corn-fed beef.

Collins said Harps also has had some recent success in perishables promotions, citing seafood specials in several stores that have been well received by customers.

At Chandler, Ariz.-based Bashas', Mike Proulx, president and chief operating officer, said he hasn't noticed any changes in consumer spending patterns during the back-to-school season, which begins early in Arizona's year-round school system.

The economy is not having much impact, he noted. “At the top-of-mind right now is the cost of gasoline and the rising cost of products and services, but it's not any different than it's been this year,” Proulx said.

One thing the chain has done differently this year is to introduce jeans and T-shirts as an in-and-out back-to-school promotion, “just to try something new and because we saw an opportunity to serve busy shoppers with one-stop shopping,” Proulx said. “Now we're anxious to see the results.”

The clothing — T-shirts in different colors and traditional jeans — is displayed with other BTS merchandise in the general merchandise lobby area of Bashas' stores, “and it looks like it's being well received,” he said. Prices range from $6.99 to $14.99.

Bashas' is promoting the clothing only with in-store signs. It isn't running print ads, Proulx said, “because we don't know how well it will do, and we didn't want to promote it too aggressively and then run short on supplies. But if it's well received this year, we will include it next year.”

Dick King, vice president, Associated Food Stores, Salt Lake City, said one new wrinkle at the cooperative wholesaler this year is in the assortment of food items that tie in with the BTS season. “Because of national concerns with childhood obesity, it's unclear at this point whether schools will remove vending machines that dispense soda and snacks,” he said, “and that's a potential opportunity for us to sell more of those items.”

Accordingly, Associated is urging its retail members to display more individual snack packs and individual juice boxes. “However, to this point, we haven't seen any increase in sales in those items, but it may pick up when school starts — we're not sure,” King said.

Given different starting dates for area schools, Associated is making some adjustments in its merchandising program to accommodate year-round school schedules in some areas.

“The big push begins in mid-August,” he said. “Until then, we're basically promoting summer closeouts.”

King said he hasn't noticed any changes in spending patterns, “but it's still early,” he indicated.

He said he doesn't anticipate seeing any possible impact from the economy until the last minute. “I've read that back-to-school clothing sales are doing well, and there have been a lot of increases in the sale of small electronics, but supermarkets are unlikely to see any increases in back-to-school purchases until school starts, as people settle in to new routines. People are still basically in a summer selling mode right now.”
Reporting by Elliot Zwiebach,
Jon Springer and Mark Hamstra