Buoyed by a strengthening economy, the 2004 holiday shopping season helped many food retailers end the year on a positive note, according to a survey of supermarket operators and analysts polled by SN last week.
Analysts said consumers were more free-spending this year because of the improving economy, and that may have contributed to more discretionary purchases at supermarkets.
"We haven't had anybody report yet, but I suspect the economy was more on their side than last year because consumers are feeling better about their employment outlook, and they are more likely to buy more gift-type items," said Chuck Cerankosky, analyst, KeyBanc Capital Markets, Cleveland.
He noted, however, that there were pockets of the country that are still overstored and thus highly promotional, citing the Dallas-Fort Worth market, and he said the big chains' effort to recover from last year's labor dispute in Southern California is continuing to skew results there.
Jason Whitmer, an analyst with Midwest Research, Cleveland, also noted that the impact of promotions may have detracted from what was otherwise a relatively good six-week span from Thanksgiving to New Year's.
"I think sales were quite good," he said. "Sales overall have been on a little bit of an uptrend the past few months, surrounding the holidays, but the retailers have also been more promotional, which cuts into margins, so it's a bit of a wash."
Retailers said the season is always promotional to a degree, although some said this year they were more promotional on certain items.
"I think sales were better than last year, and better than we expected, partly because there was an extra day in there," said Joe Azzolina, president of Food Town operator Food Circus Supermarkets, Middletown, N.J., referring to the fact that Christmas fell on a Saturday this year.
He said the company was promoting whole turkeys for 19 cents per pound as part of a Green Stamps promotion after it was left with too many after Thanksgiving.
Overall, though, retailers were pleased with the sales gains they recorded at their tills.
Stan Edde, president, Falley's Inc., Topeka, Kan., which operates Food 4 Less and Falley's stores in Kansas and Missouri, said the holiday season "was very good" and slightly exceeded the company's expectations.
"It started a little slow, but the weather here stayed much warmer than usual, and it changed the whole dynamic for us," he said. "It was still in the 60s the week before Christmas and people were still cooking out. Starting around the Wednesday before Christmas, we did very well."
One result of the warm weather was that grilling meats sold stronger than what the company traditionally expects during the holidays.
"We normally see standing rib roasts and things like that that are cold-weather related do well," he said. "Those still sold well, but we also sold T-bones and things like that that weren't holiday-related."
He also noted that his company had much better sales of fresh turkeys than usual, compared with frozen turkeys, which he attributed to an evolving consumer preference for fresh foods.
Nonfoods promotions, even some that carried a relatively high ring, generated strong results, Edde said.
"Our continuity program on bakeware did very, very well this year, as well as a continuity program on dolls. We were very pleased with the results of that promotion. It was a real quality doll -- a $20 or $25 ring -- and we sold those very well.
"We also cleaned up nicely on small appliances like microwaves and DVD players -- items with around $100 ticket size," he added. "This was the third year we've been into those kind of items, and we did stronger this year than we have in the past, and it was a real plus for us."
Ron Pearson, chairman, Hy-Vee, West Des Moines, Iowa, said holiday sales at that chain were "excellent."
"We had comparable sales of over 4%," he said. "That's on top of record-breaking comp sales over 5% a year ago, so we're thrilled. There was heavy buying among premium items, gift items and specialty items. We saw people switching back to more expensive hams, more elaborate gift baskets and floral items, and things like that.
"I think consumers had money during Christmastime. They were confident and they spent, and we didn't do any special promotions beyond our normal holiday ads."
Bob Piccinini, chairman of Save Mart Stores, Modesto, Calif., said holiday sales were "about what we expected, and overall, we were very pleased."
He said the chain had a lot of new competition in the Stockton area from Wal-Mart Stores, "but we ran our regular program there and did as well as we had expected."
Bob Hermanns, president and chief executive officer, Associated Grocers, Seattle, said holiday sales exceeded expectations "because we did a better job of ad planning and delivery coordination," which he said had been a problem earlier in the year. "But through better communications with customers, we were able to do a better job forecasting the quantities they needed and our delivery scheduling than we were able to do earlier in the year."
In terms of promotions, Hermanns said AG didn't do anything differently from the prior year. However, he said the wholesaler ran into problems with some vendors on turkey deliveries, "particularly one vendor who hadn't adequately planned on enough trucks to meet his customers' needs at Christmas -- a time when turkey volume is lower than in November, but that still created big challenges for us this year."
In Southern California, some independents reported that they have continued to reap benefits from the new customers they added during last year's labor dispute.
Mark Oerum, partner in HOWS Markets, a five-store group based in Pasadena, Calif., said holiday sales were very good this year. "They exceeded expectations, with double-digit increases over what we did two years ago, the year before the strike," he said.
In fact, the Southern California strike-lockout that was in full swing during the 2003 holiday season may have helped HOWS in the 2004 season, Oerum noted, "because we attracted a lot of new customers during the strike." With HOWS hanging its hat on prime rib in its holiday ads, "some people who remembered how good it tasted last year may have come back, so we may have attracted more than our normal base of customers for the holidays."
He said HOWS sold as much prime rib over the holidays in 2004 as it did in 2003, when business was "incredible" in the wake of the labor dispute.
Besides featuring prime rib, HOWS' ads featured Hunziger fresh turkeys, and both items did well, Oerum said. Asked why the company didn't feature hams as well, he replied, "We shy away from hams. With only five stores, it's hard to be as competitive as the chains are."
Darioush Khaledi, chairman and CEO of KV Mart, Torrance, Calif., operator of 23 Top Valu, Valu-Plus and other inner-city stores in the Los Angeles area, said holiday sales were stronger than they were two years ago, the year before last year's strike-lockout. He attributed the increase to "more people in Los Angeles."
He also said sales were strengthened by the volume his stores picked up during the labor dispute, "when we kept 25% of the increases."
