Investors Eye Grocery-Anchored Retail
According to the U.S. Bureau of Labor Statistics, food-at-home prices increased 11.9 percent year-over-year in May, a 1.4 percent increase from April. This marks the fifth straight month of increases of at least one percent for the food-at-home index. Yet, one underlining statement remains the same: everybody has to eat and shoppers are still visiting their local neighborhood center for groceries. Therefore, investors continue to snap up grocery-anchored retail because of the repeat customers and routine foot traffic to the property.
Market Outlook For Grocery-Anchored Retail
Supermarkets are seeing the impact of inflation on their bottom line. Walmart executives have noticed that value-conscious shoppers deter from high-margin general merchandise to make up for higher food prices. Walmart originally predicted three percent growth earlier in the year, but the rising costs of goods and fuel have adjusted the supercenter’s outlook to a slight decline in operating income after taking a $1 billion hit in Q1 2022.
Conversely, value-oriented Costco saw same-store sales increase more than ten percent and generated 9.2 percent more income from membership fees. Both BJ’s Wholesale Club and Sam’s Club repeat this robust performance, reporting 4.1 percent and 10.2 percent same-store sales growth, respectively.
Target plans to prioritize in-demand products, such as food and groceries, by removing excess inventory and keeping prices down where they can. As a result, the grocer may absorb some profit declines to avoid losing customers during a rapidly changing environment. However, Target still expects operating margins to rebound to six percent, indicating that it only expects the current challenges to have a short-term impact.