In a new report written for The Street, analyst Brian Sozzi discussed the pressure that traditional super markets, particularly The Kroger Co KR 2.09%, are putting on superstores Wal-Mart Stores, Inc. WMT 1.72% and Target Corporation TGT 2.32%.
Simple Strategy
Kroger has been using the following simple, yet extremely effective strategy to fight the larger competition: focus on customer service, more competitive prices and expansion of health and wellness products. According to Sozzi, this winning strategy has resulted in 45 straight quarters of same-store sales growth in a highly-competitive grocery space.
In 2014, Kroger produced double-digit same-store sales growth in its natural foods, meat, deli, and pharmacy departments. In addition, Kroger’s organic food products line, “Simple Truth” reached the $1 billion sales mark in 2014, less than two years after its introduction.
Disarming The Giant
Historically, Wal-Mart’s greatest attribute has been its low prices. However, Kroger is currently investing billions of dollars to directly compete with Wal-Mart by lowering prices.
According to Nielsen’s point-of-sale data from 2014, Kroger gained share from Wal-Mart in 2014 in each of the 15 market categories in which the two companies directly compete.
Share Prices Respond
Kroger’s success in gaining business from Wal-Mart and Target has been reflected in the share prices of the three companies as well. Kroger’s stock is up about 66 percent in the past year, handily beating both Wal-Mart’s 3 percent gain and Target’s 36 percent gain.
Can Wal-Mart And Target Respond?
Grocery items account for about 56 percent of Wal-Mart’s annual sales, and the company is scrambling to stop its market share bleeding. Wal-Mart CFO Charles Holley recently expressed the company’s commitment to a new fresh food initiative that focuses on dairy, meat and bakery offerings.
Wal-Mart is also currently re-training employees to identify and remove spoiled produce more quickly.
Target recently announced that it hired former PetSmart Inc (NASDAQ: PETM) executive Anne Dament to help revitalize Target’s grocery business.
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