Despite Overstoring, Deflation, ShopRite Still Rules $98B Market

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Here’s a look at how the top 10 retailers fared this year.

Some things don’t change. Wakefern-owned retailers once again led the market, adding both stores and sales to an already dominant share with its ShopRite, PriceRite and Fresh Grocer banners. Over the past 12 months, those 262 stores (10 more than last year) amassed estimated sales of $14.48 billion, a gain of more than $230 million from last year. Additionally, after lengthy closures and first rate remodels, ShopRite retailers had better “before vs. after” sales than any of the other retailers that acquired former Tea Company locations.

Second ranked Stop & Shop closed five stores during the past year and changed leaders with talented Ahold USA veteran Mark McGowan now overseeing both the companies New York and New England divisions which have been integrated. Overall volume was – flat – $8.03 billion v. $8.04 billion. It will be interesting to see if Stoppie can make significant gains when it moves to a decentralized merchandising model early next year.

CVS moved into third place among all retailers in the market. The Woonsocket, RI drug chain had flat ID sales, opened 15 net new stores and also increased its sales by acquiring Target’s in-store pharmacy business affecting 147 stores in the region. Operating 1,239 units in the market, CVS rang up estimated sales of $5.86 billion.

Giant/Carlisle had a solid year (not including its pending withdrawal from the Richmond market), but fell prey to the same challenges also faced by many other retailers in dealing with slightly negative ID sales caused by deflation and overall competitive issues. At its 144 stores, the only non-union unit of Ahold USA garnered sales of $5.44 billion. Earlier this month, the company announced that Tom Lenkevich would be retiring as Giant’s president at the end of the year to be replaced by current AUSA senior VP-merchandising Nick Bertram. And much like its sister Stop & Shop division, the Carlisle, PA based merchant will be shifting to a decentralized merchandising model early next year.

Wal-Mart, which remained one of the highest per-store average sales retailers in the region, had its best year since 2010. It only opened one new store over the past 12 months – a SuperCenter in Hamilton Township, NJ (and closed a “Division 1” unit in Derby, CT), but its dogged low price mantra and improved in-stock conditions at its 170 regional stores contributed to the Bentonville Behemoth reaching the $5 billion mark in extrapolated food and drug sales.

Walgreens (Duane Reade) remained the highest per-store volume leader among all drug chains in the market, but had a relatively flat year, marked by store closures and perhaps a distracted focus on its big prize – a still-pending deal to acquire rival Rite Aid. The market share leader in Manhattan now operates 703 units in the 70-county area (31 fewer than last year), which amassed estimated sales of $4.52 billion.

White Plains, NY based wholesaler Krasdale Foods continued to control the most grocery stores in the region. In a methodology change this year, we have lumped all of the Krasdale supplied banners – C-Town, AIM, Bravo, Shop Smart, Market Fresh, Shop Smart and Shop1 –into one consolidated Krasdale entry. All seven banners combined to operate 570 stores (most in the Metro NY market producing sales of $4.05 billion.

Costco once again paced all club operators in the market. Ringing up some incredibly high individual store volumes in and around the City of New York, the low-margin (13-15 percent) club merchant opened three new club stores in the past year and also managed to push the ID sales needle forward, too. For its 48 stores in the 70-couty region, the Issaquah, WA discount merchant had estimated extrapolated sales of $3.83 billion.

Much like it was with suitor Walgreens, Rite Aid experienced a slightly down year when measuring both ID sales and store counts. If the FTC allows the deal to go through, it is expected that most of the overlapping stores that will be sold (possibly to regional drug chain Fred’s) will be Rite aid units. Walgreens has once again extended the deadline to gain FTC clearance, this time until July 2. For the year, Rite Aid operated 933 units in virtually every area of the 70-county region, and accrued estimated sales of $3.61 billion.

One of 2016’s biggest gainers – Acme Markets – found the gauntlet more challenging this year, especially at the stores away from its core Philadelphia and Jersey Shore zone of familiarity. The usual suspects –overstored, diverse landscape, competitive new store openings and year-long deflation – adversely impacted the largest East Coast unit of Albertsons. However, Acme’s inability to markedly improve sales (and culture) at many of the 71 former A&P stores it acquired in 2015 also contributed to the chain’s lackluster performance. Now ranking 10th overall in the region (last year Acme ranked 14th) with 164 stores, the Malvern, PA-based chain rang up annual sales of $3.52 billion.

Other retailers that topped the $1 billion mark in annual sales in the Mid-Atlantic region included Wawa, BJ’s, Target, Key Food, Weis Markets, Whole Foods,7-Eleven, Wegmans, Foodtown and Trader Joe’s.

Significant changes that occurred over the past 12 months included: the resignation of Ahold USA chief operating officer James McCann (who was replaced by Kevin Holt); Jim Perkins returning as president of Acme; Walgreens reportedly agreeing to an FTC request to divest more stores as it continues the long journey in its quest to acquire Rite Aid; Target’s sale of its in-house pharmacy business to CVS; Weis Markets acquiring 44 new stores (38 Food Lions, 5 Mars Super Markets and one Nell’s unit) over the past 12 months; Jana Partners acquiring a 9 percent stake in Whole Foods and creating disruption, which which laid the groundwork for the sale of the organics chain to Amazon for $13.7 billion in cash; Fairway Markets’ bankruptcy (and subsequent exit) which ultimately led to Abel Porter replacing Jack Murphy as CEO; a changing of the guard at Redner’s where third generation family member Ryan Redner replaced his father, Dick Redner, as chief executive; new leadership at Save-A-Lot where former Lidl executive Kenneth McGrath replaced Eric Claus several months after Canadian private equity firm Onex acquired the discounter from Save-A-Lot; the surprising acquisition of The Fresh Market by PE firm Apollo Global; a change of leadership at independent group America’s Food Basket where David Siegel replaced Dan Cabassa as CEO; and the continued mass store closings at Kmart (and Sears).

By class of trade, the leaders are: supermarkets – ShopRite/PriceRite (162 stores, $14.60 billion in annual retail sales); clubs – Costco (48 stores $3.83 billion in extrapolated sales); mass – Wal-Mart (175 stores; $5.00 billion in extrapolated sales); drug – CVS (1,239 stores and $5.86 billion in estimated sales); and convenience stores – Wawa (497 stores and an estimated $3.10 billion in revenue). Additionally, the region’s 10 military commissaries rang up annual sales of $114.2 million, continuing a decline of military commissary volume since 2009.

Viewed as a group, the 76 multi-store retailers in the market operated 8,504 stores and accrued $94.25 billion in annual sales, good for 98.45 percent of the Mid-Atlantic region’s $95.79 billion food and drug market.

Events of note to watch for over the next year will be: the debut and progress of Lidl’s U.S. entry coupled with Aldi’s super aggressive expansion plans; the evolution of Ahold Delhaize’s merger integration plan (synergy strategy), which features decentralizing all of its divisions (brands); a final outcome of whether Walgreens and Rite Aid will actually merge their companies. While there may be some relief for retailers when deflation cycles through later this summer, the overall ride going forward still promises to present a tough and gritty battle.