Wal-Mart Pushes Giant For Lead In Ferocious $47 Billion Mid-Atlantic Market

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Bluntly stated, it was a difficult year for most of the 58 multi-store retailers (45 chains and 13 independents) that competed in the rugged $46.98 billion Mid-Atlantic market. While the competitive climate remained at a fierce level, the biggest negative impact came from deflation which primarily was felt in lower commodity prices in milk, eggs and meat. Milk, in particular was impacted by lower wholesale pricing, but also by significant price cuts made by certain retailers that featured their products at below wholesale price levels.

If you were a retailer whose store counts remained the same as last year, you were likely looking at identical stores sales of between negative 0.5-1.5 for the 12 month period ended March 31, 2017.

“It’s the most unpredictable food retailing climate we’ve seen since the 2008 recession,” said an executive at one of the Mid-Atlantic’s largest chains. “Virtually all of the Mid-Atlantic marketing areas are overstored with a diversity of retail choices giving consumers plenty of options. As a traditional supermarket operator, we’ve been slower than other channels to gain appeal to a changing consumer profile that includes millennials and Gen-Y shoppers. And even though the impact of Amazon may still be small and hard to measure in the food sector, I think all merchants know that Amazon’s share is growing annually and will continue to increase. The pressure on being a conventional chain today has never been so significant.”

The intensity isn’t likely to lessen in the near future either, with Lidl having opened its first 10 stores on June 15 (two of the Virginia stores are in our marketing area). That will be followed by another 11 stores shortly thereafter. All told, the German-owned discounter is expected to open more than 100 new stores from New Jersey through Georgia within a 12 month period. And Publix will cut the ribbon on the first of the 10 Richmond area stores acquired from Martin’s (Ahold Delhaize) later this summer, making one of the country’s most challenging markets anj even more competitive battleground.

Of course, there were a few merchants that made sales progress during the past year by either increasing same store sales or acquiring other retailers to expand their bases. Weis Markets would be the obvious example of the latter – the Sunbury, PA-based regional chain acquired 44 stores last year (38 Food Lions, five units of the now defunct Mars operation and a Nell’s independent store). However, Weis pulled a rare “double/double” over the past 12 months by also increasing ID revenue.

Others that enjoyed notable sales increases either through the addition of new stores or solid same store sales gains included Aldi, Costco, Trader Joe’s, Wal-Mart, Wegmans and the 117 International Markets (ethnic and specialty supermarkets) that now operate in the Mid-Atlantic. Additionally, CVS had a strong year of revenue growth, primarily by taking control of Target’s 102 pharmacies in the region.

Some retailers felt the cold slap of market reality. The two Supervalu corporate retail entities – Shoppers Food & Pharmacy and Farm Fresh (reportedly for sale) – both closed stores and saw IDs decline noticeably. Even the 22 Food Lion units it acquired as part of the Ahold Delhaize mandated store divestitures produced poorer sales than any other of other buyers of divested stores. Target also struggled with same store revenue and lost total sales when it sold its in-store pharmacy business to CVS. Food Lion, whose comp store numbers were marginally up, lost overall transaction, by operating 34 fewer units this year, primarily due to the aforementioned FTC driven conflict store sale.

Our annual retail market survey measures sales for the 12-month period ended March 31, 2017 and covers an 89-county territory that ranges from Central Pennsylvania to Southeastern Virginia including key marketing areas Baltimore-Washington, Harrisburg-York-Lancaster and Richmond-Norfolk.

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

Giant/Landover continues to pace the entire field, but as it’s been for the past six years, sales and overall market share continue to decline (although the results have improved slightly since the first of the year). The large unit of Ahold Delhaize now operates 161 stores (three fewer than last year), primarily in Maryland, Virginia and Washington, DC and rang up sales of $5.29 billion for the 12-month measuring period.

Remaining in second place was Wal-Mart which had a bounce back year, especially in light of rugged overstored conditions. The Bentonville Behemoth opened no net new stores for the first time in more than 15 years (although several stores were converted from “Division 1” units to SuperCenters), but amassed decent same store sales gains through relentless discounting, better in-stock conditions and cleaner stores. Extrapolated food and drug sales at its 161 Mid-Atlantic units (including Neighborhood Markets) was $4.49 billion, a $27 million increase over last year.

Moving into third place this year was CVS, whose sales and share were greatly abetted by acquiring Target’s in-store pharmacy business nationwide. In the Mid-Atlantic that meant 102 more stores from that deal and four additional new “from the ground up” drug stores. With 622 stores in the region, CVS amassed estimated annual sales of $2.92 billion, compared with last year’s volume of $2.78 billion.

CVS’ large store increase and Food Lion’s divestitures resulted in the Salisbury, NC-based unit of Ahold Delhaize dropping to the fourth spot this year. Now with 256 stores in the region, Food Lion posted estimated sales of $2.80 billion. The company announced plans to remodel its 71 stores in Richmond and surrounding areas during the next few months.

Coming off a successful two years, the past 12 months proved to be a big challenge for Safeway’s Eastern division. The unit of Albertsons changed division presidents late last year with Safeway veteran executive Dan Valenzuela replacing Steve Burnham. For the past 12 months, Safeway’s sales were $2.58 billion for its 118 stores. That compares to last year’s volume of $2.74 when the Eastern division operated 123 supermarkets.

Nobody took a bigger hit in this year’s survey than Giant/Carlisle (Martin’s). With last year’s announcement that it would be selling or closing its Richmond operation (as part of the same FTC mandated conflict store ruling), the effects were significant. Ten of its 20 Richmond stores were closed as of March 31 (the company also shuttered two other stores in Pennsylvania) and overall sales declined for the first time in the 38-year history of the Food World’s market study. The unit of Ahold Delhaize operated 67 stores during the measuring period and rang up sales of $2.42 billion, a revenue drop of $443 million from last year. The remaining Martin’s stores in the Richmond area (those that were not sold to Publix) are expected to close within the next 60 days.