Retailers, consumers and prices
“Kroger continues to help customers stretch their budgets in a number of ways, including lower prices and our expanded generic drug and gas discount programs,” chief executive David Dillon said in a statement.
The price cuts, he said, were helping Kroger’s customers save $1 billion annually, at a time when shoppers deem every last dollar precious, as they face skyrocketing prices for necessities such as gasoline.
Kroger also raised its outlook for the full year, based on the strength of the results from the reported quarter.
Food safety officials in the United States are still searching for the cause of a Salmonella outbreak that has sickened 167 people in 17 states and is believed to be linked to raw round, plum and Roma tomatoes.
If you want to see whether your state has reported a case, the Centers for Disease Control and Prevention has a site that shows the state-by-state breakdown.
Another 27,000 retail jobs disappeared in May, according to the U.S. government’s monthly employment report. That makes 152,000 retail jobs eliminated since the beginning of the year.
Overall, nonfarm payrolls fell by 49,000. But even more worrisome for the economy and for retailers could be the jump in the unemployment rate to 5.5 percent. That half-point jump was the largest such move in 22 years and brought the unemployment rate to its highest level in 3-1/2 years.
Retailer’s May sales reports yesterday were mostly better than expected, causing some analysts to think they could signal the beginning of a consumer turnaround.
But others said it just showed a blip in spending that was caused by the tax rebate checks consumers have begun to receive.
Economic concerns could still linger after all that stimulus money is gone, they say, and things could get worse if consumers, already hit by $4-a-gallon gasoline, soaring food prices and falling home values really start to worry about their jobs.
Wonder how a half-point jump in the unemployment number plays into that?
Meanwhile, to take your mind of the jobs report, there’s always the company pep rally that masquerades as the Wal-Mart annual meeting. The world’s-largest retailer flies in employees from all around the world to help pack the basketball arena at the University of Arkansas, where stars entertain the crowd (this year’s acts include Miley Cyrus), everybody does the Wal-Mart cheer, and, oh yeah, shareholders get to ask questions.
Also in the basket:
New Wal-Mart director may herald changing of the guard (Wall Street Journal, subscription required)
Target grows makeup artist brands, adds testers (WWD)
Check out McDonald’s Corp’s long-awaited switch to trans fat-free cooking oil in the United States and Canada.
Jim Skinner, CEO at the Golden Arches, said the world’s largest hamburger chain finished dumping the oil with artery-clogging trans fats during the last few months. Speaking to investors at the company’s annual meeting, he also promised that pies and other baked goods would also be trans fat-free by year end.
Will Starbucks ever get it just right with the coffee testers at Consumer Reports?
In March 2007, the magazine blasted Starbucks’ drip java for being too burnt and bitter, and said fast-food vendor McDonald’s had a superior brew.
According to interviews Reuters conducted with consumers across the United States over the past week, the answer seems to be that most of the extra money will be heading toward the basics — like food, fuel and credit card payments — with just a little left over for splurges.
Check out upcoming earnings and what they might say about food costs.
Food inflation is one of many factors putting pressure on U.S. consumers. (Housing, the credit crunch and soaring gasoline prices are some of the others.) But so far, big packaged food companies have been sticking to the mantra that consumers are willing to pay a little more for their wares as long as perceive they are getting a benefit in return.
Next week promises to offer snapshots on how rising food costs may be affecting consumer behavior. That’s because both Kraft, the largest North American food company, and Kellogg, the largest cereal maker, are slated to report earnings.
Kraft gave reporters a preview this week of new products they are launching, and none seemed to be geared to consumers trying to cut back on spending.
But grocery store operators seem to know that many consumers are scrambling to pay for necessities like food these days. Both Kroger and Supervalu are offering bonuses for consumers who turn their tax rebate checks onto gift cards to be used in the store. (Those rebate checks also are expected to start coming next week.)
So the question is, are things different this time around? Will the rising cost of fuel and food and an economy that might be in recession cause consumers to trade down to store brands and other cheaper alternatives?
Also in the basket:
Rising food prices are “global crisis”: U.N. chief
Charming Shoppes exploring alternatives on non-core assets
Protest-hit Carrefour cancels China sales plan
Plastic bottle scare is a boon for some (N.Y. Times)
Check out what Wal-Mart customers have to say about the economy and how it is changing how they shop.
Reuters reporters went to Wal-Mart stores in New Jersey, Illinois and California this week to see how the weak economy (see today’s jobs report) has made them change how they grocery shop.
Here are some of their comments. For the full story, click here. For the Reuters Television video, click here.
“I don’t buy a lot of expensive meat anymore. I buy more vegetables, because they are cheaper.” — Fran Allen, 77-year-old part-time factory employee from Romeoville, Illinois.
“I buy what is on the list and nothing that isn’t on the list.” — Patricia Norris, homemaker in Romeoville.
“That doesn’t cover it…. I went over again … It’s almost impossible to stay on budget.” – Barbara Armour, whose family food budget is $350-$400 month, after shopping at a Santa Clarita, Cal. store.
“Something has to be done, because these prices are just getting ridiculous.” — Karen Stewart, hospital housekeeper from Plainfield, Ill.
“I’m making changes just because of how much I’m paying on gas…. I went to a gas station with $100 and came out with nothing.” — Jamie Dorgan, homemaker from Joliet, Ill.
“People might not buy clothes, shoes, jewelry, but they need food. People have to eat.” — Ravi Varma, a convenience store operator who uses the Secaucus Wal-Mart as his supplier.
Also in the basket:
Family Dollar profit falls, cuts full-year forecast
Brands’ dilemma: Target elbows way into upscale beauty world (WWD)