Now that Walmart U.S. derives more than 66% of its sales from food, consumables and health and wellness related categories, Kroger is more of an immediate threat than Amazon.
Walmart’s 4,000 unit U.S. stores division derives 66% of its annual sales of $274 billion from food, consumables and health care related categories and for the better part of the past five years has struggled to generate consistent same store sales growth. Conversely, Kroger has remained the model of consistency and just reported its 38th consecutive quarter of comp growth, which equates to 9.5 years of uninterrupted increases. That is an impressive run and it underscores the challenge confronting Walmart as it look to achieve further share gains in a segment of the retail industry where the easy share gains have become harder to come by as weak players have been washed out.
Going forward, Walmart is vying for customers and shopping trips against companies such as Kroger and other leading food chains. So it is no wonder Walmart recently announced a major initiative to enhance perishable quality. There is a quality perception gap that exists between Walmart and conventional supermarket retailers and narrowing that gap is essential given the importance of perishables as a determinant for where people shop for food.
Meanwhile, Kroger keeps motoring ahead, undeterred by Walmart’s lower prices and direct price comparison ads. Kroger soundly beat first quarter sales and profit forecasts, posting a 3.3% gain in identical store sales which fuel a 92 cent a share profit that was four cents better than expect. The company also forecast fuel year comp growth in the range of 2.5% to 3.5% which would make for 10 consecutive years of comp increases.