In our early preview of 2024, we noted that less-affluent consumers and uncertainty about inflation (mainly grocery prices) would be the key to the direction of general merchandise sales and prices driven actually lower would be an accelerant. Last week we wrote about Conagra lowering prices. This week brought Albertson’s fiscal Q3 2023 quarter results, another report on national brands food prices, and the Consumer Price Index (CPI). CPI for December showed an increase of only +1.3% for food-at-home, with most processed/packaged categories declining month-over-month.
Albertsons' sales growth was once again helped by GLP-1 drugs, delivery/curbside, and loyalty program households (an increase of +1.1M quarter-over-quarter to 38.5M households). One driver to the increase in loyal households is Albertsons' focus on putting great prices on fresh produce. Starting in September, traffic results were lower for Albertsons on a year-over-year basis, which reflects a further curtailment of SNAP benefits. Given that these customers are a small portion on the company's sales mix, we’d expect traffic and comparable-store sales for customers with incomes above SNAP levels to be far more robust. Relatedly, February 2024 will lap last year's sizable SNAP reduction and two years of households shifting from conventional groceries to hard-discount, value grocers. As such, that will be the month for sighting an improving traffic trend.
