Walmart Inc.'s latest results highlighted Sam's Club's strong performance, with comparable sales excluding fuel rising by +7.2%, driven by a +6.4% increase in comp-transactions (including +3%-5% in-store transactions) and a +15% increase in membership income. Placer data showed a robust +5.1% growth in traffic. On membership, Sam's Club President and CEO Christopher Nicholas called out an "all-time high memberships, plus penetration is up 300 basis points, and renewals have increased by 230%."
Given the success of Sam's Club, Costco, and BJ's Wholesale over the past two years, we examined the warehouse club sector's longer-term performance (2019 to 2024) compared to grocery and mass retail. Using store hours (Placer visits multiplied by dwell time) as the primary metric, the analysis highlights a 30% increase in time spent shopping at warehouse clubs since pre-pandemic levels, climbing to 40% when online sales are included. In contrast, the mass and grocery channels only saw mid-single-digit growth in this metric, with grocery showing a more moderate shift toward store delivery. This underscores the warehouse club channel's strong appeal and growing share of consumer shopping time.
The increase in shopping hours at warehouse clubs highlights their success with private brands. For Sam’s Club, this is exemplified by the significant investment in Member’s Mark, enhancing both product quality and assortment. Sam’s has also attracted households by modernizing its service offerings, including curbside pickup, store delivery, and Scan & Go, which streamline the shopping experience. Walmart CEO Doug McMillon, discussing the new Grapevine, TX location, noted, "Sam's team ...eliminated traditional checkouts. So our members can use Scan & Go and the new computer vision exit technology to exit the club faster. Just imagine a 150,000 square foot Sam's Club with no traditional checkouts." Scan & Go is now available in nearly all 600 clubs. Similarly, Costco and BJ’s have also innovated their services to enhance convenience. The club channel's continued outperformance in 2023, with shopping hours up +6%, underscores the grocery category's growth, led by fresh offerings and strong private brands. This trend shows no signs of slowing and is expected to remain a key driver in 2025.
The importance of private brands was further reinforced in Kroger’s fiscal Q3 2024 results, where "Our Brands" played a central role in driving +2.3% comparable sales growth. Digital and delivery services (+11%) and GLP-1 drugs were also significant contributors. However, Kroger faced a -200 basis point headwind from fewer store visits and lower units per transaction (UPTs), with an estimated -5% decline in non-produce, national brand sales. Placer.ai data shows fewer shopping hours at Kroger banners such as Kroger, Food 4 Less, and Ralphs. This decline likely reflects a shift in share-of-stomach to warehouse clubs, mass retailers, and value grocers rather than an actual reduction in consumer calorie consumption.
Kroger also reported an 11% year-over-year increase in "digital orders" and an 18% rise in Customer Fulfillment Center (CFC) deliveries. The chart below highlights activity at its Groveland, FL CFC, capturing visitors, residents, and workers with dwell times exceeding 30 minutes. The +18% growth stems from newer markets like Fredericksburg, MD, which are still in their initial ramp-up phase, as well as growth in established "comp markets" like Groveland. Both locations are shown in the charts below, and the trends for each appear strong.
On its consumers, Kroger CEO Rodney McMullen said, “Customer spending habits continue adjusting to current macroeconomic factors. As inflation normalizes, our premium and mainstream households are feeling more confident and are returning to their pre-pandemic shopping patterns more quickly. Mainstream households are the primary driver of our positive customer engagement trends. While overall consumer sentiment remains low, expectations are improving, which positions us well for the holidays and into next year. As we said, near term, some customers are managing macroeconomic uncertainty. Spending from budget-conscious households remain under pressure as the effects of multiyear inflation and higher interest rates have had a larger impact on these households. Therefore, we expect it will take longer for these households to feel the benefits of economic improvement.”
