US supermarket group Supervalu has said that it expects declining same-store sales trends to continue in the short term.
The retailer made the prediction due to the prospect of consumer spending in the US coming under further pressure from the weakening economy and as the company ramps up its promotional and discounting initiatives.
“ID sales are not yet at acceptable levels and we are taking actions to re-engage our customers,” Supervalu CEO Jeff Noddle said in a conference call today (23 April).
Fourth-quarter identical sales dropped 1.2% while overall retail sales were down 2% year-on-year, the company revealed in its quarterly earnings release.
Supervalu said that although consumer traffic had been “fairly stable”, ID sales had been hit by consumers trading down, reducing basket spend and increasingly shopping around.
As consumers traded down to cheaper products, the company witnessed own-brand sales increase by 150 basis points as a percentage of sales in the fourth quarter. Supervalu predicted that this trend will continue in the coming year when it expects own-brand sales to account for 19% of total sales, up from around 15% currently.
The company indicated that it could also be facing lower ID sales in the first quarter of the current fiscal year.
“So far, we have seen a slightly weaker trend for ID sales in the quarter… We’re also expecting that price initiatives could dampen ID sales in the near-term… [but] we expect those investments to earn some sales gains in the second half of the year,” Noddle said.
The supermarket operator has indicated that it will focus on pricing and promotions in the coming year, reflecting the heightened importance of price to consumers.
It has compiled data, specific to each market in which it operates, to identify the products most relevant to consumers. This data mining means that “every dollar [invested in lower prices] should give us more impact,” Noddle said.
In this way, Supervalu hopes to encourage consumers – who are increasingly shopping around to find the cheapest price – to spend more in basket terms at its stores.
“We want to build more loyal customers. We think we can get customers already shopping with us and elsewhere to spend more with us,” Noddle indicated.