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The Friday Checkout is a weekly column providing more insight on the news, rounding up the announcements you may have missed and sharing what’s to come.
Discount grocers have the inside track right now with consumers given ongoing price sensitivity across the U.S. But being a discount grocer alone doesn’t guarantee success.
Grocery Outlet reminded us of this fact earlier this week when it announced a sweeping restructuring plan that includes layoffs and a significant reduction in store openings this year. The plan aims to refocus the chain on sustainable growth after it moved too quickly into new markets and wasn’t selective enough in the operators it chose to run its stores, executives said during a Tuesday earnings call.
Rapid growth is a hallmark among discount and specialty chains these days, and Grocery Outlet’s strategy of opening around 30 stores per year has been in line with what we’ve seen from Aldi and Sprouts Farmers Market. But Grocery Outlet hasn’t selected the best store sites, Chairman Eric Lindberg recently told investors, particularly in new markets, where he implied the company hasn’t effectively clustered stores to build brand awareness and drive operational efficiencies.
Value messaging has also been a problem. For all the grocer’s talk about its low prices and treasure hunt shopping experience, its customers apparently haven’t been feeling that as the company focused more on boosting margins last year.
“While we’re beginning to see value move in the right direction, we can do more to best communicate our industry-leading value to our customers,” Lindberg, who briefly served as the company’s CEO before Jason Potter’s hiring, said on the earnings call.
It’s not just Grocery Outlet that’s feeling the discount grocery blues. Save A Lot, which also operates a franchise model, has struggled recently due to its high debt load, aging store base and growing competition from discounters, according to a new report from Coresight Research. Last year, Save A Lot closed 50 stores, the report noted.
Grocery Outlet’s Q4 earnings report had plenty of bright spots, including a nearly 11% increase in net sales, indicating that the grocer is still resonating with shoppers. However, the restructuring news is a reminder that value retailers, too, will struggle if they can’t execute across all aspects of the business.
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Cerberus CEO joins Albertsons board
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