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Moody's – Supermarkets see record sales for 2020 as coronavirus spurs food shopping frenzy, but gains will not last

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<p style="position:absolute;top:155px;left:108px;white-space:nowrap" class="ft00"><b>Research Announcement:&#160;</b></p>

<p style="position:absolute;top:155px;left:364px;white-space:nowrap" class="ft01"><b>Moody's – Supermarkets see record sales for</b></p>

<p style="position:absolute;top:180px;left:108px;white-space:nowrap" class="ft01"><b>2020 as coronavirus spurs food shopping frenzy, but gains will not last</b></p>

<p style="position:absolute;top:216px;left:108px;white-space:nowrap" class="ft02">New York, July 09, 2020 --</p>

<p style="position:absolute;top:246px;left:108px;white-space:nowrap" class="ft05">»&#160;Online grocery sales will grow 35%-40% in 2020 and 2021 led by 'Buy Online Pickup in Store'<br/>»&#160;Operating profit growth will top 20% in 2020 followed by a 5%-7% decline in 2021 as restaurants</p>

<p style="position:absolute;top:296px;left:127px;white-space:nowrap" class="ft03">open and promotional environment returns</p>

<p style="position:absolute;top:332px;left:108px;white-space:nowrap" class="ft02">In its latest report, Moody’s Investors Service says that supermarkets have seen skyrocketing sales</p>

<p style="position:absolute;top:351px;left:108px;white-space:nowrap" class="ft02">in 2020, as the coronavirus pandemic has driven a food shopping frenzy both in stores and online.</p>

<p style="position:absolute;top:371px;left:108px;white-space:nowrap" class="ft02">While Moody’s expects supermarkets to see their topline grow 5%-7% for 2020, this will decline</p>

<p style="position:absolute;top:390px;left:108px;white-space:nowrap" class="ft06">1%-3% in 2021 as trends normalize and competitive pressures kick in once again.<br/>“Supermarkets will rank among the bigger outperformers this year, even as much of the US retail</p>

<p style="position:absolute;top:440px;left:108px;white-space:nowrap" class="ft02">industry takes an earnings hit from the pandemic fallout. However, weaker supermarkets will not see</p>

<p style="position:absolute;top:460px;left:108px;white-space:nowrap" class="ft02">the current sales payoff last for long as the fundamental dynamics of the industry have not changed.</p>

<p style="position:absolute;top:479px;left:108px;white-space:nowrap" class="ft02">Looking beyond this year, bigger, well capitalized supermarkets and discounters will continue to</p>

<p style="position:absolute;top:499px;left:108px;white-space:nowrap" class="ft06">dominate,” said Mickey Chadha, a Moody’s Vice-President and Senior Credit Officer.<br/>Amid protracted restaurant closures, uncertainties have prompted consumers to stockpile food and</p>

<p style="position:absolute;top:548px;left:108px;white-space:nowrap" class="ft02">eat at home. Moody’s expects the coronavirus pandemic will accelerate grocery e-commerce growth</p>

<p style="position:absolute;top:568px;left:108px;white-space:nowrap" class="ft02">exponentially, with The Kroger Co. (Baa1 stable), Albertsons Companies, Inc. (B1 positive), Walmart</p>

<p style="position:absolute;top:587px;left:108px;white-space:nowrap" class="ft02">Inc. (Aa2 stable), Target Corporation (A2 stable) and Amazon.com, Inc. (A2 positive) emerging as</p>

<p style="position:absolute;top:607px;left:108px;white-space:nowrap" class="ft02">winners. Costco Wholesale Corporation (Aa3 stable) and BJS Wholesale Club Inc. (Ba3 positive) will</p>

<p style="position:absolute;top:626px;left:108px;white-space:nowrap" class="ft06">also outperform and gain market share.<br/>Online grocery sales growth is set to almost double to 35% –40% in 2020 and 2021, from about 20%</p>

<p style="position:absolute;top:676px;left:108px;white-space:nowrap" class="ft02">growth in 2019, as consumers shop more from home. Moody’s estimates that supermarket operating</p>

<p style="position:absolute;top:696px;left:108px;white-space:nowrap" class="ft02">profit growth will be a very strong 20%-22% in 2020, followed by a 5%-7% decline in 2021 as buying</p>

<p style="position:absolute;top:715px;left:108px;white-space:nowrap" class="ft06">patterns normalize.<br/>Moody’s also expects labor costs to jump, which will put a lid on profit growth. Grocery chains have</p>

<p style="position:absolute;top:765px;left:108px;white-space:nowrap" class="ft02">hired thousands of workers to meet increased demand and have increased their pay and bonuses to</p>

<p style="position:absolute;top:784px;left:108px;white-space:nowrap" class="ft06">motivate them to work during the pandemic.<br/>Larger supermarkets with stronger balance sheets, such as Albertsons and Kroger, will continue</p>

<p style="position:absolute;top:834px;left:108px;white-space:nowrap" class="ft02">to dominate as they invest in e-commerce growth and have a greater ability to withstand pricing</p>

<p style="position:absolute;top:854px;left:108px;white-space:nowrap" class="ft02">pressures and compete more effectively with very strong alternative food retailers such as Costco,</p>

<p style="position:absolute;top:873px;left:108px;white-space:nowrap" class="ft06">BJS, Target and Walmart.<br/>For more research and insight on the coronavirus (COVID-19) outbreak, please see&#160;</p>

<p style="position:absolute;top:904px;left:694px;white-space:nowrap" class="ft04">moodys.com/</p>

<p style="position:absolute;top:923px;left:108px;white-space:nowrap" class="ft04">coronavirus</p>

<p style="position:absolute;top:923px;left:189px;white-space:nowrap" class="ft02">.</p>

<p style="position:absolute;top:953px;left:108px;white-space:nowrap" class="ft02">Subscribers can access the report, “US Retail - Supermarkets: Coronavirus spurs</p>

<p style="position:absolute;top:973px;left:108px;white-space:nowrap" class="ft02">food shopping frenzy and record sector sales for 2020,” at:&#160;</p>

<p style="position:absolute;top:973px;left:520px;white-space:nowrap" class="ft04">http://www.moodys.com/</p>

<p style="position:absolute;top:992px;left:108px;white-space:nowrap" class="ft04">researchdocumentcontentpage.aspx?docid=PBC_1234196</p>

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<p style="position:absolute;top:277px;left:108px;white-space:nowrap" class="ft02">Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and</p>

<p style="position:absolute;top:296px;left:108px;white-space:nowrap" class="ft02">municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s</p>

<p style="position:absolute;top:316px;left:108px;white-space:nowrap" class="ft02">Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s</p>

<p style="position:absolute;top:335px;left:108px;white-space:nowrap" class="ft02">Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from</p>

<p style="position:absolute;top:355px;left:108px;white-space:nowrap" class="ft02">$1,000 to approximately $2,700,000. MCO and Moody’s investors Service also maintain policies</p>

<p style="position:absolute;top:374px;left:108px;white-space:nowrap" class="ft02">and procedures to address the independence of Moody’s Investors Service credit ratings and credit</p>

<p style="position:absolute;top:394px;left:108px;white-space:nowrap" class="ft02">rating processes. Information regarding certain affiliations that may exist between directors of MCO</p>

<p style="position:absolute;top:413px;left:108px;white-space:nowrap" class="ft02">and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and</p>

<p style="position:absolute;top:433px;left:108px;white-space:nowrap" class="ft02">have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted</p>

<p style="position:absolute;top:452px;left:108px;white-space:nowrap" class="ft02">annually at&#160;</p>

<p style="position:absolute;top:452px;left:188px;white-space:nowrap" class="ft04">www.moodys.com</p>

<p style="position:absolute;top:452px;left:315px;white-space:nowrap" class="ft02">&#160;under the heading “Investor Relations — Corporate Governance —</p>

<p style="position:absolute;top:472px;left:108px;white-space:nowrap" class="ft07">Director and Shareholder Affiliation Policy.”<br/>Additional terms for Australia only: Any publication into Australia of this document is pursuant to the</p>

<p style="position:absolute;top:514px;left:108px;white-space:nowrap" class="ft02">Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited</p>

<p style="position:absolute;top:534px;left:108px;white-space:nowrap" class="ft02">ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136</p>

<p style="position:absolute;top:553px;left:108px;white-space:nowrap" class="ft02">972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale</p>

<p style="position:absolute;top:573px;left:108px;white-space:nowrap" class="ft02">clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access</p>

<p style="position:absolute;top:592px;left:108px;white-space:nowrap" class="ft02">this document from within Australia, you represent to MOODY’S that you are, or are accessing</p>

<p style="position:absolute;top:612px;left:108px;white-space:nowrap" class="ft02">the document as a representative of, a “wholesale client” and that neither you nor the entity you</p>

<p style="position:absolute;top:631px;left:108px;white-space:nowrap" class="ft02">represent will directly or indirectly disseminate this document or its contents to “retail clients” within</p>

<p style="position:absolute;top:651px;left:108px;white-space:nowrap" class="ft02">the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as</p>

<p style="position:absolute;top:670px;left:108px;white-space:nowrap" class="ft02">to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or</p>

<p style="position:absolute;top:690px;left:108px;white-space:nowrap" class="ft07">any form of security that is available to retail investors.<br/>Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency</p>

<p style="position:absolute;top:732px;left:108px;white-space:nowrap" class="ft02">subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc.,</p>

<p style="position:absolute;top:752px;left:108px;white-space:nowrap" class="ft02">a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating</p>

<p style="position:absolute;top:771px;left:108px;white-space:nowrap" class="ft02">agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization</p>

<p style="position:absolute;top:791px;left:108px;white-space:nowrap" class="ft02">(“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-</p>

<p style="position:absolute;top:810px;left:108px;white-space:nowrap" class="ft02">NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated</p>

<p style="position:absolute;top:830px;left:108px;white-space:nowrap" class="ft02">obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit</p>

<p style="position:absolute;top:849px;left:108px;white-space:nowrap" class="ft02">rating agencies registered with the Japan Financial Services Agency and their registration numbers</p>

<p style="position:absolute;top:869px;left:108px;white-space:nowrap" class="ft07">are FSA Commissioner (Ratings) No. 2 and 3 respectively.<br/>MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including</p>

<p style="position:absolute;top:911px;left:108px;white-space:nowrap" class="ft02">corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated</p>

<p style="position:absolute;top:931px;left:108px;white-space:nowrap" class="ft02">by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to</p>

<p style="position:absolute;top:950px;left:108px;white-space:nowrap" class="ft02">MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging</p>

<p style="position:absolute;top:970px;left:108px;white-space:nowrap" class="ft07">from JPY125,000 to approximately JPY250,000,000.<br/>MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory</p>

<p style="position:absolute;top:1012px;left:108px;white-space:nowrap" class="ft02">requirements.</p>

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