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Which Supermarkets Have the Best Same-Store Sales?

Did You Check Out with the Right Supermarket Stocks this Month?

(Continued from Prior Part)

Comparing the fundamentals

To get a better picture of the performance of individual companies, we’ll now compare their past financial performance. Though The Fresh Market (TFM) does not have a bright earnings outlook, the company boasts one of the best operating margins (5.7% during the last 12 months) and ROAs (return on assets at 11.7%) in the peer group. The company’s biggest problem is its declining same-store sales, which were recorded at -3.7% in its last reported quarter after being in the red for the previous two quarters.

Kroger (KR), on the other hand, is a stable company. Three-year sales growth of more than 6%, 48 consecutive quarters of positive same-store sales, and a strong earnings outlook (8.8% growth expected for the next fiscal year) make the company a show stealer. However, it has a debt-heavy balance sheet with a total DE (debt-to-equity) ratio of 2.1x. Its recent acquisitions (of Harris Teeter in particular), share repurchase programs, and capital investments have been partly funded through debt. Debt, though, might not be a big concern for the company as it still has investment-grade ratings of Baa2 from Moody’s and BBB from Standard & Poor’s.

SuperValu (SVU) has a poor sales record (0.9% growth over the last three years), low operating margins (2.7% during the last 12 months), and a low ROA (3.4% for the last reported quarter), making it the worst performer in the peer group.

Whole Foods Market and Sprouts Farmers Market

Whole Foods Market (WFM), a victim of rising competition in the niche organic market, continues to have a strong operating margin (5.4% over the last 12 months), a decent sales performance (9.6% growth over the last three years), an above-average ROA (8.6% in the last quarter), and a low DE ratio (0.02x in the last quarter). However, competition has started to weigh on its performance, and the company has reported two consecutive quarters of negative same-store sales.

Sprouts Farmers Market’s sales have grown by 26% over the last three years and are likely to grow by more than 16% next year, per the company’s guidance. It reported a stunning 7.8% growth in same-store sales during the last quarter after reporting 34 consecutive quarters of positive same-store sales. Its operating margin of 6.4% is the highest in the peer group, and the company has a strong balance sheet with low debt levels. All in all, Sprouts Farmers Market has delivered a blockbuster performance.

ETF exposure

SuperValu (SVU), Kroger (KR), Whole Foods Market (WFM), The Fresh Market (TFM), and Sprouts Farmers Market (SFM) together constitute ~5% of the SPDR S&P Retail ETF (XRT).

In the next part of this series, we’ll look at some supermarkets’ earnings releases from the month of February.

Continue to Next Part

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