Shares of Kroger, Albertsons, BJ’s Wholesale Club were up Monday at noon. Costco hit an all-time high of $ 415.32.
These stocks were among the few positives on Wall Street, as the Dow Jones industrial average appears to be heading for its biggest drop of the year. Several other home actions, including Clorox and Peloton, were also in the green.
Grocers have been among the biggest beneficiaries of the pandemic over the past year, as restaurants have temporarily closed and shoppers stocked up on basic and home-cooked items.
Retailers will face difficult comparisons in the coming quarters as they face unusually high sales growth figures. Investors and businesses have been trying to figure out when – and to what extent – consumers will resume eating habits as more people are fully vaccinated and restrictions ease. In recent weeks, however, the rise of the delta variant of Covid-19 – particularly in parts of the country with low vaccination rates – has complicated these predictions.
Brian Yarbrough, retail analyst for Edward Jones, said investors were spooked by news of the delta variant and the decline in reopening in parts of the country – such as the return of indoor mask mandates to Los Angeles. He said this was prompting some to revert to proven pandemic names.
“You saw a flight to more safety,” he said. “If this plays out and Covid starts to raise its head again and things start to stop, you would see the grocery store benefit. “
Michael Baker, retail analyst for DA Davidson, said the popularity of grocers in the market was “the reverse of what you see with airline stocks.” As of noon on Monday, airlines and cruise lines were among the hardest hit sectors as investors feared travel trends would slow or reverse.
Grocery sales are still above pre-pandemic levels, according to data from IRI, which tracks sales patterns in supermarkets, big box retailers and convenience stores. Total demand for consumer packaged goods was about the same as a year ago for the week ending July 4, although sales of perishables and inedible items edged down.
Baker said some people have developed new habits over the past year, cooking more. Additionally, he said a labor shortage affected customer service at some restaurants, giving customers another reason to eat at home.
“The American public may have learned that eating at home is good,” he said. “You spend a lot of time at home with your family and it’s more economical. “
He said recent data also confirms the stickiness of food in the home. Receipts at food and beverage stores rose 0.6% in June from the previous month, according to Commerce Department data. On the flip side, restaurant meals are still down 8% in July from a year ago, based on OpenTable bookings that track diners seated from online, over the phone, and phone bookings. Appointment.
However, not all of the beneficiaries of the pandemic saw their fortunes change on Monday. Shares of Walmart, Home Depot and Lowe’s fell on Monday.
Yarbrough attributed this to Walmart selling general merchandise and discretionary items, rather than being an outright grocer. And, he said, investors can expect retailers doing better during the delta variant’s spread could look different as the government takes different action. Instead of shutting down non-essential retailers, for example, local authorities can bring back mask warrants and consumers can decide for themselves whether to skip or reduce dining out. That would mean less dramatic sales gains for home improvement retailers, which were able to stay open during closings as essential retailers, he said.
Yarbrough said he remains confident restaurant meals will come back at the expense of grocery sales. Still, he said it could take longer to play out – and could be interrupted by spikes in Covid cases.
“With the delta variant out there, it might scare people into saying, ‘You know what, I’m going to start staying home. We’ve started going back to dinner, but we’ll start eating at home for a while until that passes, ”he said.