The Increasingly Competitive Chicago-Area Grocery Segment

The June 6 blog post (“Profitability And Competition In The Grocery Business“) discusses a variety of issues concerning increasing competition and margins in the grocery business.

In response to Safeway’s recent announcement concerning Dominick’s, the October 11 Chicago Tribune article titled “Dominick’s parent pulling out of Chicago market” offers commentary and statistics regarding the increasingly competitive Chicago-area grocery segment.

Three notable excerpts from the article:

Dominick’s did neither discounts nor delicacies better than its competitors, and even on convenience it had its match in Jewel, which has 178 Illinois locations, mostly in the northern part of the state. Under such brutal pressure, Dominick’s has been losing market share in the Chicago area for some time.

also:

In the Chicago area, according to a source with knowledge of the business, Jewel, which also was sold this year, has a 29.1 percent market share; Wal-Mart, 9.4 percent; Dominick’s, 8.7 percent; and Costco, 7.3 percent. As recently as the late 1990s, Jewel and Dominick’s controlled two-thirds of the market, the source said.

also:

Safeway President and CEO Robert Edwards laid out the problem with Dominick’s in a conference call with Wall Street analysts Thursday evening. He said the Chicago market is “fragmented” and noted the increased competition from new companies. Safeway said the Chicago stores are the lowest performing in the company.

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StratX, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

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StratX, LLC (stratxllc.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future business conditions, and offers corporations and businesses advice, strategies, and actionable methods on how to increase revenue and profitability.

Businesses’ Assessment Of Current Sales And Profit Margins

The Atlanta Federal Reserve publishes a monthly report titled “Business Inflation Expectations” (BIE) that contains statistics from a survey of regional businesses’ views on various factors that impact profitability.  These factors include unit costs, unit cost expectations, sales levels, profit margins, and other factors.

As described on the site:

Approximately 300 panelists receive the survey each month. Panelists represent businesses of various sizes headquartered within the Sixth District, which encompasses Alabama, Florida, Georgia, and sections of Louisiana, Mississippi, and Tennessee. Panelists range from executives of large corporations to owner-operators of small businesses. The industry composition of the panel roughly reflects the makeup of the national economy. Nevertheless, survey responses are weighted by industry shares of national gross domestic product.

An excerpt from the BIE Survey of September 20 (pdf) (involving 206 firms responding) :

Respondents indicated that, on average, they expect unit costs to rise 1.9 percent over the next 12 months, roughly in line with the recent year-ahead inflation forecasts of private economists. Inflation uncertainty was virtually unchanged at 2.4 percent in September from 2.3 percent in August. Firms also report that, compared to this time last year, their unit costs are up 1.7 percent. Sales levels were little changed in September, with 52 percent of respondents now saying their current sales levels are at or above normal compared to 53 percent in August. Profit margins also changed only slightly, with 49 percent of respondents indicating their profit margins are at or above normal, compared to 45 percent in August.

Among questions and responses seen in the report include the following:

  • “How do your current PROFIT MARGINS compare with ‘normal’ times?”
  • This month’s “quarterly question” asked “By roughly what percent are your firm’s sales levels above/below “normal,” if at all?”
  • The “special question asked respondents to indicate whether they felt that their firm’s performance was a leading, lagging, or coincident indicator of overall economic recession or expansion.”

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StratX, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

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StratX, LLC (stratxllc.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future business conditions, and given these conditions, offers corporations and businesses advice, strategies, and actionable methods on how to optimally increase revenues and profitability.

Prices Paid And Prices Received Diffusion Indices

Each month the Philadelphia Fed releases the Business Outlook Survey, which contains a variety of information concerning business conditions.

As seen on the site:

The Business Outlook Survey is a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants: employment, working hours, new and unfilled orders, shipments, inventories, delivery times, prices paid, and prices received. The survey has been conducted each month since May 1968.

One component of this survey are diffusion indices for both “Prices Paid” and “Prices Received.” (for those unaware, this survey provides the following definition:  ”Diffusion indexes represent the percentage indicating an increase minus the percentage indicating a decrease.”)

Doug Short provides a monthly blog post concerning the Philadelphia Fed’s Business Outlook Survey.  For reference purposes, here is a chart he has created that shows, from a long-term perspective, the “Prices Paid” and “Prices Received” diffusion indices (shown by the dots) and their 12-month moving averages (shown by the solid lines) :

(click on chart to enlarge image)

Dshort 9-19-13 Philly-Fed-PPC-and-PRC-12MA

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StratX, LLC offers the above data and projections for informational purposes only, and does not necessarily agree with information provided by these outside parties.

—–

StratX, LLC (stratxllc.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future business conditions, and given these conditions, offers corporations and businesses advice, strategies, and actionable methods on how to optimally increase revenues and profitability.

Prices Paid And Prices Received Diffusion Indices

Each month the Philadelphia Fed releases the Business Outlook Survey, which contains a variety of information concerning business conditions.

As seen on the site:

The Business Outlook Survey is a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants: employment, working hours, new and unfilled orders, shipments, inventories, delivery times, prices paid, and prices received. The survey has been conducted each month since May 1968.

One component of this survey are diffusion indices for both “Prices Paid” and “Prices Received.” (for those unaware, this survey provides the following definition:  ”Diffusion indexes represent the percentage indicating an increase minus the percentage indicating a decrease.”)

Doug Short provides a monthly blog post concerning the Philadelphia Fed’s Business Outlook Survey.  For reference purposes, here is a chart he has created that shows, from a long-term perspective, the “Prices Paid” and “Prices Received” diffusion indices (shown by the dots) and their 12-month moving averages (shown by the solid lines) :

(click on chart to enlarge image)

Dshort 8-15-13 Philly-Fed-PPC-and-PRC-12MA

_____

StratX, LLC offers the above data and projections for informational purposes only, and does not necessarily agree with information provided by these outside parties.

—–

StratX, LLC (stratxllc.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future business conditions, and offers corporations and businesses advice, strategies, and actionable methods on how to optimally increase revenues and profitability.

Business Expectations Concerning Unit Costs And Assessment Of Current Profit Margins

The Atlanta Federal Reserve publishes a monthly report titled “Business Inflation Expectations” (BIE) that contains statistics from a survey of regional businesses’ views on various factors that impact profitability.  These factors include unit costs, unit cost expectations, sales levels, profit margins, and other factors.

As described on the site:

Approximately 300 panelists receive the survey each month. Panelists represent businesses of various sizes headquartered within the Sixth District, which encompasses Alabama, Florida, Georgia, and sections of Louisiana, Mississippi, and Tennessee. Panelists range from executives of large corporations to owner-operators of small businesses. The industry composition of the panel roughly reflects the makeup of the national economy. Nevertheless, survey responses are weighted by industry shares of national gross domestic product.

An excerpt from the BIE Survey of August 14 (pdf) (involving 212 firms responding) :

Respondents indicated that, on average, they expect unit costs to rise 2.0 percent over the next 12 months, roughly in line with the recent year-ahead inflation forecasts of private economists. Inflation uncertainty declined to 2.3 percent in August from 2.5 percent in July. Firms also report that, compared to this time last year, their unit costs are up 1.7 percent. Sales levels improved in August, with 53 percent of respondents now saying their current sales levels are at or above normal compared to 50 percent in July. Profit margins declined slightly from the July reading, with just 45 percent of respondents indicating their profit margins are at or above normal.

The responses to the question “How do your current PROFIT MARGINS compare with ‘normal’ times?” are seen in the report.

Also, this report’s “Quarterly Question” asked “Projecting ahead over the next 12 months, how do you think the following five common influences will affect the prices of your products and/or services?”  A chart in the survey depicts the responses.

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StratX, LLC offers the above commentary for informational purposes only, and does not necessarily agree with the views expressed by these outside parties.

—–

StratX, LLC (stratxllc.com) is a management consulting firm and strategic advisory that focuses on the analysis of current and future business conditions, and offers corporations and businesses advice, strategies, and actionable methods on how to optimally increase revenues and profitability.