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.
When Walmart and Target released their first-quarter earnings this week, the mass merchants did a lot more than just furnish investors with an update on their finances. They also painted an unsettling portrait of the difficult circumstances many consumers are continuing to confront as they make daily decisions about how to keep their households running.
With more than 7,000 U.S. stores between them, Walmart and Target have long played a central role in supplying food and other essentials at affordable prices along with countless other products people might want yet can afford to do without. But the companies’ latest results underscore the extraordinary extent to which inflation and other economic headwinds have been driving shoppers to focus mostly on the basics to stay afloat.
Speaking with analysts during an earnings call Thursday, Walmart CFO John David Rainey pointed out that the retailer saw a bigger shift to grocery, health and wellness products from more-profitable general merchandise during the first quarter than it did during all of 2022. That dramatic shift might be somewhat masked by the fact that Walmart’s operating income in the U.S. surged by almost 12% year-over-year during the quarter, but it speaks volumes about the level to which people are having to stretch their wallets to make ends meet.
Walmart’s growing appeal among higher-income shoppers is also revealing. Rainey used muted terms to describe the company’s deepening connections with people who have more to spend, whom he described as “customers who are increasingly prioritizing value and convenience,” but it’s difficult to miss the broader trend unfolding across the economy. People might like to get bargains and have easy access to the things they want to buy no matter how much they earn, but when times get tough, as they are now, shoppers across the income spectrum simply don’t have enough money to keep going without making sharp changes to their spending habits.
Target also saw groceries play an outsize role in its performance during the first quarter. The retailer’s traffic rose by a little less than 1% during the period even as people cut back on discretionary goods because they spent more on beauty, food and beverage products, Chairman and CEO Brian Cornell said during the company’s earnings call on Wednesday.
Cornell attributed Target’s success in drawing more people to groceries to steps it has taken over the past decade improving its food and beverage business, which he noted was losing market share when he arrived at the company. But there’s little doubt that consumers’ imperative in recent months to prioritize needs over wants is also responsible for bolstering the retailer’s position in the grocery sector.
The success Target and Walmart have been having in attracting grocery shoppers could have long-term implications for conventional supermarket operators, which already face steep pressure from the mass merchants as they compete for people’s dollars. As economic conditions stabilize, will shoppers return to their old habits — or will the grocery industry have changed for good?
In case you missed it
Wendy’s new robots offer “instant pickup”
The fast-food chain partnered with Pipedream, a hyperlogistics company, to pilot an underground, autonomous robotic delivery system that brings orders from the kitchen to designated parking spots in mere seconds, according to a Wednesday press release.
Customers use an “Instant Pickup” portal to verify their identity with the kitchen and receive their order without needing to exit their vehicles, the company wrote in an email to sister publication Restaurant Dive.
Wendy’s hopes the technology will increase labor efficiency and streamline digital order pickup points, per its announcement.
Group grocery orders now offered through Uber Eats
Uber has added the ability to complete group grocery orders, aiming to build the “perfect grocery cart for delivery,” the company said in an email this week.
Offered through Uber Eats, the new feature allows customers to create shared carts where they can add their own items, set deadlines for when to add must-haves and then automatically split the bill. The experience is “hassle-free,” Uber noted, and offers users the option of placing a recurring grocery order as well as reminders for participants to get their items added each week.
Kroger and Hannaford each walked away with sustainability-related awards and recognitions this week, the grocers announced separately.
On Wednesday, Kroger was named a Sustainability, Environmental Achievement and Leadership (SEAL) Business Sustainability Awards winner in the environmental initiatives category for its Zero Hunger | Zero Waste impact plan, according a press release. In its first five years, the initiative has given $1.65 billion to hunger relief efforts.
Also on Wednesday, Hannaford said it was certified by Ratio Institute for its operational sustainability and has completed the organization’s Sustainable Food Retail Certification. Hannaford has reduced its annual carbon dioxide emissions by nearly 300,000 metric tons through energy efficiency, water efficiency and cardboard recycling measures, per a press release from the grocer.
Number of the week: $500M
This is the amount Target expects retail theft will reduce its 2023 profitability by compared with last year, the retailer stated in its Q1 earnings report earlier this week.
While the retailer’s gross margin increased compared with the same period in 2022, factors driving the uptick were offset by higher inventory shrink. Target pointed to organized retail crime as an “urgent issue” for itself and the entire retail industry because it impacts product availability, the shopping experience and the safety of team members and customers.
A cartload of earnings
Several key retailers are on tap to release quarterly earnings next week. They include BJ’s Wholesale Club, which report their latest results on Tuesday, and Costco, which is due to reveal details about its performance on Thursday.
Publix’s meal offerings have a new customer base chomping at the bit.
A large alligator was escorted to a nearby body of water by police in Pinellas Park, Florida, earlier this week after witnesses saw the large reptile strolling down the sidewalk near a Publix grocery store, according to local news reports. But police do not suspect foul play: “We can only speculate that he was on his way to pick up a Pub Sub,” the police department wrote in a Facebook post. The alligator did not violate traffic laws, according to the police.
Unfortunately for the gator, there is no indication he ever received that Pub Sub.
Correction: A previous version of this story misstated Kroger's date for its Q1 2023 earnings. The company has not announced the date for that earnings report yet.