Article Date 21/10/2019

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Grocery sales are rising but so is the pressure on profits, analyst says

Source CNBC News

Walmart continues to lead the U.S. grocery sector, but the gap with its rivals is narrowing, and pressure on profits is rising, according to a new report from Loop Capital Markets.

Walmart has a 22% share of the $847 billion U.S. grocery industry, according to analyst Andrew Wolf.

The retailer's same-store sales growth at its grocery business has been outperforming rival supermarket chains since 2017, but the gap is narrowing. Also, as food prices are disinflating, grocery gross margins have worsened for Walmart, Wolf said Friday in a research note.

It's not alone. In the second quarter, gross margins worsened for Ahold and Publix as well, but remained the same for Kroger and even improved for privately owned Albertsons, according to the note. Wolf expects more of the same in the third quarter.

The Commerce Department found that grocery sales in the third quarter rose by 4% year over year, which was a faster pace than the 2.6% gain in the second quarter and the 2.5% increase in the first quarter.

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