Is United Natural Foods Making Money?

A UNFI sale of Supervalu’s supermarkets raises doubts about the viability of brick and mortar grocers as an investment.

Grocers are not making much money in today’s market. For instance, Supervalu reported $36 million in cash and short-term investments on September 9 2018. In addition, Supervalu reported a free cash flow of $8 million and an operating cash flow of $48 million for 3rd Quarter 2018.

Supervalu reported a net loss of -$57 million and an operating loss of $53 million on $3.512 billion in revenues for 3rd Quarter 2018. Therefore, it is easy to see why UNFI wants out of the supermarket business.

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Is Sprouts Doomed?

Delivery can destroy Sprouts because it keeps customers away from Sprouts where they can see its low prices.

Traditional supermarkets depend heavily from all the spur-of-the moment purchases from shoppers in the store. How many times have you walked into a supermarket to “grab a couple of things” and ended up pushing a full shopping cart out the door?

Online shoppers only get what is on their shopping list, because they are not in the supermarket to get tempted by that extra stuff. That is good for customers’ pocketbooks but bad for Sprouts’ bottom line.

The traditional supermarket is a marketing machine cleverly disguised as a food store. Grocers fill their stores with temptations such as endcaps, free samples, delis, and cafes. The online shopper sees none of that stuff.

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Who is buying Supervalu?

Even if Supervalu keeps operating the distribution centers its new customer might be Amazon or Instacart.
A strong possibility is that Supervalu will get out of brick and mortar supermarkets and concentrate on selling groceries to delivery services. Its’ network of distribution centers is well-positioned for that eventuality.
Supervalu’s financials explain why Jeff Bezos is so interested in the grocery business. Grocers like Supervalu have a very strong cash flow, and Bezos loves cash.

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Can Sprouts Farmers Market Survive without Acquisition?

The most obvious buyer for Sprouts would be Kroger, which has been aggressively trying to attract more organic and high-end grocery business.

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The Ever Growing List of Doomed Retailers

Expect to see a mass die-off of sick retailers in January and February of 2018 as the dust from the 2017 holiday season settles. If it is anything like last year’s numerous retailers are likely to report losses and more than a few will shut down.

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What Will Amazon Acquire Next?

The question we need to ask is: “what companies will Amazon acquire next?” Some probable candidates for Amazon acquisition include:

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Supermarkets fight for Survival at SuperValu

Traditional supermarkets like Supervalu are struggling because of greatly increased competition and a collapse in food and consumer goods prices. These forces might make the historic supermarket business model unsustainable.

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Can Supervalu Survive??

Supervalu might be a good investment for Kroger; but it is certainly a lousy investment for anybody else with the possible exception of Safeway.

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Is Amazon Really a Threat to Grocers?

My take is that the major grocers; and high-end grocers like Whole Foods, will survive but many of the regional and discount chains will not. Instead of being a direct threat to grocers, Amazon will be an indirect threat taking some business and providing another headache for grocers.

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Is Staples Close to Death?

Two interesting buyers would be Walmart and Amazon. Walmart would buy Staples for its brand and online market share. Amazon might be interested in Staples’ 1,600 brick and mortar locations as pickup points for merchandise. It needs such points to counter Walmart which has already opened 600 such pickup points.

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