Markets
SFM

Zacks Industry Outlook Highlights: Kroger, Whole Foods Market, SuperValu, Sprouts Farmers Market and United Natural Foods

An image of people surrounding a sheet of paper with many charts on it
Credit: Shutterstock photo

For Immediate Release

Chicago, IL - January 26, 2017 - Today, Zacks Equity Research discusses the Consumer Staples, part 3, including Kroger Co. (NYSE: KR - Free Report ), Whole Foods Market, Inc. (NASDAQ: WFM - Free Report ), SuperValu, Inc. (NYSE: SVU - Free Report ), Sprouts Farmers Market (NASDAQ: SFM - Free Report ) and United Natural Foods, Inc. (NASDAQ: UNFI - Free Report ).

Industry: Consumer Staples, part 3

Link: https://www.zacks.com/ commentary/102165/will- economic-recovery-hurt- consumer-staples-investing

The consumer staples sector doesn't seem to be the perfect choice for investors right now as it is often viewed as more attractive when economic growth is sluggish. Further, if growth picks up too quickly in 2017, the Fed will have to become more aggressive with the pace of interest rate hikes. Higher U.S. interest rates will likely lead to a stronger U.S. dollar, which would pressure overseas profits and create a headwind for emerging market economies.

In fact, there are some disruptive trends that will likely continue in 2017 and beyond, which may influence investors' approaches. Last month, Organization of Petroleum Exporting Countries (or OPEC) decided to cut oil production in order to put a floor to the falling oil prices . The surge in oil prices in the coming months might significantly increase the commodity prices of staples stocks, thus increasing margin pressure. Headwinds like unfavorable currency, food deflation, potential price wars, a competitive environment and slowdown in international markets are also hindering growth.

Hence, investors should carefully select stocks for their portfolio as certain headwinds are likely to prevail in the coming months.

WEAKNESSES

Food Deflation and Price Wars

The grocery/supermarket business is grappling with food deflation, stiff competition, aggressive promotional environment, and waning store traffic. These headwinds have severely impacted major food grocers like The Kroger Co. (NYSE: KR - Free Report ), Whole Foods Market, Inc. (NASDAQ: WFM - Free Report ), SuperValu, Inc. (NYSE: SVU - Free Report ), Sprouts Farmers Market (NASDAQ: SFM - Free Report ) and United Natural Foods, Inc. (NASDAQ: UNFI - Free Report ).

An oversupply in some types of food - particularly meat, poultry and dairy - has dragged prices lower and forced grocery stores into more aggressive promotions. Cheaper groceries have also hurt the restaurant business, with more people opting to save money and eat at home.

Oversupply of beef, glut in poultry and egg, and a stronger dollar along with general weaker demand for dairy in Asia led to a resultant drop in commodity prices.

Analysts believe the price wars between companies will erode profits, leading to declining margins in the near term.

Slowdown in Emerging Markets

The majority of the global population lives in emerging economies. Due to a slowdown in income and consumption growth, affordability is low. Though there remains huge opportunity for sales growth in these markets, currently the state of affairs remains volatile. Apart from China, which is struggling since the past few quarters, developing countries like Brazil and Mexico are facing economic slowdown. The Middle East, Russia and Ukraine are witnessing continued political and civil unrest resulting in challenging operating conditions. Some developed markets are also facing weakness due to sluggish consumer demand.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Click here for your free subscription to Profit from the Pros .

Get the full Report on KR - FREE

Get the full Report on WFM - FREE

Get the full Report on SVU - FREE

Get the full Report on SFM - FREE

Get the full Report on UNFI - FREE

Follow us on Twitter: https://twitter.com/zacksresearch

Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

https://www.zacks.com

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Kroger Company (The) (KR): Free Stock Analysis Report

Whole Foods Market, Inc. (WFM): Free Stock Analysis Report

SuperValu Inc. (SVU): Free Stock Analysis Report

Sprouts Farmers Market, Inc. (SFM): Free Stock Analysis Report

United Natural Foods, Inc. (UNFI): Free Stock Analysis Report

To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

SFM UNFI KR

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More