Supermarkets are holding their own in the downturn.
“For the most part the industry is relatively healthy,” said Tom Gast, principal of Gast Retail Group in Tustin.
More people are cooking at home. Grocers have changed their product mixes, responding to demand for cheaper goods. Stores are selling more ground beef and private label goods.
Monrovia-based Trader Joe’s Co., which sells cheap, natural foods and specialty products, continues to thrive in the downturn.
Trader Joe’s has more sales per square foot than any supermarket operator, Gast said.
“They have the specialty items you can’t find in a regular store,” he said.
Ethnic grocers, such as Anaheim-based Northgate Gonzalez Market, which caters to Hispanics, and Buena Park-based Tawa Supermarket Inc.’s 99 Ranch stores, which sell Asian food, are faring better than the typical retailer, according to Gast.
Their customers traditionally spend more of their household budgets on food, he said.
Unlike department stores and other retailers, grocers didn’t over expand during the boom times. Instead, they plowed money into store remodels, Gast said.
“It gives them the best return on investment,” he said. “As land costs, construction and energy costs started to skyrocket, it became more difficult to justify new stores.”
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99 Ranch store: Customers spend more of household budget on groceries |
But all is not peachy for grocers.
Those such as Cincinnati-based Kroger Co.’s Ralphs and Pleasanton-based Safeway Inc.’s Vons have slashed jobs and in some cases demoted some workers to lower salaries and reclassified others as part time.
Some chains have announced closures.
Eden Prairie, Minn.-based Supervalu Inc.’s Albertsons recently said it would close nine stores in Southern California.
But supermarkets aren’t closing stores on the scale anywhere near other store chains. They’re closing under-performing stores, Gast said.
Grocers continue to face stepped up competition from Wal-Mart Stores Inc. and discounters such as Costco Wholesale Corp.
Supermarkets also face a quandary: Customers want lower prices but food costs still are high.
Lower gas prices have yet to trickle down. Food prices that went up early last year have yet to come down.
Part of San Bernardino-based Stater Bros. Holdings Inc.’s strategy during the downturn is to keep food prices steady, which seems to have helped.
Tough times make Gast a busy man.
“I’m a real estate mechanic out here fixing things,” he said.
His company helps property owners, retailers and lenders find fixes to problems such as overvalued properties that need to be refinanced. He also helps them keep shop spaces leased and control rent cuts.
Store Opening
Y-3, a sneaker and accessory store for teens, is set to open at Fashion Island in April.
The store is a venture of German sportswear and shoe maker Adidas AG and Japanese fashion designer Yohji Yamamoto. The store is the first Y-3 on the West Coast.
Auto Recovery
The Orange County Automobile Dealers Association’s recent report envisions three scenarios for recovery for the county’s struggling dealers.
Scenario one is the worst case and least likely to happen: slow and painful with sales not worth mentioning. This scenario would happen if household finances got much worse, housing prices continued to fall and credit markets stayed frozen.
Scenario two is a slow but steady recovery with healthy sales by 2011. This is the most likely (about a 70% chance), the report said.
The stimulus and the unleashing of credit should boost the economy, which could lead to a recovery beginning next year. Good deals and pent-up demand from those who just can’t bear driving their old cars could help sales.
Also, the federal stimulus package includes a sales tax deduction on new autos bought in 2009. There’s also a tax credit of up to $7,500 for plug-in hybrids bought before 2012.
Scenario three is the most optimistic: a sharp rebound in sales later this year. The chances of this are slim, the report said.
In order for this scenario to work out, the stimulus would have to have a better than predicted effect on the economy. Personal income, jobs and housing would all have to rebound within a couple of months. Buyers would have to be able to take on debt.
