Chains Make List of Stocks to Avoid

Dec 03, 2003

By George Anderson

According to a column by Michael Brush on MSN’s Money Central site, Albertsons, Kroger and Safeway are three stocks investors want to avoid buying in 2004.

Mr. Brush says that while share prices are low for the top three supermarket chains, competition from the likes of Costco and Wal-Mart will continue to cut into traditional grocery’s
share of the market.

Morgan Stanley, reports Mr. Brush, expects that Wal-Mart’s share of the U.S. food market will be greater than the combined share of Albertsons, Kroger and Safeway within 10 years.

Melissa Plaisance, a senior vice president at Safeway, says the Wal-Mart factor is not as detrimental to its business as is often suggested. She said that within three years
of entering a market, Wal-Mart’s growth slows and Safeway’s picks up as independents go out of business and their customers switch to Safeway.

Ms. Plaisance said customers that choose Safeway do so because, “We have more convenient locations and better service, and specialty departments like bakeries and delis.”

“We are also focusing on differentiating our offerings on the basis of quality, especially in perishables like produce and meat,” she said. “This is not where Wal-Mart’s strength

Moderator’s Comment: What do you see as the competitive strengths and weaknesses of Albertsons, Kroger and Safeway?

We think it’s unrealistic for any of the large chains to expect to continue growing in markets with Wal-Mart based on picking up business from independents
that go belly-up.

As we’ve discussed in this forum before many times, it is the independent that finds a better way to compete with the realities of a Wal-Mart in the market.

The independents are used to going up against the big guy. The top three supermarket chains, on the other hand, are used to being the big guy. [George
Anderson – Moderator

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