Large-Format

"Food, glorious food” could well be the Broadway show tune refrain favored by the very largest of the large-format value retailers. Groceries now account for more than half of Walmart’s sales as it solidifies its position as the country’s largest seller of groceries. Target has been furiously boosting food offerings in its traditional discount stores, and Costco credits food products with buoying its volume when the going got tough during the recession.

As befits its more affluent customer base, Costco’s supermarket offerings pay greater acknowledgement to Whole Food Market’s impact on grocery SKUs, offering, for example, plenty of organic products and both rice and soy milk. Costco says the trends of last year have continued into the first half of 2010, with shopper traffic continuing to pick up but consumers spending below normal and the bulk of purchases coming in the form of food and other necessities rather than discretionary items.

Target chairman and CEO Gregg Steinhafel says the company’s top priority is to grow the food business which, coupled with pet supplies, generated only 16 percent of total sales in 2009. “By the end of the third quarter, we expect to have more than 450 general merchandise locations with the PFresh assortment and presentation,” he said in a recent conference call with analysts and investors. PFresh is Target-speak for retrofitting grocery sections onto existing stores.

Walmart took a rare misstep with its Project Impact program, which eliminated some nationally branded food items from shelves when they were not the top-selling choice in the category. The purpose was to reduce labor and other restocking costs, but customers reacted by shopping elsewhere for favored items that they could no longer find at Walmart. Some 300 SKUs were restored to regular inventory by the end of March. The retail giant has experienced four straight quarters of declining same-store sales, and Walmart officials expect another dip in the three-month period ending July 31.