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Merger activity has increased in the grocery store industry in 1998 and the larger chains have begun to crowd out the smaller, independent stores, and this trend is expected to continue through the efforts of Wal-Mart Stores Inc. Industry earnings and profits have been good in 1998, and streamlining, buying power, and increased efficiency should enhance this. Many of these stocks are expected to outperform the market in 1999.

Competition is looming for the supermarket industry from discount store chains in the US, most notably Wal-Mart Stores Inc with its aggressive pricing and distribution, and the industry is consolidating as well. The attraction and retention of a customer base has also become a new emphasis for for the industry due to competition. These stocks are well-ranked for timeliness, but investors need to be selective in their commitments.

Consolidation within the grocery store industry is continuing at a fast pace in the 1990s, due mainly to the need to survive in the industry, the rising equity values, and lower capital costs. However, competition has increased for the industry from supercenters, warehouse stores, and other alternative retail formats, and cost control has become more important. These stocks have become more timely, but investors still need to be cautious.

The grocery store industry has been following the example of drugstores and consolidating in the late 1990s, and most grocery chains are in an excellent position to expand with stronger balance sheets, as well. In addition, the offering of private-label brands and home-meal replacements has allowed the industry to increase profit-margins. There are several individual stocks in this industry, but prospects for the years 2000-2002 are only average.

Prepared (home meal replacement), private label, and perishable foods have increased gross margin expansion prospects for the grocery store industry in 1997 and 1998. However, the retail marketplace is going through fundamental changes and grocery stores are expanding services and products to meet new competition. The grocery store industry is not timely in 1997 and 1998, and investors must be selective before purchasing stock in this sector.

The grocery store industry will face a number of challenges through the end of 1997, and this makes investment in this industry difficult. The strong performance of grocery store companies in 1996 will be difficult to top in 1997, especially in an era of low inflation, which makes it difficult to pass on costs to the consumer. Competition from discount stores such as Kmart Corp and Wal Mart Stores Inc, aggressive expansion, and merger activity are likely to characterize the grocery industry in 1997.

Grocery store operators are taking some unconventional routes to top-line expansion because of modest food-price inflation. Two strategies are remodeling existing stores and offering everyday low prices. Stores investing in computer technology will have a competitive advantage in the next few years. Grocery stores are developing ready-to-eat carry-out meals in response to growing demand from consumers. Value Line ranks the grocery industry in its lowest quartile for performance in the year ahead.

Smaller stores are being replaced with larger ones by many supermarket chains in order to enhance efficiency and provide alternatives for customers. In addition, preferred-customer programs are being introduced to build loyalty and influence repeat purchasing. Private label brands and higher-margin products are also helping grocery chains to improve their profit margins. However, most of these stocks are not timely investments in 1997.

The grocery store industry, mostly large supermarket chains, continues to show good economic growth, sufficient to attract the interest of Wall Street. Supermarket chains have used private label brand items, acquisitions, cost cutting and some expansion to overcome the handicap of intense competition. Investors should be careful to select companies that do not risk overbuilding, that will improve core operations and have low operating margins.

Grocery stores are reporting good financial results, and earnings are expected to remain good for the next few years. In spite of high stock prices, many chains are rated as good investments with above average safety. Unions are striving for higher wages at chains such as Kroger and Safeway. Nevertheless, promotion of private labels and take-out meals give investors confidence in continued high sales.

Supermarket chain earnings are expected to remain strong and the grocery industry will continue to show double digit growth throughout 1996 and 1997. Investors should be aware that many supermarket chain equities have doubled or trebled in the past few years and that many stock prices are expensively valued based on price/earnings multiples. Smaller grocery chains that have a history of expansion and plan to continue adding stores may be a better investment than larger chains that are relying on improving operations to increase growth.

The grocery store industry is expected to have good earnings and profit margins in 1996. Unit costs are being reduced with economies of scale, and there are increased sales with higher product turnover and better inventory control through technology. Margins are also expanding with better product mixes, but overcapacity could result from expansion. There are several stocks, expansive and defensive, that are good investments.

There will be good earnings for supermarket chains in 1995, due mainly to cost reduction. Competition will increase, however, with the addition of more stores. Product mix, especially with private-label brands, may help improve profit margins, but low inflation is keeping top-line growth low. Several of these shares are risky, but chains with strong growth may appeal to investors for the next three to five years.

Supermarket profits are being pressured by lower food prices and increased competition. Debt reduction, inventory control, improved technology, and cost cutting are now top priorities in this industry. Increased floor space and store replacement are major capital expenditures. Most stocks in this industry will perform well, but investors need to consider demographics and regional economies before committing funds.

Earnings for grocery stores are strong in 1994 and 1995, due to cost cutting and greater efficiency. Expansion will lead growth for the next three to five years, but less competitive operators will lose market share. Cost containment through more efficient distribution, warehousing, and procure will enhance earnings. Several stocks will outperform the market for the due to greater profits for the next three to five years.