The grocery sector is a tough place to make money: high competition, low margins, vulnerability to commodity and fuel prices — not to mention the vagaries of food and merchandising trends. Still, grocery stocks are usually stable, conservative dividend-paying stocks — which makes these dull darlings worth browsing.
As always, consumer trends affect the health of this sector, and a growing desire for better-quality, healthier foods is reshaping the competitive landscape. That said, consumers haven’t cast off Recession-era frugality — they are still “intensely focused on value”, according to a report in Progressive Grocer.
But as the traditional lines that separate grocers from general retailers blur, supermarkets are increasingly battling restaurants for consumers’ “share of stomach”, according to a new survey by AlixPartners. “Grocery and convenience stores present a real threat to the traditional restaurant segments as more and more consumers are purchasing prepared meals at these stores,” the researchers said.
So how do investors cash in on these trends? For starters, it pays to be picky when shopping for stocks. Here are two stocks to buy and two to leave on the shelf: