German grocery giant to make a big U.S. debut ahead of schedule
Lidl is coming out of the starting gate in the United States earlier than expected — and it isn’t going to waste any time ramping up its store base.
The discount grocer will open its first U.S. stores this summer, with plans to open up to 100 locations across the East Coast within a year, the Associated Press reported. The chain initially had said it planned to enter the U.S. market no later than 2018.
Lidl’s first 20 U.S. stores will be located in North Carolina, South Carolina and Virginia. Lidl, which operates some 10,000 stores in 27 countries, has opened a U.S. headquarters in Arlington, Virginia, and is building distribution centers in Maryland, Virginia and North Carolina.
Industry experts expect Lidl to go head to head in the United States with another German discount grocery powerhouse, Aldi. The chain is expanding at a rapid pace in the United States, and just recently announced a major, $1.6 billion store expansion and remodeling effort.
It appears that Lidl will try to set itself apart in the United States by not billing itself as a discount grocer. In a company presentation obtained by Business Insider, Lidl likened its U.S. format to a “hybrid,” similar to Trader Joe’s or Harris Teeter, but closer to a Trader Joe’s. (Trader Joe’s and Aldi are owned by the same company.”
"After three years of research, we discovered that U.S. consumers don't like discount groceries,” the presentation said.
We could use MORE competition in the Colorado Springs, Colorado area!
Commentary: Some red flags in January sales results
The year kicks off with a respectable set of retail sales numbers that show continued momentum in the consumer economy. The overall growth rate of 4.9% is a little way above the average monthly growth rate of 3.3% recorded in 2016, something that will give retailers some cheer as they head into 2017.
That said, we believe that there are few red flags hidden in the detail of the figures, many of which suggest that underlying performance, while reasonable, is not quite as robust as it first seems. Retailers would be advised to take heed of this as it indicates the sector is in for another choppy year.
The first point to note is that part of the elevated growth is down to the fact that last year’s comparatives are soft. January 2016 was a weak month for retail, partly thanks to Winter Storm Jonas which disrupted consumers’ regular shopping behavior. The weather was more cooperative this year and most of January went smoothly as far as consumer spending is concerned.
The overall growth rate was also boosted by a sharp rise in sales at gas stations, which were up by 13.9% over the prior year. This is the fastest pace of growth in just under five years, and signals that the era of continuously falling gas prices – which characterized the past two years – is now firmly over. Although the uplift is heavy, it comes off the back of a low base and, as such, gas prices are not at levels which are causing consumers too much pain. Even so, further rises will be generally unhelpful to retail as they will inevitably bite into consumer incomes.
Pure retail, which excludes foodservice, auto, and gas sales, is the other area of interest. As much as the overall growth trend looks good, there are some telling movements in the numbers that make up this total. Many of the bigger ticket sectors – including furniture and electricals – recorded a deterioration in sales over the prior year.
Given that our own data shows consumer confidence started to wane partway through January, this could be an indication of nervousness among shoppers. While we do not expect the declines to persist across the entire year, we do believe that continued uncertainty among shoppers will lead to a very changeable retail environment in which large purchases are carefully considered.
Within retail, some sectors performed better. Clothing was one, and although sales only rose by 0.4%, it marks a change from the declines that were a hallmark of the sector across a large part of 2016. This is mostly down to lower discounting rates across January 2017, which is the result of better inventory control, and fewer overstocks of items such as coats thanks to a much colder end to 2016.
We believe that the year ahead will be a reasonable one for retail, and nothing in this month’s numbers changes that assessment. However, growth will undoubtedly be variable across 2017, and it remains insufficient to benefit all players. The environment will continue to be one of winners and losers.
Neil Saunders is managing director of GlobalData Retail.
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January was hot for retailers
Retail sales sizzled in January, beating expectations. Even the struggling department store sector managed to beat the odds.
Retail sales, excluding automobiles and gasoline, grew 0.4% in January, according to the National Retail Federation. (The numbers exclude automobiles, gasoline stations and restaurants)
“The healthy monthly gain was driven by January’s strong payroll gains, retail employment gains and business sentiment,” NRF chief economist Jack Kleinhenz said. “We haven’t seen strong January growth in several years, which indicates that consumers are increasing their spending and remain the leading driver of the economy.”
Every major retail sector tracked by the NRF reported higher sales compared to the previous month, with the exception of furniture/home furnishings stores, whose sales were flat.
Sales at electronics and appliances stores rose 1.6% the biggest increase in a year and a half.
Sales at clothing stores increased 1.0%, the largest rise in nearly a year. Department store sales climbed 1.2%, the biggest increase since December 2015.
Sporting goods stores’ sales increased 1.8%, and sales at health and personal care stores increased 0.7%.
Despite the nearly across-the-board increases, Neil Saunders, managing director of GlobalData Retail, sounded a somewhat cautious note.
“We believe that the year ahead will be a reasonable one for retail, and nothing in this month’s numbers changes that assessment,” he said. “However, growth will undoubtedly be variable across 2017, and it remains insufficient to benefit all players.”
The environment will continue to be one of winners and losers.
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